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Week 2 The Law of Contract (Contract Offer (Not offers (Puffs (Carlill v…
Week 2 The Law of Contract
Contract
An agreement between 2 or more parties under which legal rights and obligations are created which can be enforced, if necessary, in the courts
"Legally enforceable promises"
Come in all shapes and sizes. Simple, complex, small large, high value low value, written oral, or both.
Building blocks of commerce. Their functions are
Securing expectations
Promises will be kept, or compensation will be paid to the innocent party
Facilitating planning
Parties can be more confident when planning for the future, knowing whats expected from them and what to expect from the other party
Establishing market values for goods and services
The contract fixes the price or provides mechanism to adjust it
Allocating risk
The economic risks are allocated in advance by the parties
Providing for dispute resolution
Elements of a contract
Offer, acceptance & certainty = agreement
Intention to create a contact
Consideration
Legal Capacity
Genuine consent
Legality of objects
In the absence of one or more of these elements the contract won't be created
Contract Offer
An offer is a proposal by one party, communicated to another party, to enter into a legally binding agreement
If the other party accepts the offer, then the contract is made.
Not offers
Puffs
A puff is a statement containing exaggerated claims and assertions that no REASONABLE PERSON would take serious
It has no contractual significance
Example. "worlds best coffee", several marketing advertisements
Carlill v Carbolic Smoke Ball case
Conclusion was that it was not a puff. 1000 pounds deposited demonstrates seriousness therefore contract was created
Leonard vs Pepsi Co case
Conclusion was that it was just a puff
Invitation to treat
It is an indication that a person is prepared to negotiate but its not an offer itself
Gibson v Manchester City Council
Court concluded that it was an invitation to treat
Pharmaceutical Society of Great Britain v Boots Cash Chemists
BTC argued that putting items on shelves was a mere invitation to trade, arguing that the offer occurs during checkout in registers
Court concluded that display of items on shelves is a mere invitation to treat
Statement supplying information
Harvey v Facey
Court concluded that Facey just supplied information, not an offer. Facey just replied to a question
These same legal precedents still apply today. Old cases still constitutes good law.
Can be made to:
People
Class of people
World at large
Carlill case
Must be communicated
R v Clarke
Offers can be revoked or cancelled
Can be revoked by the offerer before the offer is accepted
Byrne v Van Tienhoven
Revocation must be communicated
Leads to a timing problem
Which came first, revocation or acceptance
Option
An option is a promise to keep an offer open for a period of time
Can be revoked
Goldborough Mort v Quinn
Requires payment of consideration to be valid
Lapse
An offer lapses if:
Not accepted within a reasonable time
Not accepted within the time stated
Counter offer was made
Hyde v Wrench
New price = original offer is dead
One party dies
Reasonable person test
“Regardless of the subjective intentions of the parties, the question of whether the parties had made contracts of the kinds described was to be determined by taking an objective view of the agreements”
Must be intended to be legally binding
Acceptance
Must be communicated to the offeror
Express words, writing, conduct or performance
Watch lecture again
Relevant Cases
Carlill v Carbolic
Puffs
Pharmaceutical Society of GB v Boots
Invitation to treat
Byrne v Van Tienhoven
Revocation
Goldsborough Mort v Quinn
Option contract
Hyde v Wrench
Counter Offer