1. Formation of a contract

2. A contract is an agreement that is enforceable at law.

3. Characteristics of a Contract 1.There will be a promise or promises. 2.They will be made by “parties to the contract”. 3.They will create an obligation. 4.That obligation will be enforceable at law. 5.Often found in negotiations, rather than a formal document.

4. OFFER/ACCEPTANCE ANALYSIS OFFER +=AGREEMENT ACCEPTANCEINTENTIONCONSIDERATIONCAPACITY

5. Carlill v Carbolic Smoke Ball [1893] 1 QB 256 Unilateral contract Unilateral contract Offer can be made to world at large Offer can be made to world at large Distinguish offer from invitation to treat by looking at intention of offeror Distinguish offer from invitation to treat by looking at intention of offeror Unilateral contract – offer made at large, but only accepted by those who actually perform Unilateral contract – offer made at large, but only accepted by those who actually perform Unilateral contract – communication of acceptance not required Unilateral contract – communication of acceptance not required Consideration can equal detriment/effort Consideration can equal detriment/effort

6. Offer “the indication by one person to another of his or her willingness to enter into a contract with that person on certain terms” Carter and Harland, “Contract Law in Australia” 4 th edn p28

7. Essential features of an offer: The offeror must intend to be bound by the offer The offeror must intend to be bound by the offer The offer must be communicated to the offeree The offer must be communicated to the offeree The offer may be made to one person, a class of persons, or the whole world The offer may be made to one person, a class of persons, or the whole world The offer must contain enough information (certainty) to allow a binding contract to come into existence The offer must contain enough information (certainty) to allow a binding contract to come into existence

8. All an offer needs is a “yes” to make a contract

9. An offer is not:  A request for the supply of information  Harvey v Facey [1893] AC 552  An invitation to treat  Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1QB 401.  Gibson v Manchester City Council [1979] 1AllER 972

10. Examples of Invitations to Treat  advertisements/circulars  price lists  displays of goods in shops  calls for bids at auctions, and  calls for tenders.

11. Termination of Offers 1. Acceptance 2. Revocation 3. Rejection 4. Condition in offer not fulfilled 5. Lapse of time 6. Death of a party

12. Revocation Must be communicated Must be communicated Prior to acceptance – Byrne v Van Tienhoven Prior to acceptance – Byrne v Van Tienhoven Communication can be by third party or conduct – Dickinson v Dodds Communication can be by third party or conduct – Dickinson v Dodds Not bound by statement to keep offer open for a specified time – Dickinson v Dodds Not bound by statement to keep offer open for a specified time – Dickinson v Dodds Unless option – Goldsborough Mort v Quinn Unless option – Goldsborough Mort v Quinn

13. Revocation of unilateral contract Communication? Communication? Same as offer Shuey v United States Same as offer Shuey v United States Acceptance commenced but not complete? Old view – implied promise not to revoke until reasonable time for performance had elapsed Errington v Errington; Veivers v Cordingly New view – offeror may revoke once acceptance has commenced Damages may lie (breach of ancillary/implied promise) Mobil Oil Australia Ltd v Welcome International Pty Ltd

14. Rejection Rejection terminates an offer Rejection terminates an offer Counter offer is a rejection Counter offer is a rejection Hyde v Wrench Hyde v Wrench Response is not always counter offer/rejection May be clarification or request for information Stevenson v McLean

15. Acceptance A FINAL and UNQUALIFIED assent to the terms of an offer made in the manner specified or indicated by the offeror The “yes” which ends negotiations

16. Acceptance: May be oral May be oral In writing In writing Or by conduct Or by conduct

17. Acceptance must respond to the offer So, only those persons: -to whom the offer was made; and -who have the offer in mind at the point of “acceptance” may accept R v Clarke: must rely on offer at time of acceptance

18. What Can Be Accepted? Only what was offered (without any additions, deletions or conditions) Only what was offered (without any additions, deletions or conditions) Must end negotiations Must end negotiations Must be unqualified Must be unqualified Battle of the forms (cf counter offer) Battle of the forms (cf counter offer) Butler Machine Tool Co Ltd v Ex-cell-O Corp (England) Ltd Butler Machine Tool Co Ltd v Ex-cell-O Corp (England) Ltd

19. Acceptance must be communicated Silence is not sufficient Silence is not sufficient Felthouse v Bindley Felthouse v Bindley Conduct may communicate acceptance Brogden v Metropolitan Railways Empirnall Holdings v Machon Paul

20. Exceptions to communication Waiver Waiver Unilateral contract Unilateral contract Carlill v Carbolic Smoke Ball Carlill v Carbolic Smoke Ball Postal Acceptance Rule Acceptance complete on posting (constructive vs actual communication) Within the reasonable contemplation of the parties Adams v Lindsell May be excluded by request for notice (actual communication) Bressan v Squires

21. Conditional acceptance Can you accept ‘with strings attached’? - “subject to” some reservation. - “subject to” some reservation. NO - BECAUSE there is no “final and unqualified assent to the terms of the offer.” Whether an acceptance is truly “conditional” depends on whether the parties INTENDED TO BE BOUND by what they agreed.

22. The Three Possibilities from Masters v Cameron 1.The parties had reached FINALITY, intended to be bound immediately, but wanted the terms set out in a MORE PRECISE but NOT MATERIALLY DIFFERENT form. 2.The parties had reached finality, intended NO DEPARTURE from the terms of the agreement but made PERFORMANCE of one or more of the terms conditional on execution of a formal document. 3.The parties did not intend to make a CONCLUDED BARGAIN unless or until a formal contract was drawn up.

23. Uncertain and incomplete agreements not enforceable BECAUSE the courts cannot be sure what was agreed.

24. Courts will make certain that which is capable of being made certain

25. “Agreement to agree” not enforceable as final agreement not reached “Agreement to negotiate in good faith” may be enforceable (Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd) Agreement with missing terms may be completed (and enforceable) if terms can be objectively determined (eg arbitration clause.) (Booker Industries v Wilson Parking)

26. INTENTION TO CREATE LEGAL RELATIONS “ To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly” Atkin LJ in Rose & Frank Co v JR Crompton & Bros Ltd [1923] 2 KB 261 at 293

27. Rebuttable presumptions In social and domestic agreements there is a presumption against legal obligations In social and domestic agreements there is a presumption against legal obligations Balfour v Balfour Balfour v Balfour Cohen v Cohen Cohen v Cohen Jones v Padavatton Jones v Padavatton The presumption is rebuttable Merritt v Merritt Todd v Nicoll Wakeling v Ripley

28. Rebuttable presumptions In business or commercial agreements, there is a rebuttable presumption that the parties did intend to create legal obligations In business or commercial agreements, there is a rebuttable presumption that the parties did intend to create legal obligations Carlill v Carbolic Smoke Ball Carlill v Carbolic Smoke Ball Rose & Frank Co v Crompton & Bros Ltd Rose & Frank Co v Crompton & Bros Ltd Honour clause Honour clause