CONTRACT LAW

LARGE GROUP 1
Student Guide

Introduction to Module
Elements of Contract Formation

Context

Individuals and businesses enter into many different types of contracts on a daily
basis for all sorts of reasons and purposes. Most are based upon a contract, whether
in the form of a written agreement or an oral one. One party offers to provide services
or goods and the other party accepts that offer and provides something in return for
those goods or services. Contracts really are an integral part of modern society.
Lawyers are rarely involved at the point of formation of contracts unless the value is
substantial or the proposed transaction is complex.

The vast majority of contracts work out just fine. Clearly, though, when things do go
wrong, knowledge of contract law becomes very useful. Who is liable? Does the
contract itself cover what the parties should do? Are any legal rules imposed by the
state that provide a solution? While most people do not have a detailed
understanding of their rights under ‘contract law’, many have enforced their rights by,
for example, returning a defective product and being refunded the purchase price.
Where there has been a dispute about what has been agreed or whether there was
any breach of the agreement, then lawyers may be required to determine such
issues, as well as what remedies may be available to the innocent party. They will
need to establish the relevant facts and apply legal principles that have been
established through both case law and legislation.

In this Large Group, you will gain an overview of the module and appreciate some
the key legal topics that you will learn on the course. You will then consider in more
detail some of the main legal principles relating to contract formation and learn some
key themes relating to offers and the termination of offers. Finally, you will be
introduced to specific rules on tenders, auctions and unilateral contracts.

Outcomes

By the end of this Large Group you should be able to:

1. Summarise the topic content and structure of the Contract Law Module.

2. Identify the main elements required for the formation of a valid contract.

3. Explain basic principles of law relating to offers, auctions and tenders.

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 1. INTRODUCTION TO MODULE

1.1 Module Overview of Content

1.2 Contracts in everyday life

Activity 1: Contracts in everyday life

1. List at least five contracts you have entered in recently.

2. Have you ever entered a contract where the terms and conditions have been
drafted by a lawyer? Yes or No?

2. ELEMENTS OF CONTRACT FORMATION.

2.1 Agreement = an offer which has been accepted.

Offer – a definite promise to be bound by specified terms

Acceptance – an unqualified expression of assent to the terms of an offer

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2.2 Intention to create legal relations

Rebuttable presumptions

 Commercial agreements there is a strong presumption the parties intend

the agreement to have legal consequences

 Social/domestic agreements the presumption is that the parties did not

intend the agreement to have legal consequences but may be rebutted
depending on the circumstances.

Activity 2

1.Think of factors that might influence you to take legal action against a friend or
family member. Do you know of anyone who has sued a friend or family member?
If so, think what sort of factors might have prompted them to do so.

2.Write on the whiteboard one factor you have identified.

2.3 Consideration i.e. something given in exchange for the other party’s
promise.

3. AGREEMENT: OFFERS

3.1 Offer + Acceptance = Agreement

Activity 3: Offer and acceptance?

You have not yet considered the technical rules on offer and acceptance, but you
should be able to make a judgement on where and when an offer is accepted in each
of the situations set out below. To do this you effectively need to identify ‘the point of
no return’ ie where the parties become bound to a deal.

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1. You stop at a self-service fuel station and fill the tank of your car with petrol, then
go into the fuel station kiosk to pay. When do you become bound to pay for the fuel?

2. You park your car in a multi-storey car park. As you enter, a machine punches out
a ticket (which is time stamped). Then a barrier lifts to allow you to drive in. Payment
is made on exit to a man in a booth. The car parking charges depend on the length of
the stay. When do you become obliged to pay car parking charges?

3. You look at computers for sale on a website. At which of the following stages do
you think the contract is made?

A. You put a particular computer in to your virtual basket

B. You enter your payment details and click ‘Buy now’.
C. You receive the confirmation e-mail.
D. The goods are dispatched and you are notified.

3.2 Definition: Offer

“.. an expression of willingness to contract on certain terms, made with the

intention that it shall become binding as soon as it is accepted by the person to
whom it is addressed.”

(Treitel, The Law of Contract)

3.3 Distinguish from Invitation to Treat

 Goods on display

 Advertisements

4. TERMINATION OF OFFERS

4.1 Revocation
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  An offer may be revoked (ie withdrawn) by the offeror at any time before
acceptance

Routledge v Grant (1828)

 Unless something has been provided in return to keep the offer open

Mountford v Scott (1975)

 Revocation only takes effect when communicated to the offeree

Byrne & Co v Van Tienhoven & Co (1880)

 Communication of withdrawal of an offer by telex is effective when it

could be read, rather than when it is in fact read

The Brimnes (1975)

 Shipowner right to withdraw a ship by a given day if the hire fee was not paid on
time;
 Notice of withdrawal of the ship was sent by telex;
 Notice received during office hours at 5.45pm;
 Notice not read until the next morning (which would have been too late to give
the notice).

Decision:

 Communication of revocation does not have to be by, or with the

authority of, the offeror

Dickinson v Dodds (1876)

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Activity 4: Analysis of case facts - Dickinson v Dodds

Watch the Dickinson v Dodds media clip. Identify:

a. what was the offer made;

b. when it was stated to be open until;

c. when the offer may have been revoked;

d. when it was purportedly accepted.

Decision:

4.2 Rejection

 Implied rejection by counter-offer

Hyde v Wrench (1840)

4.3 Lapse

 An offer may lapse after a specified period or on the occurrence of a

specified condition.

 If none, after a reasonable time.

Ramsgate Victoria Hotel Ltd v Montefiore (1865-66)

 Offer was made to purchase shares in the Ramsgate Hotel company by

Montefiore (M) in early June;
 M heard nothing until late November;

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  Informed that he had been allotted shares in the hotel company;
 M refused to accept them;

Decision:

5. UNILATERAL CONTRACTS

5.1 Unilateral Contracts

A promise in return for an act. The promisor is bound to perform if, and only if, the
person (or persons) to whom the promise is made performs the specified act.

Rewards

Distinction between unilateral and bilateral contracts

Unilateral A promise (offer) in return for an act (acceptance). Acceptance of the

offer is performing the act.

Bilateral An exchange of promises between two parties immediately binding

Carlill v Carbolic Smoke Ball Co (1893)

Case determined many points of law, including analysis of unilateral offers.

 Smoke Ball Company advertised for sale a smoke ball remedy to prevent flu.
 Offered reward of £100 to anyone who used the remedy and contracted flu.
 Confirmed they had deposited £1,000 in a bank account ready to make any
payments under their promise.
 Mrs Carlill purchased the Smoke Ball remedy and completed the prescribed
course. She contracted flu and contacted the Company to claim the reward.
 The Company refused to pay her.

Decision:

Activity 5

Remember the general rule - revocation must be communicated (Byrne v Van

Tienhoven). The offer in Carlill v Carbolic Smoke Ball Co. was made to the general
public. How, if at all, do you think offers to the public may be revoked?

1. They cannot be revoked because it is impossible to contact everyone you

saw the offer.
2. They can be revoked via the social media accounts of the offeror as

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 everyone has access to social media.
3. They may be revoked by a notice of similar prominence published in the
same place.

6. AUCTIONS AND TENDERS

6.1 Auctions

s57(2) Sale of Goods Act 1979

 The bid is an offer which the auctioneer may accept or reject

 A sale by auction is complete on the fall of the auctioneer’s hammer

 Auctions without reserve

 An offer of a unilateral contract by auctioneer (ie a promise to accept the

highest bid) is accepted by the highest bidder

Barry v Davies (t/a Heathcote Ball & Co) (2000)

 Auctioneer was instructed to sell two machines.
 Informed Mr Barry the sale was to be ‘without reserve’.
 The machines were new and had a list price of £14,000 each.
 Mr Barry was the only person interested in buying them, he bid £200 for each
machine.
 The auctioneer refused to accept his bid and withdrew the machines from the
sale. Mr Barry sued the auctioneer for breach of a unilateral contract.

Decision:

6.2 Tenders

 Tenders are offers, which may or may not be accepted.

Spencer v Harding (1870)

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Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council (1990)

 Blackpool BC sent invitations to tender to a seven interested parties (including

the Aero Club) for the operation of pleasure flights. The tender process was
very prescriptive.
 The Aero Club was the current holder of the concession and had won it on
three previous occasions
 Aero Club submitted a bid in time, in line with process.
 In error, its bid was not considered.
 Aero Club sued for breach of an implied promise that a tender, returned on
time, would at least be considered.

Could an invitation for tenders be considered a unilateral offer?

Decision:

7. Workshop 1/Unit 1 Engage

 Overview of preparation.

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