Contracts

Contracts
Formation of a contract
 Proposal (offer) and Acceptance
 Proposal should express a willingness to do or abstain from something. This
willingness extends to willingness to be bound by the statement of doing or
abstaining.
 The proposal is made with the view to obtain assent of the other party.
 The proposal should be reasonably able to be identified as a proposal from the
perspective of a reasonable man, thus being the objective test.
o Bowerman v ABTA – Association of British Travel Agents made a display that
stated that if any holiday package could not be provided for whatever reason
then the association would make good the reimbursement. In this particular
case the question was could the ABTA be held liable for reimbursement. The
court held that this message could be reasonably construed as an offer and thus
the ABTA could be held liable. The objective test was held here.
 Act does not specify form of offer.
o Kleinwort v Bensen ([1989] 1 WLR 379) – Company had a subsidiary
company was given a loan and the person giving the loan expected the holding
company to act as a guarantor. The holding company sent a letter that stated
that its subsidiaries meet its liabilities. The subsidiary company however
became insolvent, thus bringing the question whether the statement the
holding company made was an offer or not. It was held not to be an offer.
o Partridge v Crittendon
o Pharmaceutical Society v Boots
o Blackpool and Fyde Aero club v Blackpool BC
 Communication is essential
 Offer is not communicated and the requirement is not satisfied until the offer comes to
the knowledge of the offeree.
o Lalman Shukla v Gauri Dutt
 Standing offer – continuing offer. Each contract requires fresh acceptance.
 Offer terminates by rejection, revocation (withdrawal), counter-offer, expiration.
 Cross offers are simultaneous offers to the same object, however cross offers alone
are not sufficient to form a contract. Acceptance to one of the contracts is still
required.
o AIR 1996 SC 1373 – UP
o LIC v Raja Vasireddy [AIR 1984 SC 1014]
 Offeree or agent of the offeree can provide acceptance.
o Powell v Lee – Managers of a school passed a resolution to appoint plaintiff as
headmaster. One manager in his personal capacity communicated this to the
plaintiff, subsequently the plaintiff found out that this resolution was
rescinded. The question arose as to whether the plaintiff could sue for breach
in contract, however there is no communication of acceptance.
o Felthouse v Bindly
 Introduction to law of Contracts by PS Atiyah – Offers may prescribe a
mode of acceptance but cannot do away with it.
 Law of Contracts by Gunther Treitel – General rule of communication
of acceptance holds good however the rule can be waived in certain
circumstances.
o Carlill v Carbolic Smoke Ball
 Any action by the offeree in terms of acceptance binds the offeror.
 Exceptions to the general rule of acceptance:
o Acceptance through unilateral undertaking
o Proposal requires acceptance through conduct
o Jayaar Impex Ltd v Toaken Group Ltd. [1992 Lloyd’s report vol 2 pg 437]
o Entores Ltd v Miles Far East Corporation
o Adam v Lintsei – the postal rule
 Consequences of postal rule
o Contract cannot be revoked once the letter of acceptance is dispatched.
o Household Fire & Carriage Accident Insurance Co v Grant [(1879) 4 Ex
D216]
o Postal of acceptance prevails over the withdrawal of offer if the withdrawal
did not reach before the letter of acceptance was posted.
o Where the postal rule will lead into absurdity or inconvenience, postal rule
will not apply.
o Holwell Securities v Hughes
 Through instantaneous modes of communication, the ordinary rule applies only when
the acceptance is received by the proposer since generally an acceptance must be
notified to the offeror.
 Goverdhandas Kedia v Girdhantal [AIR 1966 SC 543]
 Email is non instantaneous
 Special rules for email, neither ordinary or postal rule – S.13 IT Act.
 S.10 (A) – Validates contracts made through electronic communication.
 //Postal rule applies to poster only for email and is therefore bound once the proposer
sends the email. Acceptor is bound by ordinary rules, thus is only bound once the
letter of acceptance reaches the proposer.
 PR Transport Agency v UOI [AIR 2006 All. 23]
 Entores
 Brinkibon Ltd v Stahag Stahl [1983] 2 AL 34
 Carbolic Smoke Ball
 Forms of acceptance
o Usual or reasonable manner
o Acceptance by conduct
o In prescribed manner
 If acceptance is not done in the prescribed manner, the onus on whether to accept the
acceptance or not is on the offeror.
 Offord v Davies
 Mountford v Scott
 Presumption in family or social contracts that there is no enforceability
 Presumption in business contracts for enforceability.
 Intention of legal enforceability and consequences is important.
 Rose & Frank v Boss
 Jones v Padavtton
 Parker v Clark
 Detrimental reliance – If a party has relied upon another party detrimentally, then the
contract itself becomes legally enforceable.
 Executory contracts – Contract of promises only
 Commercial agreement – presumption on intention to create legal relations
 Edward v Skyways
 Esso Petroleum v Customs & Excise Commission
 Rose & Frank Co. v J. R. Crompton
 British Steel Corp v Cleveland Bridge
 Inchoate documents – pre contractual stage
 Kleinwort Bensen v Malaysia Mining Corporation
 Guarantee
 Subject to contract – no contract – specifying terms willing to enter into for contract
 Consideration – S. 25
 Currie v Misa - (1875) LRID Ex 153
 AIR 1966 SC 193
 Detriment – no pre-existing legal duty
 Bolton v Madden
 Stilk v Myrick
 Ward v Byham
 Edwards v Lawson
 Kedarnath Bhatacharya v Gorie Mohammad
 Doraswami Iyer v Arunamachala Ayyar
 Lampleigh v Brathwaite
 Abdul Aziz
 White v Bluett
 S 25 (2) – inadequacy
 De La Bare v Pearson Ltd
 Hughes v Metropolitan Railway Co (check avtar facts)
 High Trees case
 Motilal sugar mills
 North Atlantic Shipping Co. v Hyundai Construction Co
 Pau On v Lau Lin Long
 Dai Ichi Karkaria v ONGC


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