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Contract Notes

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Contract

CONTRACT LAW REVISION SUMMARY
Offer............................................................................................................1
Responses to Offers....................................................................................6
Communication of Acceptance.................................................................11
Incomplete and Vague Agreements..........................................................15
Consideration............................................................................................19
Promissory Estoppel.................................................................................26
Intention to Create Legal Relations..........................................................30
Incorporation of Derogating Terms..........................................................32
Incorporation of Supplementary Terms...................................................34
Construction (Interpretation)...................................................................36
Implication of Terms.................................................................................38
Classification of Terms.............................................................................41
Exemption Clauses...................................................................................43
Misrepresentation.....................................................................................47
Negligent Misstatement...........................................................................54
Mistake.....................................................................................................55

The four components of a contract:
o Offer

Acceptance

Consideration

Intention to Create Legal Relations

OFFER

1 An offer: "an expression of willingness to contract on specified terms made with the intention that it is to become legally binding as soon as it is accepted by the person to whom it is addresses"
(Trietel)
Offer must be

Valid (clear, certain, and addressed to offeree)
o Communicated to the Offeree

Not rejected revoked or lapsed.
NB it can often be confusing who is the offering party, eg the vendor may be the accepting party

Pharmaceutical Society of Great Britain v Boots Cash
Chemists (Southern) Ltd [1953])
Objective view of intention and agreement

Smith v Hughes (1871) Blackburn J: Offer of oats, D thought they were 'old', they were not. Contract
Found in D's favour either because oats were described as old or seller knew D wanted old oats.
 One party may be mistaken about the subject matter of the contract, even to the extent that he would not have entered into the contract had he known the truth, but the contract remains valid.
o Rose v Pim (1953) - Plantiffs asked to acquire Moroccan horsebeans described here as feveroles. Sup-ply chain established. Eventual buyer found them not to be ferevoles.
 Dennign J: Their agreement, as outwardly expressed,
both orally and in writing, was for "horsebeans". That is all the defendants ever committed themselves to supply; and all that they should be bound to".
Snapping Up Cases

Hartog v Colin & Shields (1939) - The sellers offered
Argentine hare skins at a given price per pound (mistake,
they meant per unit). Buyer ordered 30k.
 Held the buyer must have been aware of the sellers'
mistake, and therefore must have been aware that the sellers' offer did not represent their true intention.
o Chwee Kin Kong v Digilandmall.com [2004] - Emphasis on the state of mind of the would-be snappers up: buyers were said to have moved "at the dead of night" and with
"indecent haste"
o Centrovincial Estates v Merchant Investors (1983) -
Negotiations over an existing lease, the landlords' solicitors wrote to the lessees proposing that the "current market rental value" of the property should be contractually agreed to be £65,000.
 Later realised they meant £126,000. Summary judgement found in favour of lesses.
 Landlords conceded that the case would need to proceed to full trial for it to be established on the evidence whether the lessees did or did not know that a mistake was being made (hence summary judgement against them).
Invitations to Treat

Preliminary discussions are known as "invitations to treat",
and may well take the form of enquiries, obviously evincing no intention to be bound

Partridge v Crittenden [1968] - Defendant had placed an advertisement in the periodical "Cage and Aviary Birds",
reading "Bramblefinch cocks, Bramblefinch hens 25 s each".
Prosecuted as illegal to sell such birds.
 High Court quashed the conviction. The advertisement was merely an invitation to treat, not an offer to sell. In the eye of contract law it is the would-be purchaser here who makes an offer to buy

2 Contract

3 o Fisher v Bell [1961] - A shopkeeper displayed a flick knife in the window of his shop with a ticket behind it which read
"Ejector knife- 4s". Illegal to sell such knives
 Held mere invitation to treat

Grainger & Sons v Gough (Surveyor of Taxes) [1896] -
House of Lords to decide whether an offer was made when a price list of wines was sent out by a wine merchant.
 It was held that the list was merely an invitation to treat, not an offer.
 Commercially sound - merchants must be able to alert prospective purchasers to their presence in the market without the risk of ending up bound to perform an impossible multiplicity of contracts from a limited stock.
 Obiter stated that a hypothetical advert from the manufacturer (who is capable of meeting any demand)
did constitute an offer.
o Pharmaceutical Society of Great Britain v Boots [1953] -
Unsuccessfully argued that taking drugs from the shelf was the point at which the sale was concluded.
 Held the offer occurs when the customer brings the goods to the till.
 Commercially sound judgement.
o Thornton v Shoe Lane Parking [1971] - A motorist drove up to the entrance of a car-park. As he did so, a light changed from red to green, and a machine provided a ticket which the motorist took before driving on.
 Lord Denning M.R. explained that the ticket came after the contract was already complete.
o Chapelton v Barry Urban District Council [1940] - The
Council let out deck chairs on a beach. Tickets could be obtained from an attendant. The plaintiff sat on a deck chair,
which gave way and caused him injury.
 Council sought to defend itself by reference to exclusionary words printed on the ticket available from the attendant.
 The court regarded the pile of deck chairs as the offer and the act of sitting down on one of them as the acceptance as that a customer might sit for an hour or more before the attendant came round for the money.
In Unilateral Contracts.
o Carlill v Carbolic Smoke Ball Company [1893] - D
advertised a reward of £100 would be paid to any person who caught influenza despite using the smoke ball as directed.
Claimed to have deposited £1000 with their bankers
"shewing our sincerity in this matter". Plaintiff caught flu.
 Held to be a unilateral contract.
 Here the acceptance expected is not to take the form of assent, but of a specified action Contract
There is no agreement reached.
Still more strikingly, the offeree is never bound to the offeror, and seems to be able to desist from performance at will.
In Contracts Involving Land

Courts traditionally regard land as unique and not so readily traded, therefore rules of offer and acceptance applied with caution

Harvey v Facey [1893] - Series of telegrams:
 H to F: "Will you sell us Bumper Hall Pen?
Telegraph lowest cash price".
 F to H: "Lowest price for Bumper Hall Pen £900".
 H to F: purports to accept offer.
 Privy Council held that F had answered only one of the two questions in the first telegram, therefore no offer.
o Clifton v Palumbo [1944] - Plantiff: "I…am prepared to offer you or your nominee my Lyneham estate for £600,000.
 Lord Greene: remote possibility that parties binding themselves into so large a transaction couched in such terms

Gibson v Manchester City Council [1978] - Council sent
Mr Gibson a letter stating that "the corporation may be prepared to sell the house to you at the purchase price of
£2725…".
 HoL held no more than an invitation to treat.
 Lord Denning in Appeals argued one need not look for a specific moment of offer and acceptance. Lord Diplock in HoL disagreed.
 Mulcahy and Tillotson: "Denning is looking for the presence of a cake whereas those adopting a more formalistic analysis [Diplock] have looked for the ingredients of the cake and whether they have been put together in a "correct" sequence".
Auctions

Based on Unilateral Contract model

Payne v Cave (1789) - Cave bid at an auction but alter changed his mind and withdrew his bid before the auctioneer put his hammer down.
 The placing of a bid at auction is the making of an offer,
and the fall of the auctioneer's hammer is the acceptance.
 This analysis is now statutorily codified.
o Warlow v Harrison (1859) - Three horses were advertised as for sale "without reserve".
 Plaintiff bid 60guineas, current owner bid 61, winning.
Legally impossible to sell to current owner.
 The plaintiff claimed that the horse was his since he had been the highest bona fide bidder.

4 Contract
It is held (at least by a majority of the judges involved,
and obiter) that the advertisement of the sale as being
"without reserve" was an offer which had been accepted by the making of the highest bona fide bid.
 A unilateral contract - a promise made to whosoever should perform the action of making the highest bona fide bid.
o Harris v Nickersen (1873) - Plaintiff attended an auction to bid for office furniture which had been advertised as for sale.
Furniture was withdrawn.
 Court held that no contract had come into existence.
 Answer is based on policy and convenience rather than logic.
 Cf. Grainger & Sons v Gough - It is a proper object of the law to protect people in business from indeterminate liability
 Otherwise every person attending the auction would have been enabled to sue the auctioneer for damages

Barry v Davies [2000] - Customs and Excise put up two machines (worth c.15k) for sale. Claimant bid £200 for each but auctioneer refused to accept and withdrew the machines from sale.
 CA held that the claimant was entitled to damages of
£27,600 for breach of that unilateral contract.
Sales by Tender

Spencer v Harding (1870) - A circular advertised a company's stock for sale, invited bidders to submit tenders.
The tenders were to be opened together at a stated time and place.
 Spencer submitted the highest offer but this was not accepted.
 Held circular could not be construed as an offer to sell to the highest bidder. Harding was free to pick from the bidders on their own criteria.
o Blackpool and Fylde Aeroclub v Blackpool BC [1990] -
Council committed to considering tenders received before a certain date. Plaintiff submitted before the date in question but due to oversight was not considered.
 Court of Appeal held that the invitation to submit tenders was the offer of a unilateral contract accepted by the submission of a conforming tender, and that the council was liable to the company in damages for the breach of that contract.
 Aeroclub successfully sued for a 'loss of a chance'
 Council argued that although the parties might each have assumed that conforming tenders would be considered, they had not contracted to that effect.

5 Contract
Bingham LJ, is its downfall; the argument proves too much.
 Bingham LJ "there would in my view be an unacceptable discrepancy between the law of contract and the confident assumptions of commercial parties…".
o Harvela Investments Ltd v Royal Trust of Canada [1986]
- trust invited two parties to bid for shares. Part A (Plaintiffs)
offered $2,175,000. Party B offered "$2,100,000 or $101,000 in excess of any other offer…whichever is the higher amount".
 HoL held that party B's bid was invalid
 Royal Trust's invitation was the offer of a unilateral contract (to sell to the highest bidder) and was accepted by the submission of the highest bid.

6 Contract

RESPONSES TO OFFERS

7 Possible responses to an offer:
o Acceptance: the original offer is taken as it stands

Rejection: the offer is terminated
 Counter-offer: offeree responds in a broadly positive sense but proposes terms which conflict with those of the offeror. This does not include requests for further information
 Revocation: by the offeror prior to the acceptance.
 Lapse due to: passage of time; non-fulfilment of a condition; death.
Counter offer

Hyde v Wrench (1840) - D offered farm for £1,000. P
responded stating for £950. D refused. P stated would accept for £1,000. D refused.
 Specific performance rejected, second-proposal was a counter-offer that terminated the original offer.
o Stevenson v McLean (1880) - On Saturday D offered iron warrants for 40s/ton. The offer was open until Monday.
 On Monday P replied asking "whether you would accept forty for delivery over two months, or if not, longest limit you would give".
 On receipt of this D sold to a third party, but P
purported to accept offer before D informed him.
 Held that Stevenson's enquiry had not been a counteroffer. His later telegram was therefore acceptance of the original offer.
o Gibson v Manchester City Council (1978) - above Mr
Gibson filled in the form but left the purchase price blank,
asking that certain necessary repairs should be taken into account to diminish the price. The council replied that the state of the property had already been taken into account in the fixing of the price.
 Mr Gibson then wrote back on 18 March asking to proceed with the purchase in accordance with his original application.
 CA Lane LJ argued that this was counter-offer
 HoL Lord Edmund Davies: "I read it as merely exploratory of the possibility of a reduction in price in the eventuality indicated."
Battle of the Forms

BRS v Arthur Crutchley (1968) - Plaintiffs' lorry, carrying a valuable load of whisky, was stolen while being stored overnight at the defendants' warehouse.
 Driver held delivery note: "all goods are carried on the [plaintiffs'] conditions of carriage".
 D stamped the delivery note with the words
"received under A.V.C conditions".

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