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LAW1111 Contract Law 1

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LAW1111 Contract Law 1 Contract LAW 1111 Notes 1 Principles of Contract Law Text Ch 1 Casebook Ch 2 “Slades case” – significant milestone in historical development of contract law. “line in the sand” where promise became enforceable. 1602AD. Assumpsit – A ‘form of action’. Latin for “he has undertaken” or “he promised”. A promise to undertake, do or pay. Either oral or in writing, but is not under seal. Executory: A contract that has not yet been fully performed – opposite to executed. Contract law concerns itself with what people are obliged to do but have not done – or have done defectively. Consideration makes executory agreement binding. Parol promise: (simplistic) – informal agreement reached by word of mouth. Contract: “A promise or set of promises the law will enforce” – Pollock. Simple contract: may be oral or in writing Formal Contract: agreement entered into between two parties in a particular form known as a deed. Contract entered into in deed form is also known as an agreement under seal or specialty contract. Bilateral Contract: Both parties have obligation immediately to carry out their obligation or promise at the time of entering the agreement. Unilateral Contract: Only one party has obligations to perform at time of its formation. Assuming the other has already executed his or her obligation. Eg reward for lost goods. Void, unenforceable or illegal contracts: Defect in the quality of contract of one of the parties at contract formation. Treated as if never had any effect. However, until or unless it is rescinded, the contract is still valid. Unenforceable may be if not written, when there is a statutory requirement for writing. Illegal contract is one that is prohibited by statue eg contract for murder, as is contrary to public policy at common law. 2 Fact of Agreement Text Ch. 4 Casebook Ch 4 4.1 - An agreement does not mean there is a contract, unless supported by consideration & intention to create legal relations. 4.2 – Look at the negotiations between the parties and seek to establish whether one of them (the offeror) has made an offer to the other (offeree) and whether the latter has subsequently accepted the offer. The Offer 4.9 – Nielsen v Dysart Timbers Limited [2009]: “An offer is a statement of the terms upon which the offeror is prepared to be bound if acceptance is communicated while the offer remains alive”. 4.11 – For a valid offer to exist, it must be communicated to the offeree, or his agent, but the offeror, or his agent. If the offeree learns of the offer from an unauthorised person, there is no offer for that offeree to accept – Banks v Williams (1912). Once an offer is communicated to the offeree, he or she has the power to transform it into an agreement by accepting. The Existence of an offer 4.12 – Invitation to treat is “a request to others to make offers or to engage in negotiations with a sale in mind”. Bowen LJ, in Carlill v Carbolic Smoke Ball Co [1893], described an invitation to treat as follows, “in cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let… there is no offer to be bound by any contract. Such advertisements are offers to negotiate – offers to receive offers”. 4.13 – Gibson v Manchester City Council [1979], the council resolved to allow tenants of council housing to purchase their properties. The council sent a letter to Gibson in which it stated that it ‘may be prepared’ to sell to Gibson the premises that he was leasing from the council. The letter stipulated the price and terms and conditions upon which a sale would take place. The letter then invited Gibson ‘to make a formal application to buy’ by completing an enclosed ‘application form’. Gibson sent a completed application form to the council, before formal contracts were prepared, control of the council passed to the British Labour Party. The council then resolved to abandon the scheme and complete only the legally binding contracts for sale of leased premises. Gibson claimed he had such a contract. House of Lords ruled in favour of the council, holding that the council letter was only an invitation to treat. The letter “was but a step in the negotiations for a contract which never reached fruition”. 4.14 – See Contrastingly Storer v Manchester City Council [1974], A contract was found to have existed on similar facts – see case. 4.15 – Harvey v Facey [1893]. 3 Harvey telegraphed to Facey saying “will you sell us Bumper Hall Pen?.” Facey replied “lowest price for Bumper Hall Pen, 900GBP”. Harvey replied that he agreed to buy the property for 900GBP and asked that the title deeds be forwarded to him. Facey refused, claiming there was no contract for sale. The question before the court: whether Facey’s reply to the initial telegram from Harvey was an offer or simply the supply of information. House of Lords ruled in favour of Facey, saying the reply was merely the supply of information - “The mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at the lowest price”. 4.16 – As with Harvey v Facey is indicative of the view that where property, such as land, is of considerable value, the mere statement of price at which a person is prepared to sell, is usually not an offer. Circulars, Catalogues and Advertisements 4.18 – The general rule is that circulars, catalogues and advertisements setting out price lists or promoting the sale of products are seen as invitations to treat. Partridge v Crittenden [1968], an advertisement in a bird magazine which said “Bramblefinch cocks, Bramblefinch hens 25c each”, was held to be an invitation to treat only. The use of the word “offer” in an advertisement does not mean that there is an offer in law – Spencer v Harding (1870). The consequence of this is that the potential buyer makes the offer which the seller either accepts or rejects. 4.19 – Rationale for this approach is that if the seller is seen as making the offer, the number of acceptances by means of orders for the goods might well exceed the total stock held by the seller. The consequence would be that the seller would be in breach of contract to all those buyers who accepted the offer after stocks ran out – Grainger & Son v Gough [1896]. 4.20 – However, the general rule will not apply if it is clear from the circular that the seller is limiting his or her liability to the amount of stock in hand, thus in Lefkowitz v great Minneapolis Surplus Store (1957): The store placed a newspaper advertisement which read: “1 black Lapin Stole. Beautiful, worth $139.50. $1.00 First come first served”. Lefkowitz presented, store refused to sell the sell the fur stole, on the basis of a house rule in the store that the advertisement was one which could only be taken up by a woman. Lefkowitz sued the store for damages for breach of contract. Supreme court found in favour of Lefkowitz, ruling that the advertisement was an offer which Leftkowitz had accepted and that the store could not impose new conditions on the offer, in the form of the house rule, after it had been accepted. 4 “Where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract… Whether in any individual instance a newspaper advertisement is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances. We are of the view on the facts before us that the offer by GMSS of the sale of the Lapin fur was clear, definite, and explicit, and left nothing open for negotiation”. 4.21 – Carlill v Carbolic Smoke Ball Co [1893]. CSBC produces the Carbolic Smoke Ball, a medical preparation. It placed an advertisement in a newspaper offering a reward of 100GBP to an person who, having used the medication as prescribed for two weeks, nevertheless contracted influenza. The advertisement further stated that the company had deposited 1000GBP in a special bank account as evidence of its sincerity. Mrs. Carlill purchased the medication and used it as prescribed for eight weeks before contracting influenza. She sued to recover the 100GBP reward. The company argued that the advertisement was not an offer. Court stressed that the necessary will or intention to make the advertisement an offer rather than ‘a mere puff’ was to be found in the fact that the company had set up a special bank account to meet possible claims as a sign of its sincerity in the matter’. Ken: The conventional view is that these are not offers but ‘invitations to treat’ - (an ‘invitation to treat’ in modern day language can perhaps be rephrased as an invitation to ‘make me an offer and maybe we can do a deal’ or similar – ie not an offer itself). Ken: See eg Partridge v Crittenden [1968] 2 All ER 421 Text paragraph 4.18 – this being an advertisement in a bird catalogue held to be an advertisement to treat with the consequence that it is the potential buyer who makes the offer that the advertiser can accept or not. Ken: ‘Why’ did this outcome came about in the Partridge case? - which then leads to the following response: ‘the rationale is that if the seller was seen as making the offer, the number of acceptances might well exceed the total stock held by the seller’ – Text paragraph 4.16.
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