1. THE LAW OF CONTRACT Outline:
A general look at the Nature of contract law
The Importance of Contract law
Classification of contracts
Essential elements a valid contract

2. The Nature What does the law of contract deal with?
The law of contract is concerned with:
agreements that are enforceable and regulates those agreements, and
provision of remedies if contractual obligations (undertakings or promises) are breached.
Significance reliance on promises
Promises are enforceable primarily because they are relied upon or due to the foreseeable likelihood that they may be relied upon.
Reliance on a promise does not only serve as a basis for enforcing the promise but also a as a mechanism for calculating the amount of damages available for breach of the promise.

3. The Importance of Contract Law
Why do we need contract the law?
The law of contract is of fundamental importance because it deals with the enforcement of legally binding promises that are essential to business agreements.
to ensure that promises that involve some form of exchange are binding.
promises that are part of an exchange are of greater importance to the functioning of a vital economy.
For efficient operation of the market economy by making sure that its participants can have certainty on promises made to them.

4. Cont’d
To compensate innocent parties financially by attempting to put them in the economic position they would have been, if the contract had been performed as agreed (i.e. recovery of damages).
To recover a debt - a seller can sue the buyer, where the buyer fails to pay the price agreed in the contract;
To claim for restitution - to recover the money paid for the goods/services, which have not been supplied;
To recover damages- where one party has purported to carry out his part of the bargain but has done so defectively.

5. Cont’d The law of contract serves a double function of:
helping the parties to know what they can expect if the contract is not performed as agreed, and
encouraging performance by ensuring that those who breach their contractual obligations cannot simply get away with it.

6. Classification of Contracts
Contracts can be classified in several ways, but for the purposes of our course we shall consider the following.
Unilateral contract – one created by a promise given in exchange for an act.
Unilateral contracts are commonly referred to as ‘if’ contracts –i.e. based on the idea of what one promises to the other ‘if you will do such and such, then I will do so and so’.
Only one party assume an obligation under the contract.
One party’s promise is dependent upon the other party performing an act requested.
Bilateral contract - one created by a promise given in exchange for another promise.
All the parties assume an obligation under the contract.
If any promises any promises are broken each party may sue the other.

7. Cont’d
Valid contract – one that manifests all the essential elements of a contract.
Voidable contract – one that manifests all the essential elements of a contract and is legally enforceable unless disaffirmed by one or more of the contracting parties.
Void contract – one that lacks the essential elements of a contract
Unenforceable contract- one that manifests all the essential elements of a contract but will not be given effect by a court of law.

8. FORMATION OF A CONTRACT
What is a contract?
A contract is:
a legally enforceable agreement ( or set of promises)
between two or more competent parties
giving rise to obligations for the parties involved.

9. The meaning of legally enforceable
This means that not every or agreement qualifies to ripen into a contract.
E.g., social and domestic agreements are generally not legally enforceable, unless there is clear evidence of an intention to create legal relations between the parties (see Balfour v Balfour (1919)
The law also requires that something of value (consideration) must be given by both parties to an agreement; it will not enforce gratuitous promises.
In Re Hudson (1885):
Hudson had promised to pay £4,000 a year for five years to a religious charity to help it pay off chapel debts. He died before the two final instalments could be paid and his executors claimed that his estate was not liable for the remaining £8,000 as there was no binding contract in law. Held: that no consideration had been given by the charity in exchange for Hudson’s promise. The promise was gratuitous, and there was no contract in any legal sense of the word. Thus Hudson’s estate was not liable for the remaining instalments.

10. Essential Elements of a Contract
For a contract to be valid, the following essential elements must exist:
An Agreement between the parties - there must be an offer by one party and an acceptance of it by the other.
Consideration – there must be something bargained for and given in exchange for a promise.
Intention to create legal relations – intention to be legally bound by that agreement.
Capacity to contract – a contract must be made by parties having the capacity to contract.
Certainty* as to the terms of the contract
Genuine consent* – consent must be obtained by fraud, duress or mistake.
Legality of object* – the subject matter of the contract must be legal
Proper form*, if possible - some contracts must be in writing to be legally effective.

11. The Need for an Agreement
The existence of an agreement between the parties is the essence of a contract.
In deciding whether the parties have reached agreement, the law looks for an offer by one party and an acceptance of the terms of that offer by the other.
The agreement is often said to require a meeting of minds between the contracting parties (sometimes described as a consensus ad idem.
Objective test of agreement
Although the meeting of minds between the parties is essential to an agreement, the law takes a predominantly objective test of agreement.
The law is not so much concerned with what is in the minds of the parties, but with what can be inferred from their words and conduct.
In Storer v Manchester City Council [1974] 3 All ER 824 at 828, Lord Denning stressed that: ‘In contracts you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract.’

12. Rationale behind the objective approach
The objective test is adopted for the efficacy of commercial transactions, which mainly include the aspects of:
fairness, certainty and commercial convenience,
so that one party has to be able to rely on the words and conduct of the other, even if it turns out that it not an accurate reflection of the other party’s private or subjective intentions.

13. Offer What is an offer? Form of offer. To whom an offer can be made?
Offer distinguished from:
(a) invitation to treat
Advertisements in newspapers, catalogues, circulars
Shop displays,
Auctions, and
Tenders
(b) request for information or mere supply of information
Termination of offer

14. Offer
The first element to consider in deciding whether there is an agreement, is whether an offer has been made.
What is an offer?
An offer is a proposal or promise by one party (the offeror) to enter into a contract,
on a particular set of terms,
with the intention of being bound as soon as the party to whom the promise is made (the offeree) signifies his acceptance
Offeror - the person making an offer.
Offeree- the person to whom the offer is made.

15. Form of offer An offer may be: written, express ( spoken) or
implied by conduct. E.g., presenting goods to the cash desk in a supermarket, amounts to an implied offer to buy those goods.

16. To whom an offer can be made?
An offer may be made either to:
an individual person,
a particular group of people, or
it may be made to the general public (as in the case of a reward offered for the provision of information).
Offers to the public
Leading English case: Carlill v Carbolic Smoke Ball Co[1893] 1 Q.B. 256.
The defendant company placed an advertisement in the newspaper offering a reward of £100 to anyone who bought one of its smoke balls, and used it in the prescribed manner, and yet caught influenza. To show its ‘sincerity in the matter’, the company deposited £1,000 with its bank. Relying upon this advertisement, the plaintiff bought a smoke ball and used it as directed and still caught influenza! The plaintiff sued successfully for the £100 reward and the defendant company appealed against the decision.

17. To whom an offer can be made?
An offer may be made either to:
an individual person,
a particular group of people, or
it may be made to the general public
Offers to the general public
Advertisement for unilateral contracts are generally treated as offers.
a reward offered for the provision of information
Legal principle applicable:
Where an offer takes the form of payment or reward in exchange for a particular act or acts—in what is known as a unilateral offer—there is no need for notification of acceptance, performance of the specified condition in the offer will constitute acceptance of the offer and consideration for the promise.

18. Case analysis
Facts:
• Carbolic Smoke Ball Co (def) promises in ad to pay 100 pounds to any person who contracts flu after using smoke ball.
• Carlill (plaintiff) uses ball but contracts flu + relies on the advertisement.
Plaintiff’s argument : advertisement was an offer they were under an obligation to fulfil because it was published so it would be read and acted upon and it was not an empty boast.
Def argument : There was no binding contract – the words of the advertisement did not amount to a promise because:
the advert was too vague to make a contract – there was no limit as to time & no means of checking use of the ball by consumers;
the terms are too vague to make a contract- no limit as to time – a person might claim they contracted flu 10 years after using the remedy;
No contract because a contract requires communication of intention to accept the offer or performance of some overt act.
Issue: Was there a binding contract between the parties?
- A contract requires notification of acceptance – Did Mrs Carlill notify Carbolic of the acceptance of the offer?
- Did Mrs Carlill provide consideration in exchange for the 100 pounds reward?

19. Case analysis Rule or Legal principle
In unilateral contracts, communication of acceptance is not expected or necessary.
If there is an offer to the world at large, and that offer does not expressly or impliedly require notification of performance, performance of the specified condition in the offer will constitute acceptance of the offer and consideration for the promise.
Held: There was a binding contract. Carlill successful.
1. The advert was not a mere puff: because of this statement “1000 is deposited with the Alliance Bank, shewing our sincerity in the matter” – proof of sincerity to pay
Promise is binding even though not made to anyone in particular – a unilateral offer – ie. “offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer”.
The advert is not so vague that it cannot be construed as a promise – the words can be reasonably construed. For example, that if you use the remedy for two weeks, you will not contract the flu within a reasonable time after that.
2. Notification of acceptance – notification of the acceptance need not precede the performance – “this offer is a continuing offer”
There is no need for notification of acceptance of the offer. An inference should be drawn from the transaction itself that if he performs the condition, there is no need for notification.
3. Consideration: There was consideration in this case for two reasons:
Carbolic received a benefit i.e. in the sales directly beneficial to them by advertising the Carbolic Smoke Ball
The direct inconvenience (and detriment) to the person who uses the smoke ball 3 times a day x 2 weeks according to the directions at the request of Carbolic , in other words: performance of the specified conditions constitutes consideration for the promise.
Case analysis

20. Offer distinguished from invitation to treat
An offer must be distinguished from an invitation to the other party to make an offer (an ‘invitation to treat’).
What is an invitation to treat?
An invitation treat – involves some transactions in the preliminary stage in which one party invites the other to make an offer.
A possible test which can be applied is to ask whether further bargaining was still expected or whether the statement shows a clear willingness to be bound if the other party assents. However, it should be stressed that this test, although valid, is probably simpler to state than it is to apply.
Legal principle applicable
Negotiations to enter into a contract can amount to an invitation to treat but not an offer.

21. A good illustration of the difficulty in distinguishing between an offer and an invitation to the other party to make an offer (an ‘invitation to treat’) can be found in the case of Gibson v Manchester City Council (1979). The facts were:
The Conservative-controlled Manchester City Council advertised details of a scheme for tenants to buy their council houses from the corporation and P expressed interest and asked to be told the price of buying his house. The city treasurer wrote in reply: ‘The corporation may be prepared to sell the house to you at £2,180’, but the letter was not to be ‘regarded as a firm offer of a mortgage’. P had to fill in a form to make a formal application, which he did, leaving blank the purchase price and listing certain defects in the property. He was told by the Council that the price had been fixed in accordance with the condition of the property, and P wrote that he wished to go ahead on the basis of his application. The Council took the house off the list of tenant-occupied houses which had to be maintained by them, and put it on their house purchase list. As a result of a local election, Labour gained control of the Council and reversed the policy of selling council houses. They would sell only those houses where a legally binding contract had already been concluded.
Held:
The House of Lords ruled that the Council had not made an offer, the letter giving the purchase price was merely one stage in the negotiations process for a contract and amounted only to an invitation to treat: i.e. inviting the making of a formal application amounting to an offer from the tenant.
The language of the treasurer’s letter indicated this with the phrases: ‘may be prepared to sell’ and ‘this letter is not to be regarded as a firm offer of a mortgage’.

22. Examples of invitation to treat
Advertisements
As a general rule the advertisement of goods for sale is not to be regarded as an offer.
The reasoning behind the rule that advertisements are not to be treated as offers is that further bargaining between the parties is still possible or even necessary.
This is thought to serve the interests of commercial convenience, thus the balance of convenience tips in favour of the seller rather than the buyer’s convenience.
Exception to the rule:
An advertisement of the reward can amount to an offer because no further bargaining or negotiation is intended by the offeror. Advertisements of rewards (e.g. for information or the return of lost property) fall into this category. See also famous case of Carlill v Carbolic Smoke Ball Co (1893).

23. Advertisements in a catalogue or circular with a price-list
An advertisement in a newspaper, stating that goods were for sale and giving the price
In Partridge v Crittenden (1968) the appellant was charged, under legislation for the protection of wild birds, with unlawfully offering for sale a wild bird. He had placed an advertisement in a magazine: ‘Bramblefinch cocks and hens, 25s each’. The Divisional Court held that the appellant was not liable for the statutory offence as he had not offered the birds for sale; the advertisement was an invitation to treat.
Advertisements in a catalogue or circular with a price-list
If a person sees a price-list and places an order, the seller is not normally bound to supply the goods.
A seller of goods has to be free to give information about his goods (i.e. advertise them) in the interests of a competitive market.
It would inhibit this flow of information if he were to be contractually bound to supply to anyone who placed an order, as the seller might not have sufficient stock to meet the demand

24. In Grainger & sons v Gough (1896), it was held that the circulation of a price list by a wine merchant was not an offer to sell at those prices but merely an invitation to treat.
Advertisement of an auction of specific goods
There is no promise to sell the goods and the auctioneer will not be liable for withdrawing them from the sale without notice.
In Harris v Nickerson (1873), P attended an auction in order to buy furniture which the auctioneer had advertised for sale. When the furniture was not put up for sale, P’s subsequent claim for damages (for his loss of time) failed as the court held that the advertisement was not an offer of sale.

25. A display of good on the shelves of a self-service store
The customer makes an offer to buy when he or she presents to the cashier.
The offer may be accepted or rejected by the cashier.
Reason: In certain types of shops or markets a limited degree of bargaining may be possible.
In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401:
It had to be decided at what point a contract is concluded in a ‘self-service’ shop where the goods are priced and displayed on shelves, selected by customers, and then taken to the cash desk for payment. The case rose under s 18(1) of the Pharmacy and Poisons Act 1933 which stated that ‘ it shall not be lawful—(a) for a person to sell any [listed] poison, unless The sale is effected by, or under the supervision of a registered pharmacist’. It was brought to establish whether the defendants were breaking the law by positioning their registered pharmacist (who was supposed to supervise sales) adjacent to the cash-desk. If the display of goods on the shelves were regarded as an offer to sell and could be accepted by the customer when they were picked up and put into the basket provided, then the defendants were breaking the law, as the sale would not be supervised by the pharmacist as required by the statute. But if the display of items were merely an invitation to treat and it was the customer who made the offer at the cash-desk, then Boots were complying with the law.

26. Held:
That the contract was concluded at the cash-desk. The customer made the offer, and this could be accepted or rejected by the defendants.
A display of goods, with a price tag attached , in the window of a shop.
In Fisher v Bell (1961), where it was held that the display of a ‘flick-knife’ in a shop window was not an offer to sell this item.

27. A mere statement of a price by one party without any indication that the person making the statement was willing to sell.
In Harvey v Facey (1893), P sent a telegram to D: ‘Will you sell us Bumper Hall Pen? Telegraph lowest cash price’. D’s telegram replied: ‘Lowest price for Bumper Hall Pen, £900’. P’s final telegram purported to accept this ‘offer’ and ‘agreed’ to buy the property for £900.
Held :
that there was no contract, as D was not making an offer merely by responding to P’s request for information and stating a price.
There was no clear intention to be bound simply by the other party’s expression of assent.

28. Termination of an offer
An offer may come to an end under any of the following circumstances:
Acceptance
Lapse of time
Revocation (or withdrawal) by offeror
Rejection by offeree
Cancellation by a counter offer
Failure of a precondition
Death of the offeror
Death of the offeree

29. Acceptance Lapse of time
Once an offer has been accepted it automatically ceases to exist.
Lapse of time
Specified time - where a time limit is placed upon an offer, it must be accepted within the specific time period, otherwise it comes to an end.
Reasonable time - where no time limit is placed upon a offer it must be acceptable within a reasonable time.
What amounts to a reasonable time will depend on the particular circumstances of the offer and taking into account of the subject matter of the offer. See Ramsgate Victoria Hotel Co. v Montefiore (1866); Loring v City of Boston (1844); Flaws v International Oil Pollution Compensation Fund (2001).

30. Rejection by Offeree Counter offer
A rejection is a refusal of the offer by the offeree.
It takes effective when it is communicated to the offeror.
Counter offer
A counter offer amounts to a rejection of the original offer. See Hyde v Wrench (1840).
In contrast, where the offeree does not make a counter offer, but merely seeks further information from the offeror, an offer is not to be regarded as rejected. See Stevenson, Jacques, & Co. v McLean (1880).

31. Revocation ( or withdrawal) by Offeror
An offer may be withdrawn or cancelled by the offeror any time before it has been accepted.
In order to be effective, revocation must be communicated to the offeree. See Byrne & Co v Leon Van Tienhoven & Co. (1880) 5 CPD 344.
The revocation of an offer can also be communicated by other reliable source (.i.e third party). See Dickinson v Dodds (1876) 2 Ch D 463.
Failure of a precondition
Some offers may be subject to certain conditions, and failure to satisfy such conditions, the offer may lapse. Financings Ltd v Stimson (1962).See Financings Ltd v Stimson [1962] 3 All ER 386 at 390.

32. Death of Offeror
In the event where the offeror dies after making an offer but before the offeree has accepted, the offer comes to an end. This applies in a situation where it is an offer of a ‘personal’ contract (involving a personal service such as employment or agency).
It is possible for an offer to continue even after the death of the offeror, where the offeree accepts without knowing of the offeror’s death (see Bradbury v Morgan (1862)
Death of Offeree
There is no English authority that decides on this point, but it seems probable that ceases to exist and cannot be accepted after the offeree’s death by the offeree’s representatives.