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Making the Contract Agreement
- Offer can be made to indiv or group
- Carlill v Carbolic Smoke
Offer can be terminated if
- Offer must be communicated to offereeBloom V American Swiss Watch Co
- IRC V Fry
- Routledge v Grant
- ...revoked by a 3rd party on behalf of offeror
- Dickinson v Dodds
- ...lapse of time
- Ramsgate Victoria Hotel Co V Montefiore
- ...offeror makes a revised offer
- ...offeree makes a counter offer
- Distinguish offer from OTT
- Partridge V Crittendon
- Fisher V Bell
- British Car Auctions V Wright
- Barry V Heathcote Ball & Co Ltd
- Blackpool & Fylde Aero Club & Blackpool Council
Bloom V American Swiss Watch
- Facts: clm claims reward for providing information although at the time he provided it he did not know about reward offer. He sues for BOC
- Decision: not guilty because offer was never accepted
IRC V Fry
- Facts: clm owes money to IRC and sends a sum of money inferior to that owed with a letter saying that if they cash the cheque, then they accept her offer of paying less. However when received, letters and cheques are separated so cheque was cashed before letter was read.
- Decision: not guilty because, having not read the letter, IRC had not accepted the offer
Routledge V Grant
- Facts: def offered to lease a house but cancelled the demand well within the deadline of 6 weeks that he set to receive an answer. A week later he received acceptance of the offer. As he declined, clm sued him for BOC
- Decision: No binding contract. There is no legal obligation on def to keep the arrangement of 6 weeks. The offer can be terminated if revoked by the offeror at any time BEFORE acceptance
Dickinson V Dodds
- Facts: Def, offered to sell a house to the claimant within a deadline for acceptance of the offer. Later on, a reliable third party (ppty dealer) informed the clm that the house had been sold to someone else. Still within the deadline, the clm handed in a letter of acceptance to the def.
- Decision: as the offer had been revoked by a reliable third party BEFORE acceptance, the def was not liable for BOC
Ramsgate Victoria Hotel Co V Montefiore
- Facts: Def offered to buy shares in clm co in January. Shares are allotted in November and def receives notification by email. Howr, he refuses to take them up as he'd heard nothing. Clm co sues for BOC
- Decision: the lapse of time taken to accept the offer was unreasonable and thus the offer had automatically elapsed. Def not guilty.
Partridge V Crittendon
- Facts: Def placed add to sell wild birds in ocal newspaper and was charged with offering wild birds for sale contrary to the protection of birds act.
- Decision: advertising goods privately = invitation to treat. Not offer for sale! The def was found not guilty of the charge.
Fisher V Bell
- Facts: Def owned a corner shop and placed a flick knife along with a sign saying "for sale" in the window. He was charged with "offering for sale an offensive weapon ctry to the restriction of weapons act"
- Decision: Displaying goods in the window is an offer to treat. Not guilty of charge.
British Car Auctions V Wright
- Facts: def put up car for sale at a public auction. Car was defective. He was charged with "offering for sale an unroadworthy vehicle ctry to the road traffic act"
- Decision: Putting something up at an auction (UNLESS it says w/o reserve) is an offer to treat. Not guilty.
Barry V Heathcote Ball & Co Ltd
- Facts: at a "without reserve" auction, auctioneer withdraws two machines from auction after clm offered £200 for each one. He was the only bidder. The auctioneer then sold them privately for £750 each. Clm sued for BOC.
- Decision: Guilty. The auction was without reserve, which creates a contract between buyer and seller. The clm received damages of [2x(750-200)]=£1100
Blackpool & Fylde Aero Club V Blackpool Council
- Facts: club had an exclusive licence to run pleasure flights from the council's airport. Towards the lease expiry, the council invited tenders from interested parties to bid for the Club license. Club reapplied but due to error, the tender was never opened or considered and the license went to another co. Clm sued for BOC
- Decision: Although the council was under no obligation to accept the tender, they had the duty to consider it. Council was found guilty and Club received damages.
Making the Contract Agreement
ACCEPTANCE OF THE OFFER
- After acceptance, all duties, obligs and liabilities of the contract become binding on the parties
- Acceptance must be absolute and unqualified
- Hyde V Wrench
- Butler Machine Tool Co Ltd V Ex-Cell-O Corporation Ltd
- Pickfords Ltd V Celestica Ltd
- Acceptance must be communicated to the offerorAcceptance usually requires actual communication except in the case of a Unilateral offer OR :
- Postal RuleAdams V Lindsell
- Household Fire Insurance V Grant
- Holwell Securities V Hughes
- Acceptance must generally be in the mode specified by the offerorIf no specific mode specified, then any will do. Silent accepting does not constitute a contract.Felthouse V Bindley
- - Offer made by post is effective as soon as received by offeree and communicated to him
- - Acceptance of an offer is valid as soon as is placed in the letter box PROVIDING letter is pre-paid, properly addressed and posted
- - An offer that is revoked by post does not become effective until it is received by offeree and communicated to him. He is theref entitled to accept offer at any time up until the moment that the offer is effectively revoked
Offeror can expressly exclude operation of the postal rule by stating that acceptance is only effective on receipt.
- Rule applies to telegrams. With instantaneous communication such as tel or fax, offeror must actually receive acceptance.
Modern methods of communication
Telephone answering machine
- Messages delivered to businesses during normal office hours are deemed to be communicated.
- It is the offeror's responsibility to check his machine.
Hyde v Wrench
He hid his house because he did not want to sell it. Hyde.
- Facts: occurred before rule that all contracts to buy or sell land must be made in writing. Defendant writes to clm offering to sell him his house for £1,000. Clm agrees for £950. Defendant refuses and clm agrees to pay full price, but defendant changes his mind and is no longer selling the house. Clm sues for BOC.
- Decision: Clm made a counter-offer thus cancelling the original one. Not liable.
Butler Machine Tool Co Ltd V Ex-Cell-O Corporation
- Facts : Clm offered to lease a piece of machinery to Def for a specified price. The offer had a clause that allowed the Def to alter the lease price in certain circumstances. Def wrote back accepting the offer, but changing the terms to fixed lease price. The clm acknowledged the order and delivered the machine. A while later, clm tried to increase the price using the initial clause but def refused to pay. Clm sued for BOC.
- Decision : Def's counter offer was accepted by Clm when the latter acknowledged the order. Def's terms prevailed and Clm couldn't demand additional payment. Not liable.
Pickfords Ltd V Celestica
Pickfords. They help you move by picking up your stuff with Fords.
- Facts : Def wish to move their business to another city. Clm faxes a first offer but revises it a few days later for a higher price. Def faxes a confirmation. Clm carry out the work and then claim money (sum from 2nd offer). Def refuses to pay more than that calculated from original offer.
- Decision : Although the 2nd offer contradicts the first one, it was clear the defendant was referring to the first one. As the original offer no longer existed, def made a counter offer based on original terms of offer. By carrying out the work, clm accepted it. Not liable.
Adams V Lindsell
Lindsell. Il vend du lin. Lin/laine.
- Facts : Def was a wool manufacturer who rote to Clm offering to sell him a batch for a special cheap price. He stated in the letter to reply by post if interested. However, Def sent letter to wrong adress. The person at that adress realized what had happenned and sent on letter to Clm. Upon receiving the letter, Clm sent back a letter of acceptance. In the meantime, the Def had assumed Clm was not interested and sold the whool to another buyer. When Clm discovered this he sued for BOC.
- Decision : Contract became effective the moment Clm mailed the letter of acceptance. Selling the wool to smn else put Def in a situation of BOC. Clm was entitled to damages.
Household Fire Insurance Co V Grant
- Facts : Def applied for 500 shares in Clm co. Clm wrote back agreeing to allott shares to him. Def never received the letter and assumed the Clm was not interested. As a result he bought shares in another company. A time later, Clm co went into loquidation and def was in duty to pay for his 500 shares. Def refused to pay stating he had no binding contract since he had never been notified of the acceptance of the offer.
- Decision : Under the Postal Rule, the def was obliged to pay for his shares. Indeed the contract was made when the clm mailed the letter. No evidence suggested it was incorrectly adressed or posted so contract was valid. Liable.
Holwell Securities V Hughes
- Facts : Def was selling his property and gave Clm the option to purchase the ppty, exercisable by notice in writing. Clm posted a letter to def, well within the time limit, accepting the offer but the letter never arrived. A day after the time limit, Def sold his property to someone else. Clm sued for BOC.
- Decision : No contract was made because the offer required the Clm to accept by giving notice in writing BEFORE limit date. Postal Rule didn't apply. Def wanted written acceptance BEFORE the date. There was no acceptance of the contract. Not liable.
- Holwell. A hole in the Postal Rule.
Felthouse V Bindley
Felthouse. Felt is soft like a horse.
- Facts : Nephew was selling horses at an auction but knew his uncle was interested in buying one of his horses. He consequently wrote him saying that he was willing to sell them to him for a set price and "if I hear nothing from you, I will assume we have a deal and will not put stallion up for sale at auction". The Uncle received the letter and went to the bank to raise the money necessary. The nephew instructed the auctioneed to sell all horses except that one. Auctioneed sold all horses by mistake. Uncle sued auctioneer for BOC using Tort of Converson (uncle was the owner of that stallion as a consequence from the contract with his nephew, and so auctioneer had sold the uncle's horse w/o authority)
- Decision : The Uncle and Nephew had no contract because no communication of acceptance was made. Acceptance through silence will never give rise to a contract. The Uncle did not own the horse and the auctioneer was not liable.
Electronic Communications Act 2000
Implements e-signatures. Facilitates online contracts.
Making the Contract Agreement
- Consideration that is exchanged at the time of the agreement is called executed consideration, whereas a promise to give consideration in the future is called executory consideration.
- The consideration must be of some valueA deal is a deal. The seller/buyer cannot later complain that he is getting a bead deal.Thomas V Thomas
- The consideration must not be pastRe McArdle
- There must be privity of contract between the parties in litigation so only the promisee can sue on the contract.
- Privity of contract means any action for BOC must be brought by a party who gave consideration. BUT "RIGHT OF THIRD PARTIES"
- The consideration must be real or sufficientIf one party promises to do something that he is already bound to do then he is not providing consideration. Stilk V Myrick & Hartley V Ponsonby
- Williams V Roffey Bros
- Part payment of a debt is not sufficient consideration to discharge the whole debtDebtor gives no consideration for the deal of paying less so it is not legally binding (Rule in Pinnels Case)D&C Builders V Rees
Thomas V Thomas
Thomas ne paie rien
- Facts : A man died and under the terms of his will his house was to be inherited by his brothers. Knowing their brother would have wanted his wife to remain in their home, they allowed her to live in the house for the rest of her life at an annual rent of £1. A few years later the brothers tried increasing the amount but the widow refused to pay claiming they had a contract. According to the brothers £1 was not enough consideration to form the basis of a contract.
- Decision : £1 was sufficient consideration because it simply was consideration. It didn't matter the brothers had a bad deal. Not liable.
- Facts : Mr & Mrs McArdle had 5 children who were all due to inherit the property equally under the parents will. When Mr McArdle died, the youngest son and his wife moved in with Mrs McArdle. The wife carried out improvements to the property and the 5 children signed a document stating that in consideration for the works of improvement she would be paid £488 out of the estate on the death of the mother. When this happened, however, they refused to pay and the wife sued for BOC.
- Decision : The Clm was not entitled to the payment. There was no consideration on her behalf because the work she had carried out voluntarily was in the past and thus not valid. Not liable.
Stilk V Myrick & Hartley V Ponsonby
both cases involved sea voyages where a number of sailors deserted ship during the course of the voyage. In both cases, the captain promised to split the deserters' wages between the remaining crew if they successfully completed the voyage. Both captains only paid the sailors their original wage in the end. The sailors sued.
- Decision :
- Stilk V Myrick
- The crew was already bound by their existing contract of employment to continue to work the ship home as best they could. No new consideration was provided for the new deal and the captain was not liable.
- Hartley V Ponsonby
- The number of deserters was so great that the crew was providing considerably more than expected of them under the original contract. Consideration was provided and the captain was liable.
Williams V Roffey Bros
: Def entered into a contract to refurbish a block of flats. Under the terms of the contract there was a penalty clause whereby the Def would lose payment if the work was not finished upon the agreed deadline. The Def subcontracted carpentry work to the Clm for an agreed amount. When it was clear the Clm was running late, the Def offered to pay him an additional sum provided he complete the work on time. The Clm employed additional workers and worked longer hours to ensure it would be completed on time, and the Def did not incur the cost penalty. In the end, the Def only paid the Clm the original amount. Clm sued for BOC.
- Decision : It was sufficient consideration that the Def was going to gain some benefit beyond the existing contract (avoidance of the penalty clause) so the Def was liable.
D&C Builders V Rees
- Facts : The Clms were a small firm of builders who had done some work on teh Def's property amounting to a certain sum. Knowing the Clms were short on money, the Defs offered to pay a sum inferior to that owed, indicating that if it was not accepted they would pay nothing and Clms would have to sue to get their due. Clms reluctantly accepted, but then sued for the outstanding amount.
- Decision : Rule in Pinnel's Case: payment of a smaller sum was not sufficient to discharge a larger debt, as no consideration is provided. Liable.Reese sait pas compter
Central London Property Trust V High Trees House
- Facts : Before the war, the Clms granted the Defs a 99yr lease on a block of flats at a fixed amount of rent per annum. During the war period, it was impossible to rent out all flats, so both parties entered into an agreement which reduced the rent. In 1945 the flats were once again fully occupied but the Defs continued to pay reduced rent. The Clms decided to revocer rental arrears, claiming there was no legally binding agreement because the Defs did not provide consideration for the reduced rent.
- Decision : As flats were fully let in 1945, Clm was entitled to full rent. However he was not entitled to recover full rent for the war years. It did not matter that the Def provided no consideration, since the Clm had promised to take a reduced rent and it would be unfair to allow him to go back on his word. Not liable, under the Promissory Estoppel.
Coombe V Coombe
: A husband and wife separated and the wife sued for a divorce. When discussing the financial arrangements, the husband agreed to pay his ex-wife a certain amount per year for the rest of her life and in reliance on this agreement, the ex-wife did not apply to court for a maintenance arrangement. When the husband failed to pay, the ex-wife sued for BOC relying on the Equittable principle of Promissory Estoppel.
- Decision : Promissory Estoppel is a rule designed to give a defence in a case where a clm is going to breach a promise, it is not intended to create new claims. Her claim failed and the husband was not liable.
Created to fix the defects of Common Law, that did not always provide an appropriate remedy.
- 1 - Accord and Satisfaction
- Agreement to accept something different as repayment for debt.
- - a lesser sum at an earlier date
- - goods or some other material benefit in addition to or instead of the part-payment
- - part-payment by a third party in return for an agreement by teh creditor not to pursue the original debtor for the remainder of the debt
- 2 - Promissory EstoppelProtects debtors who may rely on creditors' promises not to pursue a debt. Even though a creditor may have a common law right to sue for the remainder of a debt, the creditor may lose that right in certain circumstances if it would be unfair to allow him to go back on his promises.
- Central London Property Trust V High Trees House
- characteristics:It is an equitable principleDesigned to create fairness when the application of common law would be unfair. The pple is discretionnary, meaning the court doesn't HAVE TO use it.
- D&C Builders V Rees
- It is a shield, not a sword
- Can only be used by a defendant who s being sued unfairly.Coombe V Coombe
Essential elements of PROMISSORY ESTOPPEL
- 1 - there must be an existing contractual relationship between the Clm and the Def
- 2 - Clm must have agreed to give up some of his rights under that contract
- 3 - Clm knows the Def is likely to rely on that promise
- 4 - Def has relied on Clm's promise to give up some of the debt
Balfour V Balfour
- Facts : def was a civil servant stationned abroad. After having returned to England with his wife for leave, he returned to his station alone, as his wife's health condition didn't allow for her to follow. Before leaving he agreed to send his wife £30/month. He failed to do so and, as a consequence, the couple separated. Mrs Balfour sued for recovery of the money.
- Decision : The agreement was not legally binding, it was only domestic arrangements, not a contract. The parties had no intention to create legal relations at the time of the agreement. Not liable.
Jones V Padavatton
: Mrs Jones made an offer to her daughter, Mrs Padavatton, that if she gave up her job in the US and came back to the UK to study for the Bar, she would provide her with maintenance and accomodation during the course of her study. In light of this, the daughter carried out the terms of the offer and began studying for the Bar. Mrs Jones bought a house for her daughter and paid for the maintenance. Later on, Mrs Padavatton had remarried and Mrs Jones claimed possession of the house. Mrs Padavatton had not finished her studies yet, and refused to vacate the house on the grounds that she ahd a binding agreement with her mother.
- Decision : Although it looks a lot like a business agreement, with substantial commitment on both sides, the fact that nothing had been put into writing and that the terms of the agreement were uncertain, suggests it's no more than an informal domestic arrangement.
Merritt V Merritt
: The couple separated and the parties had a meeting where the husband agreed to transfer the house ownership to his wife once the mortgage was entirely paid off, if she continued to pay the mortgage instalments. The wife did so but when she was done, the husband refused to transfer her the ownership claiming it was a purely domestic agreement which was not intended to create legal relations between the parties. In his view, based on the contributions he had made towards the house when the couple was still living together, he was entitled to some share in the property.
- Decision : At the time of the agreement, the couple had separated and were clearly negotiating a business arrangement with legal relations. Details were outlined in writing, clearly intending for the agreement to be binding. Liable.
Jones V Vernon's Pools
: Jones sent a football coupon to the Defs which correctly selected the winning team. When Jones claimed his winnings, teh Defs denied having received the coupon. A clause in the agreement stated that it was "binding in honour only" and Vernon's relied on this to say that even if the coupon had been received, there was no binding contract between the parties. Jones sued for BOC.
- Decision : Although it appeared to be a business deal, the use of the phrase "binding in honour only" rebuts the assumption that it creates legal relations. No contract and not liable.
Letters of comfort
When businesses enter into substantial contracts, they provide "letters of comfort" which often include promises which are extra to teh contractual commitments and their legal status in not always clear. It is moral responsibility not a legal liability.
Kleinwort Benson Ltd V Malaysia Mining Corporation Berhad
Kleinwort Benson Ltd V Malaysia Mining Corporation Berhad
: The Defs, a Malaysian company formed an English subsidiary. The Clms were merchant bankers who granted a substantial loan to the English Co after relying on a Letter of Comfort provided by the Defs that stated "it is our policy to ensure that the business is at all times in a position to meet its liabilities". The subsidiary went into liquidation and the Clms sued for BOC claiming the Letter of Comfort was a legal obligation. The Defs should make good of the Clms losses.
- Decision : Not liable. A Letter of Comfort is not a binding agreement.
Making the Contract Agreement
Contract is only valid if it's not immoral and the contract as a whole does not go against public policy
- Restraint of trade (3 types of contract)This is a contract that goes against public policy. A contract in r.o.t. is one where a person is stopped from carrying on employment or a business for a certain amt of time.
- Contract between employer and employeeIf the employment clause prevents the employee with particular talent from competing with the employer's business, the courts will not uphold this arrangement. However if it is genuinely to protect a proprietary interest such as trade secret, the cause is more likely to be declared valid by the courts.
- Attwood V Lamont
- Fitch V Dewes
- Forster & Sons V Suggett
- Contracts for the sale of a business
- A business may be sold on condition that the seller will not set up a similar bus during a fixed period and/or within a specified distance. British Reinforced Concrete V Schelf
- Nordenfelt V Maxim Nordenfelt Guns & Ammunition Co
- Solus agreement
- When a trader agrees to be supplied by only one company. Such agreements are often entered into in return for a loan to carry out premise improvements.Esso Petroleum V Harpers Garage
- Cut out unreasonable bits of the clause to make it valid. The fact that a restraint clause is void does not prevent the rest of the contract from being valid.
- Goldsoll V Goldman