Contract Law Week 2 Readings

 Objective approach: How a reasonable person will interpret a party’s intention from his conduct in all
circumstances.  Assume dominance.
 Appearance of agreement alone to establish consensus ad idem. A person’s conduct may indicate
his consent to a contract when he had no such intention or when he believed he was consenting to
different terms.

Agreements and deed

 Agreement and contract may not be the same at all. All contracts require some form of agreement
while not all agreement requires contract.
 Agreement is necessary but not sufficient to form contract.
 For there to be agreement there needs to be two parties.
 One kind of agreement which is legally binding but not contract is deed – needs to be documents
which lists promises to be made, have it executed and need seal to establish legal relations, and have
it delivered. In the past, when talking about deeds, need to get the document to destroyed to ensure
promisor is no longer bound.
 We don’t really need these nowadays: company stamp, stickers etc, so long as we are able to prove
the intention to create legal relations and circumstances.
 Person failing to perform promise in document the person must compensate
 With regards to Agreements and contracts: talking about enforcing of legal promises
 A deed necessarily require document. Possible to have a deed in the form of an electronic

Justification for objectivity

 Justification for objectivity: Parties can misrepresent their own meaning and meaning of others.
1. Accessibility: Impossible to determine what was in a party’s mind at the relevant time. An
objective approach overcomes the evidential difficulties in determining parties’ intentions.
2. Avoidance of fraud: Can’t access intention  cannot determine person’s intention by references
to assertions. Once conflict between parties arisen, a person’s incentive to distort truth in favour
of self-interest disqualifies such evidence.
3. Certainty and protection of reasonable expectations: If one party could escape liability he
appeared to have assumed to the other party by simply asserting that he meant something else
 great disruption. Objective approach allows parties to know in advance how their own conduct
will be interpreted and how they are entitled to interpret conduct ofothers.

Subjective approach: what the party’s actual intention is, regardless of appearances.

Meaning of objectivity

 ‘Promisor’ objectivity: adopts interpretation of honest and reasonable promisor.

 ‘Promisee’ objectivity adopts interpretation of the honest and reasonable promisee.
 Each party’s actions should be interpreted as they would be reasonably understood by an honest and
reasonable person in addressee’s position

Conventional rules in attributing meaning to ‘formal objectivity’ (the higher in the list the more
superior it is of the next one)

 Signed final writing contained in a contractual document.

 Unsigned final writing contained in a contractual document
 Other writing or to speech
 Non-verbal contract (a nod/ wink)
 Silence or omissions  Does not constitute acceptance even if clearly intended.

Attributing meaning in whole context for ‘contextual objectivity’

 Contextual interpretations lately  Modern approach.

 Urging court to place itself in the same factual matrix as that in which parties were at the time when
contract were made and to take into account absolutely everything reasonably available to parties
which would have affected way in which contractual documents would have been reasonably
understood.

Subjectivity and Objectivity

Objective test examines what the parties said and did and not what they actually intended to say or do.

o Three different interpretations

 First is the standard of detached objectivity
 What interpretation would a person watching the behaviour of the contracting
parties place upon their words and actions
 Second is to interpret the words as they were reasonably understood by the
promisee
 Supported the most by case law
 Third is to use the standard of a reasonable person in the shoes of the promisor 
method used most of the time.
 Most of the time we look from the perspective of an objective man in the shoes of the offeree. We
want the third party to have some characteristic of the offeree as the communication from offeror
must be understood by him so there cannot be offer if it was not being understood.
 E.G. Paul Wilson v. Partenreederi Hannah Blumenthal 1983: Reject subjective view of determining of
intentions, ‘’tried to identify a reasonable man in the shoes of an offeree”. Trying to ascertain the
offeree’s intentions from the shoes of a reasonable offeree.  This is for a promise for a promise –
bilateral contract.
 However all judges have different intentions of objective reasonable man behaviour. Two types of
offer:
 Bilateral contract: Promise to do something for promise to do something  Acceptance involves
promising to do Y. Offeree can only accept by communicating his intent to offeror.
 Look at the context and how the words are used to allow justify that an objective reasonable man will
have such intention. Critique to support the argument or not
 Having this kind of meaning/ intention for objective man – there must be some kind of communication.

Offer

 TCH: offer is the communication by offeror to offeree in which the offeror shows he intends to be
llegally bound to the offeree if offeree accepts the offer.  any words can be used to communicate
that he intends to be bound.
 Offer is a manifestation (whether orally, in writing or by conduct) by the offeror of a willingness to be
bound by the terms proposed the offerree (addressee), as soon as offeree signifies acceptance of the
terms. It contains:
1. Proposal of terms of exchange; and
2. An expression of willingness to be bound as soon as the offeree manifests acceptance.
 An offer puts offeror on risk: confers power on offeree to bind offeror at precise moment of
acceptance  offeror loses ability to withdraw from/ negotiate arrangement.
 A party may deny existence of valid contract by denying
1. Mistakenly made
2. Not an offer at all
3. No longer valid at the time of purported acceptance

Requirement of Certainty in formation of contract

- The terms of a contract must have established all important variables and eliminated areas of
uncertainty, for it to be valid as an enforceable contract.
o British Steel Corporation v Cleveland Bridge and Engineering Co Ltd
 Illustrates the effect of omissions of important terms on an incomplete contract.
 Also proves that agreement to other stated terms can be inferred from conduct –
BSC’s acceptance of the constructed nodes made them liable for payment
quantum meruit basis as they satisfied the conditions required : that the work
was carried out at their request, and that the work done conferred a benefit on
them. The omissions on defective goods, delivery and other important terms
means that any disputes centering around these scenarios are not subject to
appeals or claims.

Traditional rule for Offer and Acceptance to determine whether a contract has been reached is the ‘mirror
image’ rule
- Court must be able to find in the documents between parties a clear and unequivocal offer and
acceptance.
- Counter-offer does not count as it kills off the original offer.
- A true acceptance should be one that accept all the terms of the original offer
- Rule provides certainty and a standard that can be applied to every type of contract
o Problem with it being too rigid

Objectivity and mistaken offers

 Detached objectivity: viewpoint which does not represent offeror or offeree.

 Most of the time we look from the perspective of an objective man in the shoes of the offeree. We
want the third party to have some characteristic of the offeree as the communication from offeror
must be understood by him so there cannot be offer if it was not being understood.
 E.g. Paul Wilson v. Partenreederi Hannah Blumenthal 1983: Reject subjective view of determining of
intentions, ‘’tried to identify a reasonable man in the shoes of an offeree”. Trying to ascertain the
offeree’s intentions from the shoes of a reasonable offeree.  This is for a promise for a promise –
bilateral contract.
 However all judges have different intentions, objective reasonable man behaviour.

1. Knowledge of other’s mistakes/ objective interpretation

 Since objective is the reference point for fixing whether the parties intend to be bound and what they
intend to be bound by, this trumps a party’s assertion of a different subjective intention i.e. how an
average person views contract is the way the contract how one party may have viewed the actions of
the other, despite the other claiming to be otherwise,
 E.g. in Hartog v. Colin & Shields, seller offered to sell hare skins at per pound instead of per price.
Buyer purported to accept and sued, but court ruled that in context of customs of trade and
 negotiations that per piece was always the norm and not per pound – that buyer did know that
mistake had occurred in seller’s offer.
 The conventional interpretation of the case is that seller’s subjectivity trumps buyer’s objectivity in this
case i.e. in the point of view of a third party, the buyer would have known that the seller has made a
mistake.
 Counterpoint: this contradicts objectivity. If objectivity was the reference point, an honest and
reasonable buyer will have known that the seller meant ‘per piece’ and not ‘per pound’ and would not
have proceeded to purchase the oats.
 E.g. Smith v. Hughes – appeal by seller of oats upheld (previously plaintiff won as jury believed that
seller knew that he was contracted for old oats, and knew that buyer believed that he would supply
old oats);
 There was a mistake of terms known to the buyer. This case establishes that what a party knows
must be taken into account as part of the context in which meaning is honestly and reasonably
attributed to another’s conduct – the buyer had during inspection thought new oats were old and got
supplied with them.
 Another case Chwee v. Digilandmall.com – Advertised price for commercial laser printer $66 but
actual price $3,854. Court rejected C’s contention that it was unaware of D’s mistakes, and
objectively speaking, could not have known of it.
 This has to be done through circumstantial evidence and inference.

2. Misleading offers
 While auctioneers are entitled to assume that bidders know what they are bidding for (making
mistakes legally irellevant), they cannot do so if they have carelessly induced bidder’s mistakes.
 E.g. Scriven brothers & co. v. Hindley & co., Judge appeared to apply subjective test  there was no
id adem as to subject-matter of proposd sale i.e. Scriven brothers thought there was hemp while
Hindley never intended to sell hemp and intended to buy tow. (irrelevant without misleading catalogue
 However objectively: Many bales in different lots, same shipping marks. Never happened for different
commodities from same ship
 Reasonable for buyer not to have foreseen potential for confusion. – only inspected hemp on show
and not tow bearing same shipping mark.

3. Latent ambiguity
 Difficult to determine what parties agreed where there is nothing in writing.
 E.g. South East Windscreens Limited v. Hamid Jamshid
 However, explanation is unnecssarily wide. Exact coincidence of intentions must be rare in contracts
(unlikely that both parties will be that ambiguous) and non-coincidence does not always mean that a
contract will be void, even after taking into account the factual matrix and circumstances – hence the
no grounds for an ‘objective’ argument.

Offers and invitations to treat

 What the other party purported to accept was not an offer, but something less.
 However, a party’s word or conduct amount to an offer can be difficult to determine because parties
themselves are often ambivalent; each seek greatest commitment from the other while conceding the
least commitment himself.
 Law has to:
1. Strike a balance between protecting reasonable reliance and giving adequate room to manoeuvre.
Parties should be able to spell out terms on which they are willing to contract and look for best deal,
without being locked into a contract before they are ready to commit to it.
2. Uphold not only parties freedom to contract, but also freedom from contract:
Unfair for one party to induce another party’s reliance while still remaining free to pull out.

1. General Principles
 No offer is made when a party communicates his proposed terms unless he also communicates his
commitment to be bound on the other’s acceptance of the terms.
 This is the substantive sense of that intention to create legal relations means that agreements made
in a social/ domestic context are note intended to be enforceable.
 A communication may only be a request for or supply of information, not an offer, e.g. Harvey v.
Facey: seller asked if he will sell pen and telegraph him the lowest price, while buyer replied that it
costs 900 pounds – buyer claims he accepted the ‘offer’ and wanted to buy the pen. Privy Council
found no binding contract because seller only supplied information and had no intention to be bound
by buyer’s acceptance i.e. never said ‘I will sell you’
 A party’s communication may not amount to an offer because it is only an invitation to treat-
Expression of willingness to embark on negotiations with the other party to see whether agreement
can be reached
 Even if serious terms are proposed, an offer is only made if speaker confers addressee power to
bind speaker on addressee’s acceptance.
 E.g. case accepted: Storer v. Manchester City Council- C sent brochure advertising details of scheme
for tenants to buy houses. S ascertained price and sent formal application. Council responded saying
that if S will signa greement and return it to “me, I will send you the agreement on behalf of the
corporation in exchange”.  Change of management, council did not want to sell now. Court of
Appeal held that a contract was concluded because Council’s letter evinced an intention to be bound
by terms of agreement as soon as S accepted it
 E.g. case rejected: Gibson v. Manchester CC. Council wrote to G informing him the price at which
they “may be prepared to sell the house” and giving details of a mortgage proposal. C stated that
letter should not be “regarded as a firm offer of a mortgage and G should complete further form if he
wished to make “formal application”. G applied and after unsuccessful negotiation over price and
certain repairs, asked C to proceed with application. C put up house for sale before C changed hands
 Council’s letter did not confer power on G to bind C to sell the house as soon as G manifested
assent. Council’s conduct indicated is intention to accept G’s offer, but had not completed the
acceptance by communicating it to G. G jumped the gun.
 This general approach to making distinction between offers and invitations to treat have replaced the
search for parties’ intentions in common contracting situations.

2. Displays and Advertisements

 Displays or advertisements of goods for sale are not offers to sells the goods, but only invitations to
treat, even when word ‘offer’ is used. Because it may not have been used in the legal sense (e.g.
Spencer v. Harding (1870)).
 Customer is generally regarded as making offer when he presents the goods at cash desk or
otherwise shows an intention to buy. This leaves traders with power to accept orreject customer’s
offer.
 The rule was established and reinforced in a line of cases on statutory offences relating to sale of
specific goods
 E.g. Pharm society of GB v. Boos Cash Chemists – efficient self-service pharmacy where pharmacist
supervises sales generally, rather than serving each customer – court do not want to deter self-
service pharmacies by convicting Boots of the offence and to achieve this result, display has to be
treated as an invitation
 E.g. Partridge v. Crittenden, Cocks and hens were advertised for sale at a stated price, and advertiser
was charged with contravening the Protection of Birds Act. Judge says advertisement was only an
invitation to treat.
 E.g. Fisher v. Bell same judgment for display of flick knife.
 Three reasons were given for the conclusion (all not very convincing):
i. If displays were offers, customer’s act of putting it into the basket amounts to acceptance,
preventing customer from changing mind without breaching contract. This problem is
easily met by delaying point of acceptance when customer communicates his acceptance
when presenting item for payment –however intervention then will be too late  Should point
of payment be acceptance?
ii. While traders should not be allowed to refuse to contract with any customers nor refuse to
contract on marked prices to prevent deceptive sales, if displays or advertisements were
offers, vendors will be deprived of freedom to deal with particular customers and contradict
idea that shop is a place for bargaining, not compulsory sales;– however, bargaining not the
reality in shops today  ‘take it or leave it’, no room for negotiation shouldn’t then the
advertisement be the offer?
iii. If displays/ advertisements were offers, vendors will be obliged to supply to everyone who
accepts, even if he runs out of stock. However, this problem is easily met by implying
common sense limit that it only applies ‘while stocks last’  displays/ advertisements are an
invitation to treat

Counterpoint: Such decisions bring law into disrepute as statutes prohibiting the offer of certain items for
sale in all circumstances – it may be necessary to construe displays/advertisement in law for such cases
or by having the statutes prohibiting both offers and invitations to treat. Rigid application of decision in
Boots also expose customers to unfair trade practices  Bait advertising (see Mindy Chen Wishart, pg
55.

 Courts have also treated displays and advertisements as offers when there were good policy reasons
to do so
 In Chapelton v. Barry UDC, it was held that display of deck chirs for hire on a beach with a notice of
charges was an offer, which was accepted by customer taking a chair. Treating the display as an
offer allowed court to bring forward time of contract formation, in order to keep out harsh
exclusion clause later (clause in ticket purporting to exclude liability for injury did not prevent
customer from claiming compensation when deckchair collapse).
 An advertisement may also be treated as an offer: based on the promise to the whole world and
unilateral contract arrangements who met conditions ‘on faith of advertisement’., e.g. Carlill v.
Carbolic Smoke Ball Co, S promised to pay 100 pounds to anyone catching flu after using smoke ball
correctly. C successfully sued for 100 pounds when she caught flu after proper use. Court rejected
manufacturer’s claims that advertisement was too vague and not seriously made.
3. Timetables and automatic vending machines
 Railway and bus timeables are offers which can be accepted by passengers who buy railway tickets
or board buses.
 However, most timetables now contain express disclaimers of any obligation to provide services
contained in the timetable.
 In Thornto v. Shoe Lane Parking Ltd, Lord Denning held that an automatic machine outside a car
park stating charge rates make an offer, which the motorist accepts by driving g in and prompting
machine to issue a ticket.
 Exclusion of liability contained on a notice inside is not part of the contract as it only comes to
motorist’s notice after the contract is made and cannot bar motorist claim for injury
 He also explained that there is no expectation or opportunity for negotiation; once the consumer
drives in, there is no scope for withdrawl since product/ service cannot be easily returned and queue
of cars behind him will prevent him from backingout.
 These reasons extend to analogous situations such as self-service petrol stations and vending
machines, which dispense an ever-increasing range of goods.

4. Auctions
 Sale of auction in the following steps: advertisement that an auction will take place on a certain day
(Harris v. Nickerson (1873) and putting goods up for sale are invitations to treat;
 Bid by purchaser is an offer
 Fall of a hammer indicates acceptance.
 This allows the auctioneer to refuse to hold auction at all (if goods are poorly attended) or refuse to
knock down to highest bidder if bid fails to reach minimum point.
 Where the words ‘without reserve’ are added to the advertisement, this increases bidder expectation
that the auction will take place; no minimum price and item will be sold to highest bidder. Objectivity:
Advertisement is construed as an offer which is accepted by those who turn up, would be able to
quantify loss of those disappointed.
 Martin B stated obiter in Warlow v. Harrison (1858) that transaction should be analysed as two
separate contracts:
i. A unilateral contract between highest bidder and uctinoeer by which auctioneer is obliged to
accept highest bid from bidder making it,
ii. Main contract for sale of the main subject matter between highest bidder.
 This is confirmed by Court of Appeal in Barry v. Davies where B was awarded 27,600 pounds in
damages for auctioneer’s refusal to accept bids.

Counterpoint: ‘without reserve’ would be meaningless if auction could be called off altogether or
halted once bidding starts. This allows auctioneer to refuse to sell to highest bidder. However, that
conclusion fits rather awkwardly within the offer and acceptance framework:
1. Departs from convention that advertisement is invitation to treat (is an offer now as people
accepted to come to auction because it will go to highest bidder).
2. If the sale is not held or item is withdraw, impossible to identify highest bidder to whom obligation
is owed since until hammer is brought down, a bid can always be outbid or withdrawn.

5. Tenders
 An invitation to tender is merely an invitation to treat;
 Offer is made by those submitting the tenders
 The acceptance is made when the person inviting the tenders accepts one of them
 However, where justice is demanded, courts invoke a two-contract analysis to impose liability for
failure to consider lowest/ highest tender
 E.g. Harvela Investments, R decided to sell shares by sealed competitive tender between two parties
stating that they would accept the highest complying offer. H tendered a fixed bid of $2,175,000 while
Sir Leonard tendered a referential bid of ‘$2,100,000 or $101,000 in excess of any other offer,
whichever is the higher’. R accepted Sir Leonard’s bid for $2,276,000. House of Lords held that R
 was bound to accept H bid as R’s invitation to tender was held enough to be an offer of a unilateral
contract to sell shares to highest bidder, even though invitation asked bidders to submit an ‘offer’.
 Sir Leonard’s bid was also invalid as vendors’ invitation was to ascertain higher amount each party
was prepared to pay and if both bid referentially, it would have been impossible to determine which
would be the highest bid – the encouragement of fairplay, the protection of tenderer’s reasonable
expectation that the process would be determined by fixed bids and tenderer’s reliance on this be
investing he resources in putting together the bid are concerns mirrored in other cases.
 E.g. In Blackpool and Fylde Aero Club Ltd v. Blackpool BC, Council invited tenders for concession to
operate pleasure flights on terms that:
 ‘Council do not bind themselves to accept all or any part of the tender. No tender which is received
after the last date and time specified, Noon 17 March 1983 shall be admitted for consideration.’At
11am that day, BFAC posted bid in Town Hall letterbox on which there was a notice stating that it was
emptied at noon each day. Letterbox was duly processed and Council did not consider BFAC’s
‘late’bid, awarding the concession to another party with a lower tender.
 Court used two-contract analysis: one between Council and the party whose tender is actually
accepted; the other comprising of Council’s invitation to tender which constitutes a unilateral offer to
consider any conforming tender which was accepted by any party submitting such a tender. The
Council breached th contract to consider BFAC’s tender.
 Judgment by Bingham LJ (concern to protect vulnerable party in tendering process – summarised as
following): A tendering procedure is heavily weighted in favour of invitor as he can invite tenders from
as many or as few parties as he chooses, and has little accountability to those he invited. Invitee may
often be put to considerable labour and expense in preparing a tender, without recompense if he is
unsuccessful. Invitation to tender involve time and expense to prepare but invitor does not commit to
the project.Invitee is in judgment as he submitted a conforming tender before deadline entitled of
contractual right, so that his tender will after deadline be opened and considered in conjunction with
all other conforming tenders.
 When court imply an offer to consider: invitation was made to small number of parties; duty to
consider was consistent with parties intention; tender process was ‘clear, orderly and famililar’,
enabling court to state unilateral offer with reasonable precision
 Other features which are persuasive: As local authority, defendant owes a public law duty to act fairly
and reasonably; claimant was existing concession holder and so had something akin to legitimant
expectation in law its bid would be considered.
 Breach of duty in this case would only be if Council accepts any bid before or after the deadline.
However due to the clause excluding liability: Council was not obliged to accept any tender or to
award the concession, provided the decision was bona fide and honest, to any tenderer’ breach of
duty would be difficult to translate into remedies.

Overview of considerations in determining the existence of an offer

Finding an offer is pro-liability, mere invitation to treat is anti-liability.

1. Factor relating to alleged offeror:

 Ned or party to maintain some room to manoeuvre (anti-liability)
 Need to police exploitative trade practices such as bit or misleading advertising, or failure to observe
offeror’s own rules (pro liability).

2. Factpr relating to offerree

 Protection of offeree’s reasonable expectation or reliance (pro-liability).
3. Other factors
 The promotion of consumer protection (pro-liability)
 Control of unfair exclusion clauses (anti-liability)
 Need for certainty

Acceptance

 Acceptance is an unambiguous expression of consent to proposal contained in the offer and has the
effect of immediately binding both parties to the contract.
 Neither party can get out of the contract or vary contents. In addition, a valid acceptance must:
1. Correspond with offer
2. Be in response to the offer (there must be connection between acceptance and offer
3. Be made by an appropriate method and;
4. Communicated to offeror (fixing time of contract formation, crystallising terms and making
withdrawl impossible).

Correspondence of acceptance with offer

Mirror image approach to contract formation requires acceptance to mirror offer. This requirement of
exact correspondence means that a purported acceptance that deviates in any way from offered terms is
unlikely to conclude contract

1. Conditional Acceptance
 ‘Acceptances’ which contemplate further conditions being satisfied or steps being taken, such as a
mere formal contract, no intention to be legally bound and render agreement incomplete and not
binding.

2. Counter-offer kills original offer

 An offeree whose response varies the offer will usually be regarded as having made a counter-offer.
Counter-offer terminates the original offer. If offer is rejected, it is no longer ‘live’ for acceptance.
 On receiving offeree’s counter-offer (rejection of original offer) the offeror is free to deal somewhere.
 E.g. in Hyde v. Wrench, W offered to sell farm to H for 1000 pounds. H said he would only pay 950
pounds and was rejected by W. H then agreed to pay 1000 pounds which also rejected. Held: H
proposal of 950 was a counter offer which terminated the original offer, making it incapable of
subsequent acceptance.
 Offeree can retain power to accept original if court finds that riginal offeror’s rejection of counter-offer
includes renewed offer on original terms; or that offeree’s response was not a counter-offer but
merely a request for information.
 E.g. In Stevenson, Jaques & Co. v. Mclean, M offered to sell S iron at ‘40s per ton net cash’. S asked
whether M ‘would accept forty for delivery over two months, or if not, longest limit you would give’.
 M sold iron to third party. Hearing nothing, S accepted original offerby telegram before M’s
revocation.

3. Battle of Forms
 Terms only bind if recipient of unsigned document has reasonable notice of the challenged term.
 Counter-offer must itself be accepted before parties are bound. There are few problems when there is
a signature or other clear manifestation of acceptance.
 Battle-of-form arises where the parties purport to conclude a contract by exchange of forms
containing incompatible terms (variously called offers, tender,s, invoices, orders, delivery notes and
so on).
 For example, X offers to sell goods on his own standard –form terms and Y accepts by placing an
order on his own terms. X delivers goods accompanied by his own invoice and Y receives goods
without objection.
 Depends on which party fired the ‘last shot’ in the case – party who presents terms last without
provoking objection from the recipient who acts on the ‘contract’ (accepted the terms by the party
offering it) succeeds in binding the recipient on his terms.
 E.g. Brogden v. Metropolitan Railway Co (1877), M sent B a draft agreement for supply of coal. B
amended agreement and returned it. Nothing further was done to formalise agreement  M did not
specify if he agreed B’s terms.
 M ordered coal from B, which B supplied and M paid for  Clearly when M did not send
acknowledgement, contract M’s amended draft term and not B’s.
 When a dispute broke out, M denied any binding contract. It was held that B’s amendment amounted
to a counter-offer which M accepted by conduct when M placed the order
 Another e.g. Butler v. Ex-Cell-O Corporation Ltd. B quoted price for manufacturing a machine for E on
B’s standard terms, with price variation clause.
 E then placed an order on E’s standard form, one without price variation clause. This standard form
had a tear-off slip inviting supplier to acknowledge order is on E’s terms.
 B signed and returned the slip, but also attached a letter stating that they were supplying the machine
on their original terms.
 B relied on this letter to claim an additional sum on delivery of machine.
 E denied any obligation to pay extra sum. Held: Majority of Court of Appeal held that B’s original offer
was met by E’s counter offer (B having sign E’s acknowledgment form), which B accepted when B
signed and returned acknowledgement. B’s accompanying letter is not a counter-offer but as
recognition that E’s terms were different from his.
This can hide the real basis for intent for decisions: No agreement was reached despite objective
interpretation. Letter accompanying B’s signature on tear-off slip and appended terms were to show
that B’s terms was counteroffer.
 E.g. In Tekdata Interconnectors Ltd v. Amphenol td, Court of Appeal reaffirmed normal rule (that an
offer to buy on buyer’s terms followed by an acknowledgement of purchase on the seller’s terms and
delivery would normally result in a contract on seller’s terms), although the rule can be displaced
where parties’ common intention is that some other terms were intended to prevail.
 Possible for court to conclude there is a contract, but on neither party’s terms. In GHSP Inc v. AB
Electronics Ltd, issue was whether contract was on claimant’s terms (imposing unlimited liability on
seller), or on defendant’s terms ( which effectively excluded liability for all consequential loss and
damage). After reviewing case, Justice Burton said both parties were only interested in excluding
themselves from liabilities.

Nexus between offer and acceptance

A valid acceptance must be made in response to a known offer. This mens rea (state of mind)
requirement means that conduct purporting to be an acceptance is ineffective if it is done in ignorance
of the offer, even if it matches the offer. The issue arises in cases of cross-offers and offers of
rewards

1. Cross offers
  Two identical cross-offers made in ignorance of each other do not amount to a contract do not
amount to a contract, unless until one is further accepted. In Tinn v. Hoffman, H wrote to T
offering to sell him 800 tons of iron at 69ss per ton. On the same day, T wrote to H offering to buy
on same terms  Not bind parties
2. Rewards
 A person ignorant of reward offered for his conduct has no contractual rights to the reward
 In R v. Clarke, a reward was offered for information leading to arrest of certain murderers. C was
charged with murders and gave relevant information in order to absolve himself. C’s claim for
reward is rejected because he admitted when giving the information he had forgotten about the
reward.

Method of Acceptance

1. Method of acceptance prescribed

 If offer requires offeree to comply with particular method of cceptance, a purported acceptance that
deviates from this may not bind offeror unless offeror waives his right to insist on compliance.
 However, courts lean towards treating the stipulated mode as permissive rather than mandatory: slow
to conclude that offeror only intends to be bound by stated method of acceptance unless very clear
words are used.
 Offeror will be bound if actual method of acceptance did not disadvantage him (e.g. by occasioning
delay) compared with method prescribed.
 E.g. in Manchester Diocesan Council for Education v Commercial and General Investments Ltd, M
invited tenders on particular form stating that the person whose bid was accepted would be informed
by a letter sent to the address contained in the tender. However, M sent an acceptance of C’s tender
to C’s surveyor. C sought a declaration that no contract was concluded. Court held that mode of
acceptance specified in invitation to tender was not sole permitted means of acceptance. since C was
not disadvantaged by notification to surveyor. Moreover since it was M who made stipulation, M could
waive strict compliance.

2. Acceptance by silence  Restriction to offerors to frame acceptance.

 Silence cannot be inferred from offeree’s silence
1. Silence is ambiguous, often be difficult to infer an intention to accept from it
2. Rejection may not be known to offeror.
3. Acceptance must generally be communicated to offeror so that he knows when a contract binds
both parties.
4. Prevents offeror from exploiting an offeree’s inertia (by imposing liability unless he actively rejects
it.
 Counterpoint:None of these reasons applied on facts of Felthouse v. Bindley;
1. Nephew had objectively manifested his acceptance by informing auctioneer that horse had been
sold,
2. No ambiguity – uncle waived need for communication of acceptance
3. Nephew did not need protection from contractual liability

Rule against acceptance by silence cannot be absolute. Primarily aimed at protecting offerees from
unwanted contractual liability and should not avail an offeror who has invited acceptance by silence
when offeree has relied on this invitation

Sometimes silence is assumed that contract is ongoing, e.g. insurance policy

Communications of acceptance

 General rule is that offeree must communicate acceptance to offeror. Only at that moment
does offeror know that contract is binding and each party know that they can safely rely on
existence of the contract. Communication requirement:
1. Timing: delay between sending and the receiving of acceptance, should offeror’s revocation or
the offeree’s rejection of intervening period be effective?
2. Failure of communication: Which party should bear th risk if acceptance does not reach the
offeror without either party’s fault?
 Answers to these questions have depended on whether method used to communicate is
instantaneous or postal
 Instantaneous (e.g. by telephone), acceptance takes effect when and where it actually comes to
offeror’s attention – offer can be rejected or revoked before that ime.
 Where it is postal – acceptance takes effect when letter is sent, offer cannot be rejected or revoked
afterwards.

1. Two-way instantaneous
 Both parties are present, no delay between sending and receiving of acceptance, any failure of
communication is usually detectable and rectifiable immediately, unless:
i. If face-to-face oral acceptance is drowned out by noisy aircraft flying overhead, offeree must
repeat his acceptance once aircraft has passed
ii. Telephone goes ‘dead’ before acceptance is completed, offeree must telephone back to
complete acceptance
iii. If offeror does not catch clear and audible words of an acceptance or printer receiving telex
runs out of ink, but the offeror does not bother to ask for message to be repeated, it is
offeror’sown fault that he did not receive the acceptance and will be bound
 Where neither party is blameworthy, rule requiring actual communication of acceptance favours the
offeror – no contract if offerree reasonably believes it has gotten to offeror.

2. One-way instantaneous
 Where the condition of simultaneity is met – permits a distinction between two-way instantaneous
communcations ‘where condition of simultaneity is met’ (telephone, face-to-face conversation), and
one-way instantaneous communications where condition of simulataneity is not met (emails, text,
answer-phone messages, faxes or telexes as message arrives almost instantaneously but recipient
does not necessarily access message instantaneously.
 When acceptance will take effect will require a flexible approach, dependent on intentions of parties,
by sound business practice and in some cases by a judgment where risks should lie.
 When it is NOT: When it is sent ( prejudices offferor who may not know of it at that time); when it
actually comes to offeror’s notice (allows offeror too much control over whether and when contract is
concluded. Offeror could revoke his offer without reading acceptance or only read it after
unreasonable delay)
 When IT IS: Reasonable offeror would access message, taking account of all cirumstances. 
Balance parties’ respective interests.
 E.G. SS Co Ltd.. v. The Brimnes. Held: Revocation of offer. If fax was sent to place of business
during ordinary business hours, revocation was effective when it was received on telex machine. 
Ensure that offeror won’t pretend not to see it. If sent after office hours or to non-business premises ,
revocation was not effective at the time received. If mode of acceptance is acceptable to offeror – he
has to check in timely fashion.
 Risk should lie with party best placed to avoid failure of communication. If mode of communication is
within offeror’s control, such as an answer phone, he should bear the risk since he has invited
reliance on it for acceptance. Otherwise as with emails, which are processed via servers outside the
control of parties, failure which is neither party’s fault or responsibility – risk lies with offeree.

Assessment of whether approach is suitable? 4 steps to do during legal analysis:

 Issue: Is there a contract? If particular issue is not in dispute just because the facts are clear don’t
deliver the obvious.
 Rule: Offer (intention manifested ) and acceptance (intention manifested)
 Application: Would you be embarrassed to say that in front of the judge – reasonable argument or too
far-fetched. Sometimes there may even be utility for creativity.
Application is using of data and cases as a precedent, particularly relevant when talking about
fuzzy kind of rule
 Conclusion: Can a case for offer/ acceptance can be made out?

Don’t blindly apply Electronic Transaction Act for transactions relating to 2010 onwards.

 TCH: Postal acceptance can be used. However, try to treat emails to be more like ordinary
communication because postal acceptance rule is weak. Messages sent via post has to be
subjected to delay while teletype there’s instantaneity. However, one could also argue that
message is only effective when received  Therefore general rule applies  reasonableness
has to be expected from both parties – offeree sending out the acceptance should not be
sending out a mail late at night expecting to be replied that hour while offeror should not
purposely ignore the mail despite it coming in.

 So when is the effective receipt? – S13(2): Assuming electronic records is email while
electronic address is email address. S13(3) concept of retrieval is separate from awareness.

 Law is unclear: whether acceptance is valid when received or sent. . No statutory provision to say
that. Maybe can follow postal acceptance rule etc. or Section 13: It only addresses the time of
sending and receipt, does not address. ETA also has circular definition which is poorly defined.

Impact of Electronic Transactions Act 2010

a. ETA 2010 and predecessor

 The Singapore Parliament enacted the ETA 1998. The ETA 1998 was based in the main upon
the UNCITRAL Model Law on Electronic Commerce 1996 as well as the Illinois Electronic
Commerce Security and Utah Digital Signature Acts.
 In 2010, ETA 2010 was enacted to, inter alia, align the law on electronic transactions with the
United Nations Convention on the use of Electronic Communications in International Contracts.
 Other purposes
o To facilitate electronic communications by means of reliable electronic records
o To facilitate electronic commerce, to eliminate barriers to electronic commerce resulting
from uncertainties over writing and signature requirements, and to promote the
development of the legal and business infrastructure necessary to implement secure
electronic commerce
o To facilitate electronic filing of documents with public agencies, and to promote efficient
delvery by public agencies of services by means of reliable electronic records.
 o To minimise the incidence of forged electronic records, intentional and unintentional
alteration of records, and fraud in electronic commerce and other electronic transactions,
o To help to establish uniformity of rules, regulations and standards regarding the
authentication and integrity of electronic records
o To promote public confidence in the integrity and reliability of electronic records.

b. Application of ETA 2010

 The First Schedule shall not apply to any rule of law equiring writing or signatures in any of the
matters specified in the second column of that schedule.

c. Relevance to contract formation

i. Application and consent
 Section 5 of ETA 2010 clarifies that the parties have the autonomy to decide whether to exclude or
agre to the use of electronic transactions, or to agree to additional requirements as to the form or
authentication of a contract or transaction.
 This elaborates upon the similar section 5 of ETA 1998, which merely provided that the parties could
carry by agreement any provision in Part IV of the ETA 1998, which concerned electronic contracts.
Section 5 gives effect to the fundamental principle of contract law in giving effect to the parties’
intention.

ii. Time and place of despatch and receipt

 Section 13 of the ETA 2010 modifies section 15 of the ETA 1998 on when and where an
electronic communication is deemed to have been despatched or received.
 Section 15 provided that the despatch of an electronic record occurred when it entered an
information system outside the control of the originator or the person who sent the electronic
record on behalf of the originator
 Section 13 now provides that the time of despatch occurs when the electronic communication
leaves an information system under the control of the originator. An illustration of this rule is that
when a sender sends an email from his office account to an addressee in another company, the
time of despatch is when the email leaves the office’s server  Rules better fit for internet
communication and improve upon ETA 1998.
 However, where the electronic communication does not leave an information system controlled
by the originator, such as a posting on an Internet website, the time of despatch is when the
electronic communication is received.
 Insofar as the time of receipt is concerned, section 13 deals with three situations concerning
whether the addressee has designated an electronic address for receipt
o If addressee has designated such an address, receipt occur at the time when the
electronic communication becomes capable of being retrieved by the addressee, which is
different from ETA 1998 that specified the receipt occurred when the electronic record
entered the designated information system.
o If the addressee has designated an electronic address, and the communication is sent to
an electronic address not so designated, receipt occurs at the time when the electronic
communication becomes capable of being retrieved by the addressee and the addressee
becomes aware that the electronic communication has been sent to that address.
  This is similar with the previous position in ETA 1998. However, it may be said
that the ETA 1998 in stipulating that receipt occurred upon actual retrieval, did
not deal with the slightly different concept of awareness of possible receipt.
o If an electronic address has not been designated, receipt occurs at the time when the
electronic communication has been sent to become capable of being retrieved by the
addressee and the addressee becomes aware that the electronic communication has
been sent to that address.
 This is different from ETA 1998 which provided that receipt occurred in this
situation when the electronic record entered an information system of the
addressee.
 However, not all forms of electronic communications may in fact be instantaneous: electronic
records may be collated and transmitted in batches, may be saved in computer systems for re-
transmission, or may even be forwarded from computer to computer when recipient requests his
electronic messages. Looked at in this light, it may well be the case that the “postal acceptance
rule” might be appropriate.
 Section 15 is intended to prescribe legal rules to allow parties to ascertain the time and place of
receipt of information, which would otherwise be difficult to ascertain if rules that were designed
for non-electronic communications were applied to electronic communication techniques.
o However, such impact is by way of supplementary effect. It must be determined whether
or not the general rule or the postal acceptance rule apples, then can the guidance in
section 15 be utilised.

iii. Invitation to make offers

 Section 14 of the ETA 2010 now provides that an electronic communication proposing to
conclude contracts and addressed to the world at large is considered an invitation to make offers,
not offers capable of immedae acceptance, unless it clearly indicates the intention of the party
making the proposal to be bound in case of acceptance.
 New rule brings online retailers to the same rules governing offer and acceptance as merchants
displaying goods in physical stores.

iv. Automated message system

 Section 15 of the ETA 2010 provides that contracts formed through the use of automated
message systems are not to be denied validity or enforceability solely on the ground that no
natural persons had reviewed the action of the system or the result.
 This is a significant qualification to the operation of section 15. It presupposes the formation of a
contract, which in turn implies the application of substantive rules of offer and acceptance.
 Put another way, even if correspondence had been exchanged in an electronic environment, it
does not automatically mean that a contract had been formed pursuant to section 15.
o E.g. if reply to an electronic letter of offer had been to qualify that offer, then no contract
would have been formed.

3. Acceptance by post
 A letter of acceptance is posted, arrives some time later, and later again, is read by the recipient.
When does it take effect:

i. Postal acceptance rule

 Where it is reasonable for offeree to accept by post, acceptance takes place when offeree posts his
acceptance (Adam V. Lindsell)
 Letter must be properly addressed (evidence with date and time of posting). The offerors must not
have precluded by terms of the offer  not applicable to registered mail because through registered
mail offeree can find out about the status of the mail.
a. Offeror is bound before he knows of acceptance, even if its arrival and even if he never actually
receives it. Risk lies with offeror
b. Offeror cannot revoke his offer after offeree’s acceptance is posted. In Byrne v. Van Tienhoven, V
sent an ofer to sell tin plates on 1 October, When it arrived on 11 October, B immediately send
out acceptance, concluding contract on 11 October. However, on 8 October, V sent a letter
revoking its offer; this reached B on 20 October.  Held: Postal acceptance does not apply to
revocations
ii. Some justifications for postal acceptance rule

For
Postal office is agent of both parties, so
communication to agent is as good as
communication to offeror.
Offeror who initiates negotiations through the
post should assume risk that postal acceptance
may be delayed/ lost.
Offeree is less likely to detect acceptance letter
has gone astray, because has gone astray,
because he expects his letter to arrive in the
normal course and expects no further
communication to conclude contract. Offeror
waiting for a responseis more likely to inquire if
he does not hear from offeree (offeror is best risk
avoider)
Offeror can always contract out of postal
acceptance rule (stipulate that acceptance only
take effect when it is actually communicated to
offeror)
Once offeree posts acceptance, he cannot know
whether and when the offeror acquires notice of it
, unless the offeror writes to tell him of its arrival.
Disadvantages offeror by allowing offeree to rely
on existence of a contract before oferor can,
barring offeror from revoking his offer before he
can know of acceptance.
Limitations
However, postal office is an agent to transmit, not
to receive contents.
However, offeree may just as likely have initiated
postal negotiations  Use of postal system is not
unusal and does not
However, offeror may equally interpret absence
of response as rejection of offer
The fact that parties can contract out of a default
rule is no justification for rule
Only multiply problems of communication sought
to be resolved.Offeree will be disadvantaged
since offeror can safely rely on existence of a
contract while offeree remains vulnerable to
revocation until he knows acceptance has
arrived. This leaves timing to offeror, may not
admit to receiving acceptance and may revoke

 Postal rule also does not apply where it is expressly/ impliedly in contract.

Unilateral contracts

Contracts are usually bilateral, involving exchange of promise. However, a contract may be unilateral,
involving an exchange of a promise for a completed act (or refraining from acct). Distinction matters in
determining i) what constitutes valid acceptances and ii) when offers are revocable

1. Acceptance
 Unilateral contracts only concluded by performance of stipulated act (e.g. A agrees to pay B for
running).
 Unilateral offer is only accepted when B performs stipulated act > offeree does not need to
communicate to offeror his intention to do so.
 E.g. Carlill v. Carbolic Smoke Ball, C accepts offer when she buys and uses smoke ball, although she
is entitled if she catches flu. She need not communicate to conclude contract, however she need not
communicate to CSB to conclude contract.

2. Revocation
 Unfair for offeror to revoke contract once he knows that offeree has begun stipulated act.
 Injustice lies in offeree’s induced reliances and in some circumstances’ unpaid-for benefits
 Obligation on offeror not to revoke offer once offerree has unambiguously begun performance of
stipulated act or abstention, so offer can no longer be withdrawn.
 E.g. Errington v. Errington: Father promised son and in-law that if 2/3 mortgage paid, house would be
theirs. Father died by CA held: representatives not to revoke arrangement despite arrangements
being already underway and large part of it completed.
 Denying implied obligation barring revocation e.g . Luxor Ltd v. Cooper House of Lords denied real
estate agent’sclaim for 10,000 pound commission payable on completion of a sale when agent found
buyers found buyers, owners did not want to sell. Comission was equivalent of Lord Chancellor’s
annual payment for work done within eight or nine days. Held: The risk in the hope of a substantial
rumeneration for comparatively small exertion
 E.g. Court of Australia in Mobil V Well Come International  Allowed Mobil to revoke offer to give
nine additional years of franchise free if they obtained 90% in annual Circle of Excellence judging.
Held: rejected suggestion that attainment of 90% in the first year = 90% for all six years  so does
not bind Mobil not to revoke.

Revocation by offeror

Offer is terminated as soon as the offeree communicates his rejection of it to the offeror (e.g. counter-
offer). Rejction only takes effect when it is actually communicated to offeror. Logically lead to undesirable
conditions:

 Where offeree posts acceptance, changes mind and notifies offeror of rejection by speedier means,
parties still bound by postal acceptance.
 Offeree posts rejection, then changes his mind and posts his acceptance before his rejection letter
arrives, can bind offeror, although his acceptance arrives after his rejection letter.

Lapse of offer

 Offer may lapse on:

1. Expiry of stipulated period for which offer is open
2. Expiry of express/ implied condition other han time (while stocks last)
3. Passage of a reasonable period of time where no time limit or other condition is imposed.
Reasonable depends on all circumstances, including the urgency of the matter, the nature of
subject matter, practice of trade and mode of communication used.

Death of offeror or offeree

 Offer is terminated by death of offeree/ offeror. However Errington v. Errington shows offer remains
open if offeror could not have terminated the offer during lifetime, and performance of contract does
not depend on offeror’s personality, but can be satisfied out of estate.
However, such rule is too rigid – leaves offeree unprotected contracts other than those for personal
services are usually enforceable against party’s executors and an option can be exercised by option
holder’s estate.Same for offeree estate.

Change of circumstances

1. The court can imply a condition into the offer that the offer will lapse if subject matter of contract is
not, at time of acceptance, in substantially same condition as it was when offer was made. In
Financings Ltd v. Stimson (1962), this meant that no valid contract was concluded when after buyer
offered to buy car from finance company, the car was stolen, damaged and subsequently recovered
and sold for 224 pounds
2. An offer can lapse if there has been fundamental change in basis of offer.
3. When it is not fully operational for retrospective proceedings. In Norwest Holdings v. Newport Mining,
seller offered to sell phosphate mines for 10 million. However, earthquake and mines were damaged.
Buyer refused to pay and seller resold to another for 4.5 million , seller sued for remaining amount–
Held: as seller could not deliver at that time , buyer not bound to pay

Assessment of Revocation
 Bilateral: Revocation done before contract is done. Know who the parties are for the revocation.
 Unilateral: Revocation are problems for unilateral. This is because there is difficulty in determining
when the start of acceptance is and the identity of the offerees?
 Revocation by means of broadcast by which was the same means of broadcased initially. Even
though reader does not know of revocation, so long as he has not started, revocation is completed.
However if he has started, that is the problem.
 Not too many cases in case law for Singapore in cases offeror revokes offer in context after action.
Must reach highest court to make it become “law”  purist point of view. However pragmatically
speaking, it is unlikely courts would do so as they do not want to upset the precedent, e.g. law of
unjust enrichment.

Assessment of mirror image approach

Criticisms of mirror image approach

1. Unsuitability: cases that don’t fit

 Mirror image analysis purports to be of general application – many contracting situations do not fit
easily into normal analysis of contract being constituted by offer and acceptance (Gibson v.
Mancester CC at 297)

2. Insufficient to explain the conditions of enforceability; and

 Agreement must be sufficiently complete and certain,
 Must be to create legal relations
 Agreement must satisfy one of the criteria of enforceability: consideration, formalities, or promissory
estoppel

3. Misleading as to what the courts are really doing.

 Objective test of intention ‘bites’ precisely when a party’s actual intention differs from his apparent 
enforceable contract does not reflect genuine consensus
 Courts can cure agreements which are vague or incomplete, by interpretation and gap-filling, but they
do so by reference to factors external to parties’ matching intentions
 Situation specific rules may contradict objective test as to whether there is an ‘offer’ or an
‘acceptance’. Or courts may find agreement despite evident lack of consensus.
 Courts may find that an agreement has come into existence before one of the parties can know of
theother’s agreement.

4. Backward reasoning
 Judges often give impression that they reason deductively (i.e. forwards), assessing the facts of the
case for compliance with legal requirements, thereby arriving at solution (offer + acceptance =
agreement).
 Reinforced that judges merely apply settled rules without reference to justice of rules/ outcomes they
yield.
 Many cases make more sense when seen in terms of courts’ attempt to balance competing demands
of: giving effect to parties intentions; promoting certainty and preventing unfairness.
 Judges reason back from sense of ‘right’ solution to ‘find’ the presence or absence of offer and
acceptance necessary to justify it. Reasons must be sought elsewhere other than parties’ conduct

Policy considerations

i. Respecting parties intentions

 Courts are concerned to whether parties have committed to a binding contract
 Courts are also concerned to give parties room to manoeuvre without risk of making binding
commitments. This can be done by finding a particular communication to be less than an offer, or by
concluding that the agreement was too uncertain or lacking in intention to create legal relations
ii. Certainty
 Sufficient certainty in agreement is necessary in order to enforce it.
 Rules on how specific and common conduct will normally be interpreted (e.g. display, advertisement,
postal acceptance) allow parties to know where they stand.
iii. Preventing unfairness
 Some rules discourage opportunism and encourage fair negotiating practices – silence is no
acceptance
 Use of unilateral contract analysis and two-contract device prevents one party from acting
inconsistently with reasonable expectations or reliance induced in other party
 Courts are more ready to impose contractual liability to protect reliance where a party has
commenced performance of an apparent/ anticipated contract.
 Unfair terms can be excluded by moving forward time of contract formation to before offending
clause.

Offer and acceptance still dominant approach:

i. Many contracts are naturally susceptible to this analysis

ii. Analytically convenient and provides a degree of certainty about general framework that
courts will adopt in resolving questions about existence or contents of contracts
iii. Considerable flexibility is built in to take account of other policy concerns.
iv. Offer and acceptance is well established and has weight of authority.

Certainty

Even if there is sufficient correspondence between offer and acceptance, there is no enforceable contract
if
  agreement expressly anticipates need for further agreement (one more step problem);
 Impliedly does so because it is too vague; or is silent on material points.
 Judicial task is to draw line between uncertainties that are:
 Curable, by a process of judicial construction of parties’ implied intentions and those that are
 Incurable, being a mere ‘agreement to agree’, where agreement is unenforcemable, but a
claimant who has done work in anticipation of concluded contract may be able to sue on
promissory estoppel.
 Agreements which are expressed to be ‘subject to contract’/ subject to solictor’s advice indicate there
is no binding contract. However, presumption of unenforceability is rebutted by clear evidence to the
contrary. Court may enforce agreement although it is expressed to be subject to signing of mutually
aggreable contract if:
 Expression is meaning less and can be severed because there is nothing left to be negotiated and no
need for any futher formal contract, and both parties had proceeded on this basis (e.g. stoner v. Man
CC – ‘ send you the agreement signeed on behalf of corporation in exchange’ – contract was formed
on S’s return of signed agreement.
 There is a clear intention to be bound and non-signing party’s subsequent words and conduct amount
to waiver of stipulated step up: RTS Flexible System Ltd v. Molkerei GMBH (2010): Entered into letter
of intent while full contract ineffective until each party had executed and exchanged counterpart.
Substantial work was carried out and draft agreement was varied in important respects, R claimed
payments for work done at M’s factor – Held: clear evidence of contract because parties agreed to
work with relevant contract terms.
 The more complicated the subject matter, the more likely parties want to enshrine contract in some
written document to be prepared by solictors. No binding contract unless formal contract is duly
executed.
 If parties’ intentions have changed so that need for an executed written agreement is expressly or
impliedly waived, courts are more likely to find if all essential/ important terms have been agreen and
substantial work done.
 Where certain terms of economic significance have not been agreed, parties may be held to have
agreed separate preliminary contract to allow work begin, although parties are unlikely to have left it
for future decision for unagreed term if it was important
 In absence of binding contract, work done may give rise to restitutionary claim for recompense if
defendant has received incontrovertible benefit, e.g. immediate financial gain/ saving of expense from
claimant’s services, where defendant requested claimant to provide services/ accepted them when
offered (despite having the ability to refuse, knowing that services are not provided freely)
 No award will be made if claimant took risk of doing work in order to obtain and then perform contract.

Vagueness and incompleteness

1. Bias towards cure

 Judges show willingness to cure uncertainty in order to uphold contracts. Four reasons to support this
 Imprecision in business practice. Many business people refrain from insisting on precise terms for
fear of losing deal Hope no serious problems will arise and that if they do, amicable and informal
solutions can be reached.
 Necessity and difficulty of building in flexibility: Parties my try to agree terms that will allow some
flexibility to accommodate market fluctuations and other and other future unknowns if contract was to
supply goods over long term. Building and civil engineering contracts often contain terms allowing
variations in work to be done, time for performance, or price in view of specific changes. – however
not all contingencies may be encapsulated and may be expensive to do so. Courts will fill gaps
 Protecting reliance: reluctant to deny existence of a contract where parties have commenced
performance.
 Unmeritorious pleas of uncertainty: courts have little sympathy for parties who seek to escape from
contracts for unmeritorious reasons (where market fluctuations made contract disadvantageous for
them or can sell for more/ buy less elsewhere), especially if they have already received benefits from
contract.

2. Overview of techniques for overcoming uncertainty

 Courts fill gaps and resolve vagueness by reference to: any previous dealing, customs of trade,
standard of reasonableness; technique of severance; nature of undertaking; workability/
substitutability of any agreed but defunct method for ascertaining material terms.

3. Previous dealing, custom and reasonableness

 Where sufficient intention to bound can be inferred from reliance of parties on the contract, it will be
difficult to submit that contract is void for vagueness/ uncertainty especially if transaction is executed.
 E.g. Hillas v. Arcos – Seller tried to escape from ‘100,000 standards for delivery during 1931’ for
plywood for unenforceable meaning. Held: previous dealing of 22,000 standards of softwood in 1930,
customs in timber trade and standard of reasonableness (reasonable assortment of timber of kinds,
qualities, sizes taking into account season output.
 E.g. Foley v. Classique Coaches: F sold C some land on basis that F will buy patrol ‘at a price agreed
by parties from time to time. However, C tried to backout. Held: C bought petrol from F before
denying arrangement, but refusal to enforce petrol agreement deprive F of part of price of selling land
 Where parties are silent as to price of goods or services supplied, buyer must pay reasonable price
 However statutes do no apply where parties are not silent but have stipulated they will agree the price
later.

Sometimes courts may also think that uncertainty is incurable:

 Agreements to sell goods on ‘hire-purchase terms’ or ‘subject to war clause’ have been denied
enforcement for vagueness (Scammell and Nephew v. Ouston, Bishop & Baxter v. Anglo-Eastern
Trading and Industrial Co Ltd).
 Courts could not say which of many different varieties of such terms intended (e.g. Raffles v.
Wichelhaus ‘ex peerless from Bombay – did not say which ship
 In Baird Textile Holdings Ltd v. Marks & Spencer plc, M &S terminated arrangement with B, main
supplier of clothing for 30 years. B’s claim of implied contract not to terminate except on reasonable
notice of three years was denied because there was no objective criteria by which court could assess
what would be reasonable – either quantity or price and would contradict M& S deliberate abstention
from committing itself to long-term contract in order to maintain flexibility.

4. Severance
 If essential aspects of transaction are agreed, vague words can be severed as meaningless and
redundant and remaining agreement enforced
 If the parties clearly regard themselves as bound, the law should honour this lest defaulter seach for
some meaningless clause to free ride

5. Agreements to negotiate
 Parties may expressly agree to negotiate on particular matter with view to reaching agreement, or
they may agree not to negotiate with 3rd parties over particular matter.
 House of lord held that agreements to negotiate are unenforceable for uncertainty; agreements not to
negotiate with 3rd parties are enforceable if there is a time limit.
 E.g. Walford v. Miles contained both. Parties agreed that if W provided an assurance from bank
confirming financial resources to pay M’s asking price for business, M wold a) break off negotiations
with third party and b)would deal exclusively with W with view to concluding deal.
 M sold his company to 3rd party eventually and court awarded misrepresentation damages but held:
agreements not to negotiate with 3 rd parties are only enforceable if there is a time limit on duration,
otherwise enforcement may indirectly impose duty to negotiate in good faith
 They would not imply a duty to negotiate in good faith which puts party in breach if he walks away
from negotiations without good reason. Three reasons:
 Contract about self-interest – duty to negotiate in good faith seen as repugnant to adversarial position
of parties involved who are entitled to act self-interestedly. However, this assumes that negotiations
are always adversarial and competitive, when by agreeing to negotiate in good faith, parties have
chosen a cooperative, problem-solving mode of negotiation. Party will take incentive to take expense
of putting proposal if he knows that he will then have a period of time when he can exclusively
persuade other party to contract with him. To deny enforcement of term contradicts reasonable
expectations of parties.
 Difficulty in determining whether breach has occurred: a duty to negotiate in good faith may require
party to actively commence negotiations and participate in them, consider and put forward options,
not take advantage of other’s known ignorance and not withdraw from negotiations without giving a
truthful reasonable which should not be wholly unreasonable.
 Damages for breach impossible to quantify – if everything was subject to contract; an ex

6. Workability of any agreed mechanism for ascerntainment

 Standard of reasonableness cannot be used to fill gaps where parties expressly agree to agree later
– an agreement between two parties to enter into an agreement in which some critical part of contract
matter is left undetermined is no contract at all (May and Butcher v. R 1934). However this has been
criticised as essential terms omitted can be identified and especially if parties intended to be bound.
 Courts are slow to invalidate contract for uncertainty where parties have agreed workable criteria
(formula etc.)for resolving matter left unresolved. If parties fail to agree or if designated machinery for
ascertainment breaks down, court can step in and apply agreed formula, unless agreed machinery is
‘essential’ – failure for resolving the uncertainty is incurable if parties only intend to be bound when
stipulated machinery fills the gap.
 In Sudbrook Trading Estate Ltd v. Eggleton (1983), held: machinery for appointing valuers was not
essential to ascertaining of a fair and reasonable bid

7. Control of contractual discretion

 An agreement may leave particular matter to be determined by one of the contracting parties. This
discretionary power over rights/ liabilities of other party may be conferred in an unqualified ways using
terms such as ‘satisfied’, ‘approved’ , ‘at his sole discretion’.
 Courts have also set minimum standards by which discretionary contractual power must be
exercised.
 However, requirement of honesty and reasonableness in exercise of contractual discretion will not
automatically be implied into commercial contract, but courts wil imply such a term where
circumstances require it.