BUSINESS LAW

ATTY. CHRISTIAN GEORGE LLANES MELITANTE, BSBA, LLB, MBA,

REALTOR
What is the General Rule relating to Omissions:

• A duty is owed where it would be reasonable to act

• A duty is owed unless it is unsafe to act
• A duty is only owed by professionals in their calling
• No duty is owed for a failure to act
• All of the Above
The Following are the different courts in Common Law, except:

• Court of Appeals
• High Court
• County Court
• Crown Court
• Magistrates Court
Which of the following does not connote a Barrister:

• Wears a Robe
• Has lower public exposure
• Employed
• Specialist in Knowledge
• Less Public Access
Consideration is:

• The promise to do or not to do something

• The price for which the price of something is bought
• The promise thus given for value is enforceable
• A, B, and C
• A and C only
Which of the following is a Sufficient Consideration?

• A son promised his father to bore his father with complaints in exchange
for the father’s promise to discharge son’s debts
• A promise to make payment for the services done a week ago
• Performance of a Duty bound under the law
• All of the Above
• None of the Above
Which of the following is not a Division of the High Court:

• Family
• Chancery
• Queen’s Bench
• All of the Above
• None of the Above
It refers to the remarks of a judge which are not necessary to
reaching a decision, but are made as comments, illustrations or
thoughts.

• Canon Of Interpretation
• Ratio Decidendi
• Stare Decisis
• Obiter Dicta
• Judicial Precedent
Refers to Full-time judges who deal with the majority of
cases in the county courts.

• District Judge
• Circuit Judge
• High Court Judge
• Court of Appeal Judge
• Supreme Court Judge
Refers to an untrue statement of past or existing fact made by one party to
the other party before or at the time of making the contract, which is
intended to and does induce the representee to enter into the contract

• Negligent Misrepresentation
• Actionable Misrepresentation
• Innocent Misrepresentation
• All of the Above
• None of the Above
Which amongst the following is not a concept of Common Law?

• Less Prescriptive
• Judicial Decisions are binding
• Extensive Freedom of Contract
• All of the Above
• None of the Above
What test is used to decide whether the defendant owes a duty of
care?

• Alcock Test
• Objective Test
• Caparo Test
• Neighbour test
• None of the Above
Refers to offers that are not in the nature of an Invitation to
Treat for being made to the world at large:

• Bilateral Contract
• Unilateral Contract
• Reciprocal Contract
• None of the Above
• All of the Above
Terms in a Contract can be implied by, except:

• Court
• Statute
• Usage of Trade
• Custom
• None of the Above
The following are the parameters to state the quality of condition of a
product, except:

• Finish
• Appearance
• Safety
• All of the Above
• None of the Above
It refers to the document that provides details of a
company’s bid to perform a service or to buy or sell goods:

• Sales Invoice
• Offer
• Purchase Order
• Tender
• Advertisement
Which of the following falls within the jurisdiction of a
County Court:

• Kidnapping
• Grave Injury
• Trespassing
• Rape
• Murder
The following are ways to terminate an offer, except:

• Counter-Offer
• Acceptance
• Revocation
• All of the Above
• None of the Above
Which of the following is not an exception to the communication
rule:

• Terms of the Offer

• Conduct of the Offeror
• Postal Rule
• All of the Above
• None of the Above
The following are elements of a Contract, except:

• Offer
• Intention to create legal relationship
• Consideration
• Capacity
• Certainty of Terms
Statement 1: An Offer will continue until terminated.

Statement 2: Acceptance must be reasonably communicated

to the offeree.

• Both statements are true.

• Both statements are false.
• No. 1 is false, No. 2 is true.
• No. 1 is true, No. 2 is false.
Question:

Alan owns a one-man business organizing guided outward-bound trips in the

North York Moors. A trip will involve hiking and foraging. Alan’s trips are
offered throughout the year and take place in all weather conditions.
Charlotte booked a day trip with Alan for herself and Darren, her twin
brother, as a joint-birthday celebration. The trip was scheduled for late
January.
Charlotte had learnt about Alan’s trips through his website, which included a
link to the business’s terms and conditions Charlotte made her booking over
the telephone and, in due course, she received a confirmation in the post. On
the back of the confirmation letter was an extract from Alan’s terms and
conditions stating:
Customers participate in Alan’s holidays at their own risk. Alan excludes any
liability, whether caused by breach of express or implied term, for loss
suffered by customers on one of Alan’s holidays.
On the day of Charlotte and Darren’s trip Alan misreads his map, which meant that by
dusk the group was miles off course. To correct his mistake, Alan decided to take a
short-cut to get the group back on track. The particular short-cut Alan chose was
through terrain which was well known to be treacherous and which a competent guide
would avoid during the winter months. Whilst the group were on the short-cut they
were caught up in a land-slide. In the incident, both twins were badly bruised and their
expensive hiking equipment was destroyed. They eventually made their way to a
nearby village several miles from their intended destination where Alan told the twins
that the trip would have to be abandoned. As it was now very late the twins incurred
the additional expense of spending the night in the village pub. When Charlotte
subsequently complained to Alan, Alan referred Charlotte to the exclusion clause
quoted above.

Advise Alan regarding the validity of the exclusion clauses. Advise Charlotte regarding
recovering the damages for their
• Injuries
• Damaged hiking equipment
• Expenses of village pub

Is Alan’s exclusion clause valid?

Answer:

It is established that a legally binding contract has been created between

Alan and Charlotte as all the components of a contract were present when
Charlotte purchased a day trip from Alan. The contract was formed when
Charlotte had seen the trip on Alan’s website, called the company to book her
trip and subsequently paid for it.

It is essential to look at if the exclusion term was incorporated into the

contract and if reasonable steps were taken to bring it to Charlotte’s
attention. The case of L’Estrange v E. Graucob Ltd is of relevance as it was
held that an individual cannot escape a contractual term by failing to read the
contract but it was essential to recognize if ‘reasonable notice’ was given by
the business to give the claimant a chance to read the terms.
 Alan’s terms and conditions were available on the business
website and on the back of the confirmation ticket which
Charlotte viewed when she learnt about the trips on the business
website. She also received a copy of them on the back of her
ticket, which shows Alan has incorporated the terms correctly.

Limitation clause is a term that simply limits the liability of

a party to a specified amount in the event that a term of the
contract is breached.

For an exemption clause to be enforceable, it must:

 Be incorporated as a term
 Cover the loss which has occurred in the circumstances in which it
has occurred
 Not be rendered unenforceable under legislation - Unfair Contract
Terms Act 1977 and the Consumer Rights Act 2015
 Alan’s exclusion clause, intends to remove all liability as it states ‘express
or implied’. Alongside this Act, Section 2 of the Unfair Contract Terms Act
1977 deems the term invalid for the purposes of inducing liability. The
chances of personal injury occurring on an outward hiking trip in the winter
are likely and the terms and conditions should compromise this and not be
contrary to good faith which as a result has caused a significance imbalance
in rights. Although Alan has specified the terms very clearly Section
2(3) removes any acceptance Charlotte may or may not have implied because
of Alan’s removal of liability in the term. Therefore on the facts presented
Alan’s exclusion clause lacks validity.
 Now for Charlotte to recover damages it is essential that there was some
form of negligence suffered and the modern law of negligence was
established in Donoghue v Stevenson whereby it was expressed that the
claimant must prove the defendant owed and breached a duty of care. It
must be also established by the claimant that the breach of duty caused the
damage and the damage was not too remote, were all four elements are
satisfied the claimant will be successful in a negligence claim.

To begin with the damages for Charlotte’s personal injury and hiking
equipment a duty of care needs to be established. The test to determine
whether a duty of care exists was created by Lord Bridge in the case of
Caparo Industries plc v Dickman where the Caparo Test was formulated,
it was said “in addition to the foreseeability of damage, necessary ingredients
in any situation giving rise to a duty of care are that there should exist”.
Given the nature of the contract with Alan and the nature of his service, there
is sufficient proximity as Alan was aware of Charlotte’s booking and could
foresee the events that may have occurred between the two parties; this
creates a duty of care.
 Whether the duty has been breached is also necessary to establish and the objective test used
to determine this was laid down in Vaughan v Menlove where the defendant’s haystack caught
fire, he argued he had used his best judgement and did not see any risk of fire, the court held his
best judgement was not enough. The court held that he was to be judged by the standard of a
reasonable man. Applying the objective test to this scenario it is clear there is a breach of a duty
of care because the reasonable man would ensure that as a trip guide he is familiar with the route
he wishes to take the customers through. As this is Alan’s profession, it is essential to have not
misread the map or to not take a short-cut which is well known to be treacherous in the winter
months as the customers may be endangered.
 The next requirement to establish a claim for negligence is causation, which shows the breach
of duty caused the damage to the claimant. The test to apply for this is the ‘but for test’ which was
established in Barnett v Chelsea & Kensington Hospital and in this scenario the test is ‘but for
Alan’s incompetent behavior on the trip would the injuries have occurred’ no injuries would have
occurred if Alan had not taken a short-cut as Charlotte and her sibling were caught up in a
landslide and badly bruised from the short cut route.

Given the trip was guided and lead by Alan it is clear to see that his actions have lead to the
injuries and there is no intervening act to break the chain of causation. The hiking equipment
damaged has also occurred as a direct result of Alan’s negligence as a trip guide and applying the
‘but for test’ one may conclude that this damage, like the personal injury, would not have occurred
had Alan not have breached his duty of care.
 The final requirement is to assess the remoteness of damages, the standard test set is The
Wagon Mound this asks whether the damage is of a kind that was foreseeable and if so then the
defendant is liable for the full extent of the damage no matter whether the extent of damage was
foreseeable. The defendant is also liable for loss much greater than expected. The injuries suffered
by Charlotte and her sibling consist of bruising and this was type of injury was foreseeable by the
Alan as it was well known that the short cut is dangerous in the winter conditions.

As a result of this, the damages for the injuries are not too remote to claim a form of
compensation from and the Wagon Mound test is satisfied as Alan’s negligence was of a
foreseeable kind. As for the damage to the hiking equipment, the Wagon Mound case expresses
that if the damage was foreseeable then the defendant is liable for the full extent, which is the
hiking equipment. The hiking equipment was within close proximity of Charlotte and therefore a
landslide would surely cause personal injuries and damages to property in close surroundings.
 In regards to the expenses for the ‘additional expense of spending the night in the village pub’
this may be described as pure economic loss or consequential resulting from the personal injury
negligence. The term ‘pure’ suggests a loss must be self-representative and separated from other
losses and may be recovered using the law of contract where there has been a breach. It has been
established that Alan may well have breached his contract by using unfair terms so any loss may
be recoverable through the law of contract.

Consequential loss can be recovered were the economic loss derives from the personal injury.
The law of negligence may recover the economic loss Charlotte has suffered.
A duty of care and a breach of duty have already been established so causation and remoteness
will be discussed.

The element of causation asks the question of ‘but for Alan’s actions and guidance would the
claimants have been “several miles from their intended destination” and abandoned’.

The final element to satisfy the requirements of a negligence claim in regards to the expense of the
village pub is remoteness. The Wagon Mound test applies which asks if the damage was
foreseeable. Alan, as a trip guide, who operates all year round would be aware of the
consequences of a breach of duty of care and the expense of the village pub would have been
ominous when he decided to abandon Charlotte late that night. Asking to recover the expense of
the village pub will not be considered as too remote as the claimants are merely asking to put
themselves in the position they would have been had the negligence not have occurred, a
dominant principle itself of tort law.
Question:
Last year Katie bought a car from Oliver for £3,500 to be paid in two instalments of £1,750.
Katie did not pay the second installment when it was due. She never disputed that she owed
Oliver this money.
Oliver felt sorry for Katie, who lost her job not long after buying his car. He told her that if
she paid him the half of what she owed him (£875) by the following Wednesday, he would let her
off with the rest.
Katie paid him the £875 on the following Tuesday. She also gave him a bottle of wine “in
consideration of his kindness”.
On the Friday Katie was notified that she had been successful in one of her job applications
and would be starting work at a much better salary than her old job on the First of the Month.
Oliver has heard about Katie’s new job and realizes that she is likely to be earning more than
he is. He now wishes to claim the rest of the money which she had originally agreed to pay for the
car.
Advise Oliver.
Answer:

In order to advise Oliver, the starting point is to establish that there was a contract
between Oliver and Katie for the sale of Oliver’s car. This requires that there is an offer
(that the car is for sale for £3,500) and an acceptance (that Katie agrees to buy the car) of
that offer, and that consideration for the contract moves between the buyer and seller (the
£3,500)1.
There is little question that there has been an offer and acceptance of that offer. The
usual analysis is from an objective position, but here it can easily be assumed that there is
a subjective agreement on the initial contract terms.
However, while it was agreed that the consideration of £3,500 was to be paid by Katie
in two installments, the second installment was not paid. At this point, Katie is in breach
of the contract, she has not fulfilled her duties under the contract. This she did not
dispute.
 At this point Oliver would have been entitled to insist on specific performance of the contract,
and insist Katie pay the full second installment. Where a contract provides for a specific price to
be paid, the remedy available to the claimant is clear and would not be varied by a court. This
being one of the few situations where a promisor can request full performance of the contract as a
remedy.

Nevertheless, Oliver then volunteered to accept part payment of the second instalment, rather
than the full amount, and let Katie “off with the rest”.

Where a seller accepts part payment of the debt owed to them under a contract, the general or
common law rule (as found in upheld in Foakes v Beer) is that there is nothing to prevent the
seller claiming the balance due to him at a later date. This applies where the buyer has not
provided consideration to enforce the promise of the seller to accept part payment as full
satisfaction of the contract. It was held that the agreement to accept part payment would be
binding if the buyer, at the seller’s request, had provided some fresh consideration.
 To state, if the seller agreed to accept part payment on an earlier date than the due date, then
that could be construed as sufficient for the purposes of fresh consideration. While Oliver did
accept payment of the £875 a day earlier than he had requested (Tuesday, instead of Wednesday),
this was nevertheless still later than the original second installment had been due. The most likely
conclusion being that this would not be construed as fresh consideration.

Alternatively, if the seller agrees to accept something instead of money (even if worth less that
the debt, since consideration needs to be sufficient but not necessarily adequate, merely the
presence of some consideration is enough) that might be viewed as appropriate for the purposes
here. Could the fact that Katie paid some of the money due, so at least Oliver received something
of the second installment, fall under this proposition?
 Some cases, for example Foakes v Beer, have ignored a factual benefit gained by the
promisor of receiving part payment. Others, have found consideration to exist, even if there was
no discernible benefit to the promisor or detriment to the promise. The decision in Williams v
Roffey Bros & Nicholls (Contractors) Ltd is an important one in this area and places the
emphasis squarely on the promisor obtaining a “practical benefit”, rather than a benefit “in the
eyes of the law”. However, where the issue at hand is one of part-payments of debt, the
application of the principle in Williams v Roffey Bros does not apply (see Re Selectmove). On
this basis the rather more strict view of Foakes v Beer would apply and the benefit of receiving
part payment itself not suffice as consideration, after all, part payment cannot “be satisfaction of a
greater sum owed“. In other words, Oliver gains no more benefit than he was already due under
the contract
Here the question may arise whether the wine given to Oliver, by Katie, “in consideration of his
kindness”, could be sufficient consideration? Perhaps not, it was not requested by Oliver as part of
the contract. Oliver did not agree to accept it in any capacity relating the contract that is known of.
It could be seen as merely a gift, not of reference to their agreement regarding the payments.

Certainly, the gift of the wine could carry the same inference. The importance of consideration is
as a valuable sign that the parties intend to be bound by their agreement….”, would Oliver see
accepting the gift of wine as anything more than a gift, or as forming part of his agreement with
Katie? Most likely the former.

There are certainly some grounds to say Oliver can claim the balance now he believes Katie’s
financial position to have changed significantly for the better.
However, could Katie find a defense under the rules of equitable doctrine of promissory estoppel?
Promissory estoppel is a means of making a promise binding, in certain circumstances, in the
absence of consideration11. If found to be applicable promissory estoppel could mean that Oliver
would have to accept part payment of the second instalment as being his complete contractual
right, as a result of promising Katie that he would let her “off the rest”.

The doctrine of promissory estoppel operates where one party (Oliver) has made a representation
that they do not intend to enforce their strict legal rights, made with the intention that the other
party (Katie) will rely on the representation, and that party does indeed rely on the representation
without providing consideration. Estoppel would prevent Oliver from enforcing his strict legal
rights in so far as it is inequitable to do so.
Firstly, Katie must be able to prove that there was a clear and unambiguous statement by Oliver that he
would not enforce his strict legal rights. There is no definite information but it would seem clear that
Oliver did assure Katie that he would not ask her to pay any more than the half of the second
instalment. If he did indeed say he would “let her off the rest”, that would sound rather unequivocal to
most reasonable people.

Katie must also show that she acted in reliance on this promise. Of her actions it is known that she paid
the sum in part and then gave Oliver the wine. Ostensibly then she did act in reliance on Oliver’s
promise, however she had been bound by the original contract to make some payment (a larger one at
that) to Oliver, so this is not a vastly different course of action to that she had originally agreed to
undertake.

While it is necessary that Katie committed herself to a different course of action, estoppel cases
sometimes also look for an element of detriment incurred by the promisee. This is difficult to find.
Katie would need to show that she altered her position in reliance on the representation given by Oliver.
But there is some difficulty in how to interpret her actions, she had already agreed in the original
contract to pay a full £1,750, but in the end only paid £875. This would appear to be of some benefit to
her. Where there is no detriment it is difficult to show that it is inequitable for Oliver to go back on his
word. Promissory estoppel works in equity and therefore places emphasis on preventing a party acting
“inequitably” or “unconscionably”. Arguably, Oliver is not doing so. But Katie did commit to different
course of action as a result of Oliver’s words, and that might be enough to invoke promissory estoppel.
Be that as it may, the payment in question is the final installment, there will not be any more, so
Katie may argue that any sum paid under Oliver’s promise would be in full and final satisfaction
of the whole debt.

The upshot being that while the precedent of Foakes would suggest there are some grounds for
Oliver to claim the balance of the money due to him, he is likely to be estopped from doing so.

Oliver would be best advised that, on the balance of the facts, Katie does not have to pay the
remainder of the final installment.
Question:
Hugo, a recently retired lawyer, joined the ‘NO TECH movement in July 2013. The members of the
movement are strongly opposed to the use of digital technology. The majority of members live in the
village of Utopia.
Hugo will be moving to Utopia at the end of 2014. Therefore, he will no longer need his car, a five
year old Volkswagen Polo. He places an advertisement on the notice board of his local newsagent.
‘FOR SALE’- Volkswagen Polo in excellent condition. Will be sold to the first person who sends
notice in writing that they wish to buy it for £3,000 to the following address: 53 Bridge Street, UT1
FG3′
On Sunday evening, Letty, a newly qualified driver, posts a letter stating that she wants to buy Hugo’s
car on Wednesday morning.
On Monday morning, Jackie, Hugo’s acquaintance, passes the news agent’s on her way to work. She
sees the advertisement and recognizes the address. On her arrival at work, she sends Hugo an email to
the email address that he provided her with when they first met, two years ago, stating that she is
willing to pay £3,000 for the car. Hugo never receives the email, since as a member of the ‘NO TECH’
movement he no longer uses computers or mobile phones.
On Tuesday evening Hugo meets his friend Mike for dinner and over the course of the meal, Hugo
promises to sell the car to Mike for £2,500.
Advise Hugo as to whether he is contractually bound to Letty, Jackie and Mike.
Answer:

In order for any contract to be valid, the elements must be present. Firstly, there must be an agreement by
the parties. Secondly, this agreement must be such as to demonstrate an intention to create legal intentions and
finally, the agreement must be supported by consideration. Clearly, the final two elements will only become
relevant once an agreement is found and, on the facts here, will only require discussion in respect of Mike and
then only in relation to legal intention, also to mention capacity and certainty of terms amongst the elements.
The starting point is the agreement therefore and in order to consider this point, it is prudent to briefly set
out the general approach taken by the courts when determining the existence of a potential agreement, then
work through each of the parties’ claims to a binding contract with Hugo and finally conclude whether Hugo is
bound to sell his car to any one of them.
The Courts’ General Approach “In contractual terms an agreement is split into two parts, an offer and
acceptance. An offer is seen as a statement that has the effect of demonstrating that a party is willing to
contract on the terms set out on the basis that they will be bound to do so if the offer is accepted by the party to
whom it is addressed. 

Acceptance, rather unsurprisingly, is the response given by the party to whom the offer has been made,
which demonstrates that they agree unconditionally to the terms set out. In respect of both elements, the court
takes an objective view as to the existence of an agreement. In this respect an individual will be bound by their
conduct if the conduct is such that a reasonable person would believe that they intended to contract, even if
they actually held no such intention.  The starting point in this scenario therefore is to consider whether Hugo’s
advertisement could be seen to constitute an offer.
Is there an Offer?
In ordinary circumstances an advertisement is not considered an offer. It appears that this is the
case because of the binding nature of an offer. In other words, if Hugo’s advertisement was
considered an offer, he would be bound to sell the car to all who accepted it, something which is
clearly impossible. 
Here however, the nature of Hugo’s advertisement is slightly different to ordinary advertisements.
In ordinary circumstances, an advertisement is often open to some degree of negotiation. Here, for
example, a potential purchaser of Hugo’s car may attempt to negotiate a lower price than that
advertised. This does not appear to be possible in respect of Hugo’s advertisement. Hugo’s
advertisement makes it clear that the car will only be sold to a person who sends written
confirmation of their desire to buy.
In this respect, there is little doubt that Hugo intends to be bound once this written confirmation
has occurred. At this point he cannot renege on the offer. This kind of contract is known as a
unilateral contract and has the effect of making an advertisement into an offer. The point being in
this respect, that it is only when an advertiser makes it clear that they intend to be bound
immediately by anybody accepting the offer, that it will constitute an offer.
The distinction is a fine one and it seems that the crux of the matter in this context is Hugo’s use
of the word ‘first’ in his advertisement. In using this specific wording he is demonstrating his
intention to be bound by one offeree only, thus avoiding the impossibility issues discussed above,
but also demonstrating that the acceptance will be binding on him.
 It seems reasonable to suggest that in the absence of the word ‘first’ the advertisement would
have been considered an invitation to treat rather than an offer and Hugo would not therefore have
been bound by any of the parties. Given that the advertisement is likely to be considered an offer
however, it becomes necessary to consider each of the remaining character’s actions in turn.
 There are two issues in respect of Letty’s comments. The first of these is whether her letter constitutes
acceptance of Hugo’s offer at all and, if it does, whether it will be binding on Hugo because it seems clear
from the facts that when he agreed to sell the car to Mike, Hugo had not yet received the letter from Letty.

In terms of the first matter, the issue in this context is whether Letty’s letter is accepting the terms of the
offer as set out by Hugo or is attempting to impose a new term. If it can be found that it is the latter
circumstance, Letty’s letter will not be considered an acceptance of the offer at all, but rather a counter offer
to Hugo’s offer or an invitation to treat. The point in this context is that Letty stipulates that she will buy
Hugo’s car on Wednesday morning. If this means that she will only buy the car on Wednesday morning and,
if it is not available at that time, will have no interest in buying it, the letter may not be considered as
acceptance of Hugo’s offer.

It is at this point that the court’s objective approach becomes important and rather difficult where the
provided facts are limited. The question in this context is whether a reasonable person would believe that
Letty’s letter constituted acceptance of Hugo’s offer as it stood. In this respect, it seems reasonable to suggest
that facts outside of those specifically contained within the letter would be taken into consideration. If, for
example, Letty was going to be away from the area where the car was located until Wednesday, but wanted to
ensure that Hugo would not sell it before then, it could be suggested, because Hugo had not stipulated within
the offer the date upon which the car must be purchased, that the specific comments within Letty’s letter were
simply clarifying points rather than an attempt to impose additional terms into the contract. If however, Letty
will only be in the area where the car is located on Wednesday and will not be willing to buy it on any other
day, it seems that this will be an additional term and cannot be considered acceptance to Hugo’s offer.
The fact that the status of Letty’s letter is unclear means that it is necessary to consider the second
element in this context, whether it will be binding on Hugo. The general position in respect of all
offers is that acceptance must be communicated to the offeror. For these purposes, communication
ordinarily occurs once the offeror is made aware of the acceptance. There are certain circumstances
whereby the need for communication is waived however. The most common of these being where
the contract is a unilateral one. Although it appears that Hugo’s advertisement could be considered
an offer for the reasons set out above on the basis that it creates a unilateral contract, the very nature
of the offer is that it requires express acceptance in the form set out. In other words, where conduct
is sufficient for a unilateral contract offer to be accepted in ordinary circumstances thus avoiding
the need for communication to the offeror, here Hugo has set out the conduct required within the
offer; that conduct being communication.
On the face of it at this stage in the consideration, it appears that Letty will not have communicated
her acceptance of the offer to Hugo by the time he promised to sell the car to Mike because he was
unaware that Letty’s letter had been sent. This is not the end of the matter however because there is
one significant exception to the notion that communication of acceptance occurs only when the
offeror is aware of it.
 Under, what is known as the postal or posting rule, acceptance is considered to have been
communicated to the offeror as soon as the offeree posts a letter containing it. This is because the
post office is considered to be the agent of both parties to the agreement and thus, it is considered
that the offeror is aware of the acceptance as soon as it is posted. There is one further complication
in this respect. This is that it is possible for an offer to be made in such a way that it is expressly
apparent that the postal rule should not apply. In other words, the offeror is able to assert that the
acceptance must be communicated to them. One method of doing this is by holding that the offer
can only be accepted once the offeror has notice of the acceptance. (Howell v Hughes)

This approach clearly fits with the facts here, in that Hugo expressly states that he will require
written notice of acceptance and therefore it seems that, in doing so, he will have avoided the postal
rule.
 Jackie presents an interesting problem here, in that whilst Hugo’s offer stipulates that written
confirmation must be sent to his address, it does not stipulate that this must take the form of a letter.
The effect of this, it could be suggested, is that, because emails are practically instantaneous, it
would be deemed to have been received by Hugo almost as soon as Jackie sent it.
There are two issues in this respect however. The first, in the same manner as described above,
relates to the use of the word notice within Hugo’s offer. This, as mentioned, connotes the notion
that in order to be bound Hugo would need to be aware of the contents of Jackie’s email, which of
course, he was not. The alternative issue is that email communications are only considered to have
been received at the point when it would be reasonable to expect the recipient to have read them. In
this context, it seems that even if Jackie was unaware that Hugo belongs to the ‘NO TECH’
movement, it would be reasonable for Hugo to argue that she could not reasonably have been
certain that he would have read an email that was sent to an address that was two years old.
It seems clear in this context, if either of the approaches mentioned above are taken, that whilst
Jackie’s email could, on the facts, constitute acceptance of Hugo’s offer, the acceptance will not be
binding on him because it will not have been effectively communicated to him. Entorres v Miles
Far East [1955]
The position in respect of Mike is not in any way linked to the offer that Hugo made in the
advertisement. The offer to sell Mike the car for £2,500 is clearly separate from that earlier offer. In
this respect, it seems clear that offer and acceptance would be satisfied, although the facts are silent
as to the details of this. The only issue in this respect therefore would lie in whether, if he wished to
avoid the contract, Hugo would be able to demonstrate that there was no intention to create legal
relations between the parties.

The general position in this respect is that in social agreements, and agreements between friends
clearly fall within this category, are not intended to be legally binding. This does not mean that such
an agreement cannot be binding however, because here, as in assessing offer and acceptance, the
courts will look objectively at the facts.

No facts are set in the scenario as to the nature of how Hugo’s promise was made, but if it was in
passing in a general chat at the meal, Hugo may be able to assert that he did not intend it to be
legally binding. If the discussion was more considered however, it seems far more likely that Hugo
would have difficulty in demonstrating this point.
Conclusion

Hugo will not be bound by Letty’s letter until it arrives, will not be
bound by Jackie’s email and may be able demonstrate on the facts
that he ought not to be bound by his promise to Mike.
Question:

Liv advertised in her local newspaper. The advert states “For sale, rare pottery collection, £800.
Contact 07557123456” On Monday, Jamie saw the advertisement and telephoned Liv expressing
his interest in the collection. Liv said that as Jamie was obviously a very keen collector, she would
let him have the items for £600, Jamie then offered £550. Liv said she would think about it and
get back to him the following day. On Tuesday Dan saw the advertisement, and contacted Liv.
Dan asked Liv what the minimum price she would accept for the collection. Liv replied stating
that the minimum she would accept is £575. Dan said that he accepted the offer over the phone
and would be in touch later that week to finalize the details.
On Wednesday, Liv met up with her friend, Charles, who expressed interest in the pottery
collection. He offered £600 for the collection and Liv agreed to sell immediately.
That lunchtime a mutual friend, Dora, told Jamie and Dan about the pottery Charles had just
bought from Liv. Jamie and Dan are both very cross as the pottery is worth at least £1000, and are
demanding that Liv sell them the Pottery collection.
Advise Liv.
Answer:

There are certain components that need to be present in order for a valid contract to be
formed. The most basic of these is that there must be a valid offer and an unequivocal acceptance
of that offer which form the very basis of a contract. This needs to be accompanied with an
intention to create legal relations and valid consideration. Without these there can be no
contract. The scenario will be assessed in order to identify the relevant parties and possible offers
and acceptances in order to determine whether any potential contracts could be formed. Where
these two fundamental elements can be established, consideration and intention to create legal
relations will be assessed in order to advise Liv whether she is legally bound to sell the pottery.

The newspaper advertisement details the pottery for £800. It must be established whether this
was an offer by Liv, or a mere invitation to treat. The general presumption is that advertisements
will be construed as the latter. This is due the fact that contractual intent is assessed by the courts
objectively. Even though subjectively Liv may have intended this to be an offer, objectively it can
be seen that this was not the case due to the issue of multi-acceptance. Liv only had one pottery
collection so it is not possible that she intended to contract with every person that responded to
her advert.
Jamie

As it has been established that the advert is not in itself an offer, it is necessary to distinguish an
offer from the conversation that takes place between Liv and Jamie. This comes when Liv tells
Jamie he can purchase the collection for £600. Liv offers the pottery to Jamie at a reduced rate on
the basis that Jamie is an ardent collector. It would appear from the nature of the transaction that
there is an intention to be legally bound and thus, the offer is likely to be valid. In order for an
offer to be accepted, the rule is that it must be accepted unequivocally and without
alteration. However Jamie does not immediately accept this offer, instead providing Liv with a
counter offer of £550. This has the effect of destroying the original offer and as such Jamie will no
longer be entitled to go back and accept Liv’s offer for the sale of the pottery for £600. Instead
this will act as a fresh offer which Liv can then accept. Jamie is entitled to revoke the offer at any
time before Liv gets back to him, provided that such revocation is communicated to Liv.

As it is left between Jamie and Liv there is no contract for the sale of the pottery.
Dan

As it has been established that Liv’s advert will not constitute a valid offer it is first necessary to
distinguish whether an offer is made at any point within the communications between Liv and
Dan. When Dan contacts Liv regarding the pottery and asks the minimum price she will accept for
it, Liv’s reply will not constitute an offer. This is because the general rule is that a statement of
minimum price is neither an offer nor an acceptance. The offer here comes in the form of Dan’s
attempted acceptance of what he believes to be an offer from Liv. When Dan replies that he is
willing to pay the £575 this forms an offer which Liv is open to accept. However the conversation
ends there without Liv ever offering such acceptance and accordingly, there is no contract formed
between Dan and Liv.
Charles
The conversation that takes place between Liv and Charles is more straight forward in terms of
distinguishing a clear offer and acceptance. It appears that Charles’ offer to Liv for £600 in return
for acquiring the pottery collection is a valid offer to which Liv gives an unequivocal acceptance.
Although Liv and Charles are friends, the nature of the discussion goes further than a social or
domestic agreement and the presumption that there is no intention to create legal relations can be
rebutted due to the nature of the facts. Having successfully established these elements it is
necessary to establish valid consideration in order to advise Liv whether she is bound to sell to
Charles. Consideration is defined as “some right, interest, profit or benefit accruing to one party or
some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other”. 
It can be seen here that this is satisfied in Charles paying the £600 in return for the pottery and
vice versa. The general rule is that consideration must be sufficient but need not be adequate. This
reflects the self-regulatory foundations of contract law and the respect courts afford to privy of
contract. This means that although Liv has essentially made a bad bargain, the courts will not step
in to protect her by insisting that Charles contract for the full value of the goods.
It is evident from this analysis of the facts that there is indeed a valid contract between Liv and
Charles and as such, Liv must honor this contract for the sale or Charles will be able to bring an
action for breach of contract.
Question:

Fitness Fitness Fitness places an advertisement on their window stating:

The first 25 people to complete interval training on our brand new treadmill machines within five
minutes, will be rewarded with one year’s free membership.

Emily notices the advertisement and completes the task, within five minutes. Emily is one of the
first 25 people. Whilst Emily is completing the interval training, the manager places a notice on
the window withdrawing the promotion; the manager is refusing to give Emily her free
membership for 12 months, stating that the promotion is no longer valid.

Advise Emily.
Answer:

Emily appears to have entered into a contract with FFF, of which performance will entitle her
to free membership for a year. Contract law requires certain features to be present within the
agreement in order for it to be valid, although this is not determined by any prescribed
formalities. The features that need to be present include an offer, acceptance of that offer,
intention to be legally bound, and consideration. The advertisement placed by FFF will be
assessed in terms of whether it is capable of representing an offer. Emily’s performance of the
terms of the offer will be assessed to determine whether this is sufficient to amount to
acceptance. Finally, an assessment into the withdrawal of FFFs offer will be undertaken as a
means of establishing the rights and obligations of Emily and FFF.
 An offer is a statement made by a party that they are willing to enter into contractual relations
with another party on specified terms.  Where both parties agree to undertake certain obligations
in return for the performance of the other parties’ obligations there is a potential for a contract to
be formed. FFF’s advertisement in the shop window appears to meet the requirements of an offer
in that it imposes an obligation upon them to provide free membership in return for the first 25
customers to complete Interval Training on their new treadmills.

It is worthy of noting that advertisements in shop windows or shop displays are usually
described as an invitation to treat as opposed to an offer. The principle reason for this is that the
shopkeeper must always be entitled to refuse to serve the member of the public.  There is little
consistency with the application of the invitation to treat doctrine and therefor it is not always
possible to determine whether an advertisement falls within the category of an offer or merely
represents an invitation to treat.
 In Carlill v Carbolic Smokeball the deposit of £1000 in the bank to demonstrating the
offerors sincerity, was sufficient to amount to an offer and demonstrate an intention to be legally
bound.  Not all advertisements will be interpreted as invitations to treat as this is merely a
rebuttable presumption, and thus a newspaper advertisement for the sale of fur coats at
dramatically discounted prices was held to be a valid offer due to it circumnavigating the issues of
multi-acceptance with the qualifying statement ‘first come first serve’. In this regard, Peel
determines that the principle distinction between an offer and an intention to treat is the intention
of the parties. In this case there is no statement of good faith that can be identified with Carlill v
Carbolic Smoke Ball, but neither does the wording of the agreement suggest that it only
represents an invitation to treat. There is no requirement for Emily to make an offer of payment
that can be accepted by the retailer. Her only obligation is to complete the interval training in the
specified time, which she has done. For these reasons it is likely that the advertisement will be
treated as an offer.
 Once a valid offer has been established, then it is necessary to ascertain whether the offer has
been accepted before it can form the basis of a legally binding contract. The general rule is that
the acceptance must be communicated to the offeror however, there are many instances where
acceptance is communicated at the time the contract is performed. Emily’s performance of the
terms and notification of this performance will communicate the acceptance of the contract in this
scenario.

It therefore appears that there is a valid offer and acceptance in this scenario. Nonetheless a
difficulty lies in the fact that the offer was withdrawn whilst Emily was in the process of
completing the training. It is therefore necessary to understand whether this withdrawal of the
offer is valid and supersedes the acceptance of the contract.
 FFF withdrew their offer whilst Emily was in the process of completing the Interval Training
and this it could be argued that they have revoked the offer before Emily has notified acceptance
of its terms. It is possible to revoke an offer at any point in time prior to the offer being accepted.
 However, the general rule is that the revocation of the offer must reach the offeree in order for the
withdrawal of the offer to be effective. In Byrne v Leon van Tienhoven, the offer was posted to
the offerees who accepted it by post prior to receiving the letter revoking the offer; the revocation
failed as the offer had been accepted before it was received.

Emily does not appear to have received the revocation of the offer whilst she was actually
performing the obligations contained in the offer. She may or may not have seen the manager
putting a notice alongside the offer however, it is unlikely that she would have seen the detail
contained within the notice. It is only following the completion of the Interval Training, at the
point of notifying acceptance and performance of the contract, that Emily is notified that the offer
has been withdrawn. It is very unlikely that FFF will be able to rely on their withdrawal of the
offer as the contract has already been performed.
Conclusion

As this scenario demonstrates, there is really very little formality required in respect of parties
forming a valid legally binding contract. Contracts can be accepted before notification is given to
the offeror and mere performance is sufficient to accept the contractual terms. The only area
where formality is required is in the revocation of an offer which must be received by the offeree
prior to their acceptance of the contractual terms. Emily will be entitled to the free gym
membership for one year from FFF. If FFF fail to perform their obligation under the contract
Emily will be entitled to damages for breach of contract to the value of the fee membership.
THANK YOU