1 Law of Contract

2 LAW OF CONTRACT What is a Contract? 1)A contract is an Agreement 2) Giving rise to Obligations 3) Enforced or recognised by the Law.

3 LAW OF CONTRACT Agreement There must be : 1)a Definite Offer. 2) an Unqualified Acceptance.

4 LAW OF CONTRACT Agreement ? Have the parties reached agreement? 1) The Courts will analyse by looking at the dealings in context of Offer and Acceptance? 2)The test is objective ! Parties real Intention not relevant

5 LAW OF CONTRACT Analyse Agreement Based on Offer and acceptance model “Mirror image rule” e.g If seller’s offer(terms) differs from buyers, terms, No mirror image An unequivocal offer matched by an unequivocal acceptance Butler V Ex- Cell -O Corporation (1979) Held: Seller, became offeree who accepted the terms by replying thru tear off slip, to buyer. Gibson V Manchester City Council (1979)

6 LAW OF CONTRACT Objective test? 1) Test : what parties actually said and did, and from that, courts, will conclude as to what they agreed upon. 2) (Not what they intended to say or do.) see : Smith V Hughes (1871) as Per J Blackburn Centrovincial Estates V Merchant Investors (1983) But see: The Hannah Blumenthal

7 LAW OF CONTRACT Offer-Definition 1) Definition of Offer - Expression of willingness to contract made with intention that it shall become binding on the offeror upon acceptance by the offeree. 2) Did parties make a definite offer and other responded with an unqualified acceptance of that offer. Butler V Ex-Cell O Corpn (1979) Gibson V Manchester City Council (1979) HL

8 LAW OF CONTRACT An Offer..Is a statement by one party of a willingness to enter into a contract on stated terms, provided terms are accepted by other party or parties. Can be oral, written or by conduct Gibson V Manchester City(1978)CA (1979)HL. Lord Denning said look at the intention from the general terms, even if some differ. HL disagreed, said look at offer and acceptance. Held : There was no offer

9 LAW OF CONTRACT Offer May be in : 1) writing 2) Verbal 3) or implicit in conduct. 1)Bilateral or 2)Unilateral. i.e Offer may be made to one person or to the world at large

10 LAW OF CONTRACT Offer-Unilateral Contract Offer can be addressed to individual or to group or to world at large Carlill V Carbolic Smoke ball (1893) 1) Its possible to make an offer to the world. 2) the use of the ball (performance) amounted to acceptance.

11 LAW OF CONTRACT Invitation to treat V Offer 1) Invitation to treat : is an invitation to make an offer an expression of willingness to enter into negotiations which could lead to conclusion of contract Gibson V Manchester City Council (1978) Held: letter by treasurer was an invitation to treat

12 LAW OF CONTRACT Invitation to treat 1) Advertisements 3) Tenders 2) Display of Goods 4) Auctions

13 LAW OF CONTRACT Advertisements Advertisements in news papers, circulars, catalogues of goods for sale are purely Invitations Partridge V Critendden advertisement in a periodical to sell a wild bird, held not to constitute offer,..Protection of Bird’s Act 1954.

14 LAW OF CONTRACT Adverts v Unilateral contracts 1) A contract arising where an offer is made in the form of a promise to pay in return for the performance of an act…so that performance is taken as assent. Carlill V Carbolic Smoke ball (1893) No need for communication of acceptance in unilateral contract…all that’s required is performance

15 LAW OF CONTRACT Display of Goods 1) A shopkeeper who displays his goods with a price tag on it, is not making an offer…but merely asking public to make an offer for it….ie.He is inviting an offer Pharmaceutical Society of Great Britain V Boots cash Chemists (1953) Held : No offence because no sale done until acceptance by cashier. Fisher V Bell (1961) Flick Knife case

16 LAW OF CONTRACT Tenders Tenders are Invitations to treat… Unless one expressly undertakes to accept the highest bidder, in a unilateral contract. Spencer V Harding (1870) Harvela Investments V Royal Trust (1986) HL Held: If in a confidential offer, one undertakes to accept highest offer…its an offer made to the to highest bidder.

17 LAW OF CONTRACT Auctions The general rule is that an auctioneer, when he invites the bids, is making an invitation to treat. Thus a bid is an offer and the fall of the hammer is the acceptance British Car Auctions V Wright (1972) Payne V Cave (1789) S 57 (2) : fall of the hammer. & S58 (2) : bidder may withdraw offer before hammer. Sale of Goods Act 1979

18 LAW OF CONTRACT Auctions An advertisement that an auction would take place is an invitation to treat,..not an offer. Offer is made only when the bidder bids and its accepted by the fall of the hammer. Harris V Nickerson (1873) Held : Advertisement of auction was an invitation.

19 LAW OF CONTRACT Public Transport Offer made by the transport company, plying the route, and the acceptance occurs when the passengers board the bus. Wilkie V London Passenger Transport Board (1947).

20 LAW OF CONTRACT Sale of Shares When a company “offers to the public” shares for them to subscribe to, they are inviting an offer for the public to make an offer for the share allotments. Exception : When the company issues shares, as rights issues to its existing shareholders,... the letter informing shareholders is an offer.

21 LAW OF CONTRACT Bilateral and Unilateral Bilateral Contracts A promise for a promise. Unilateral Contracts A Promise for an Act. Calls for an acceptance in the form of an unqualified promise to perform according to terms. Unilateral - Carlill V Carbolic Smokeball (1893).

22 LAW OF CONTRACT Revocation of Offer Offer can be revoked at anytime before acceptance Payne V Cave(1789)

23 LAW OF CONTRACT Revocation of Offer Exceptions to the rule, above. Where Offeror promises to keep the offer open for a specified period & offeree has given some consideration (option agreement). Routledge V Grant (1829) Held : An option agreement (is a separate contract), is an agreement to keep offer open till, the specified date.

24 LAW OF CONTRACT Communication of Revocation 1) Revocation of offer is only effective if and when offeror actually communicates his withdrawal to the offeree, before the acceptance. Byrne V Van Tienhoven(1880) Held : Revocation effective only upon actual communication..ie upon the receipt of the letter of revocation.

25 LAW OF CONTRACT Communication of Revocation 1) Revocation need not be communicated directly. 2) Offer cannot be accepted after Offeror had decided to sell the land, and the offeree had the knowledge of the sale, to someone else. Dickinson V Dodds (1876) CA

26 LAW OF CONTRACT Communication of Revocation In the case of Unilateral Offers, Offer cannot be revoked once performance (acceptance) has begun,..even if it had not been completed. Errington V Errington and Woods(1952) CA Facts : Father bought son & Daughter in law, a house, and they were required to pay off the mortgage. Held : as per Denning LJ, since they started to pay the mortgage offer cannot be revoked.

27 LAW OF CONTRACT Communication of Revocation Once Offeree embarks on the performance of his promise, its too late for the offeror to revoke. Daulia Ltd V Four Millbank Nominees (1978) But see : Luxor Ltd. V Cooper (1941) Held : Claimant not entitled to commission because payable only upon completion of sale.

28 LAW OF CONTRACT Lapse of Offer An Offer may lapse when : 1) Rejected by Offeree 3) Lapse of time 2) Occurrence of a Terminating condition 4) Death of Offeror or Offeree

29 LAW OF CONTRACT Rejection of Offer 1) An offer that is rejected by an Offeree cannot be subsequently accepted by him. 2) A Counter-Offer is considered as a rejection of the original Offer.

30 LAW OF CONTRACT Terminating conditions An Offer and its acceptance, can be made subject to a condition. If that condition is not satisfied, the offer is not capable of acceptance. Financings Ltd. V Stimson (1962) Facts : express provision that car will be in good condition not met during acceptance, thus Offer not capable of acceptance.

31 LAW OF CONTRACT Lapse of time 1) If an offer is not accepted after an unreasonable amount of time : offer lapses 2) Where an Offer is stated to be open for a specified period of time : it terminates after expiry of time period. Ramsgate Victoria Hotel V Montefiore (1866) Facts : 08th June, D offered to buy shares, 23rd Nov, P accepted the Offer. Held : 06mths delay unreasonable. Offer Lapsed.

32 LAW OF CONTRACT Death of Offeror/Offeree If performance of promise by Offeree, personal to Offeror, then upon knowledge of death of Offeror,..the Offer lapses. Upon death of an Offeree, the Offer lapses. Bradbury V Morgan (1862) Reynolds V Atheron (1921) Held : obiter : Upon Offeree’s death Offer lapses, and thus