1 FORMATION OF A CONTRACT (1) 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention to create legal relations 6. No vitiating factors present

2OFFER Person who makes offer is offeror, person who receives offer is offeree. Person who makes offer is offeror, person who receives offer is offeree. Promise to be bound on particular terms. Promise to be bound on particular terms. Must be capable of being accepted (i.e. not too vague). Must be capable of being accepted (i.e. not too vague). Sets out terms upon which offeror willing to enter into contractual relations with offeree. Sets out terms upon which offeror willing to enter into contractual relations with offeree. May be made to a particular person, group of people, world at large. May be made to a particular person, group of people, world at large. Carlill v Carbolic Smoke Ball Co (1893). Carlill v Carbolic Smoke Ball Co (1893).

3 7. Distinguish an offer from: i. Statement of Intention i.Cannot form basis of contract even though party to whom made may have acted upon it. ii.Re Fickus [1900]. ii. Supply of Information i.Cannot form basis of contract, i.e. supplying information about price does not mean that you contract at this price. ii.Harvey v Facey [1893].

4 iii. Invitation to Treat i.An invitation to others to make offers. Person making invitation not bound to accept any offers made. ii.Fisher v Bell [1961]. Display of goods in shop window. iii.Pharmaceutical Society of GB v Boots Cash Chemist [1953]. Display of goods on the shelves of a self service shop. iv.Partridge v Crittenden [1968]. Public advertisement.

5 8. Rejection of Offers i.Express rejection of offer terminates offer. Offeree cannot subsequently accept it. ii.Counter offer (where offeree tries to change terms of original offer) also terminates offer. iii.Distinguish from a request for information. iv.Hyde v Wrench [1840]. 9. Revocation of Offers i.Offeror withdraws original offer.

6 ii.Offer may be revoked at any time before acceptance. iii.Routledge v Grant [1828]. iv.Revocation not effective until actually received by offeree. v.Byrne v Van Tienhoven [1880]. vi.Communication of revocation may be made through a reliable third party (e.g a broker). vii.Dickinson v Dodds [1876].

7 viii.Promise to keep offer open only binding where there is a separate contract to that effect. ix.In unilateral contracts revocation not permissible once offeree started performing task requested. x.Errington v Errington and Woods [1952]. 10. Lapsing of Offers i.Offer no longer capable of being accepted : i. At the end of a stated period or after a reasonable time if no time limit set. ii. Where the offeree/ offeror die.

8ACCEPTANCE 1. Once offeree assents to terms offered contract comes into effect. Both parties bound, offeror cannot withdraw offer and offeree cannot withdraw acceptance without consent. 2. Forms of Acceptance i.Acceptance must correspond with terms of offer. Offeree must not seek to introduce new contractual terms into acceptance. ii.Neale v Merrett [1930] & Hyde v Wrench [1840]. iii.Acceptance may be in the form of express words (oral or written) or may be implied from conduct. Brogden v Metropolitan Rly Co [1877].

9 3. Communication of Acceptance i.General rule, acceptance must be communicated to offeror. ii.Silence cannot amount to acceptance. iii.Felthouse v Bindley [1863]. iv.Exceptions to general rule: v.Where offeror has waived right to receive communication. E.g in unilateral contracts or reward cases acceptance occurs when offeree performs required act. vi.Carlill v Carbolic Smoke Ball Co [1893].

10 vii.Where acceptance is through the postal service. Acceptance is complete as soon as the letter, properly addressed and stamped is posted. The contract comes into effect even if the letter subsequently fails to reach the offeror. viii.Adams v Lindsell [1818]. ix.Postal rule does not apply when instantaneous communications are used. When acceptance made by telephone, fax or telex etc… offeror must actually receive acceptance. x.Entores v Far East Corp [1955]. xi.Postal rule only applies where both parties contemplated that post would be used as method of acceptance.

11 xii.Postal rule can be excluded if: i. Offeror insists that acceptance only to be effective on receipt or in a particular manner. Holwell Securities v Hughes [1974]. Yates Building Co v J Pulleyn & Sons [1975]. If offeror does not actually insist on acceptance in a particular manner, then acceptance effective if it is communicated in a way that is no less advantageous to offeror.

12 4. Tenders i.Where one party wishes particular work to be done and issues a statement requesting interested parties to submit the terms on which they are willing to carry out the work. ii.Person who invites tender is making an invitation to treat not an offer. Person who submits tender is offeror.