Contract Law - Large Group 1

Introduction to Module, Elements of Contract Formation Offers

Introduction

Contracts in Everyday Life

Activity 1:

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

Gym Membership
Buying Clothes
Food Shop
Diesel for Car
Credit Card

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

Employment Contract

Elements of Contract Formation

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
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.

Reliance on terms, nature of the relationship of the parties for example divorce.

Consideration

Consideration is something given in exchange for the other party’s promise. Something of
value to which a party is not already entitled, given to the party in exchange for contractual
promises.

Consideration can take various forms such as:

 Monetary payment.
 Promise to do something.
 Promise to refrain from doing something.

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.

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?

You become bound to pay for the fuel as soon as you start to fill your tank up, you are
accepting the price of the fuel and therefore entering a contract. The pump is the offer and
beginning to fill up the tank is the acceptance.
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?

You become bound to pay for the parking once you drive level with the ticket machine
causing it to punch out the ticket. The machine constitutes to the offer and driving level with
it constitutes to acceptance.

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

Agreement - Offers

Offer + Acceptance = Agreement

Definition - “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)

 Offeror = the person who makes the proposal or offer

 Offeree = the person the proposal is made to

Definition
 Willingness to be bound
 Certain terms
 Intention to be bound when accepted
 Contrast Invitations to treat

Termination
 Offers can be revoked any time before acceptance; but must be communicated
 Rejection (incl counter-offer)
 Lapse

Distinguish from Invitation to Treat

 Goods on display
 Advertisements

Termination of Offers
Revocation

 An offer may be revoked (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)

 Communication of revocation does not have to be by, or with the authority of, the
offeror - Dickinson v Dodds (1876)

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 late to give notice)

Activity 4: Analysis of case facts - Dickinson v Dodds

Watch the Dickinson v Dodds media clip and identify;

a. what was the offer made - £800 for the Land.

b. when it was stated to be open until - 9 o’clock on the Friday.

c. when the offer may have been revoked - when he third party told Dickinson Dodds had
already sold the land.

d. when it was purportedly accepted - once at the mother in laws and once at the train
station.

Rejection

Implied rejection by counter offer - Hyde v Wrench (1840)

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

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.

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

Auctions and Tenders

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.

Tenders

Tenders are offers, which may or may not be accepted

Spencer v Harding (1870) - did not amount to a promise to sell to the person who made the
highest offer.

Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council (1990) - implied unilateral
offer to consider bids.

 Blackpool BC sent invitations to tender to 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.