law paper 3 - contract
OFFER
For the to be a valid offer (no valid offer = no valid contract)
1) the terms of the offer must be certain
2) the offer must be communicated to the offeree
3) the offer must have been terminated
Chitty on Contract thirteenth edition: defined an offer: ‘an expression of willingness to contract on specified terms this is to become binding as soon.’ - this ensures the offer must be clear and certain with the person making the offer indicating they wish to be legally bound
In order to amount to an offer, must be shown that the offeror had the intention to be bound - HARVEY v FACEY - there must be a clear offer to sell
OFFER = a statement of intent to be legally bound by the terms of the offeror if it is to be accepted - STORER v MANCHESTER CITY COUNCIL
INVITATION TO TREAT = an indication that one person is willing to negotiate a contract with another, but not willing to make a legal offer. GIBSON v MANCHESTER CITY COUNCIL
An offer needs to be distinguished from an invitation to treat. An invitation to treat cannot be legally accepted so will not result in a contract being established e.g.: advertisements, tenders, shop windows or auctions.
Rule on advertisements is that they are only invitations to treat – Patridge v Crittenden
An advert can only amount to an offer if the advert is a unilateral offer – Carlill v Carbolic Smoke Ball Co
Bilateral contract – this type of contract require both offeror and offeree to do something. Both parties have obligations.
Unilateral contract – in a unilateral contract there is an agreement to pay in exchange for performance, if the potential performer chooses to act. There is no obligation to perform the act.
Tenders is a formal process where businesses are invited to bid for contracts. The request for tenders represents and invitation to treat and each tender submitted only amounts to an offer if the request specifies that it will accept the lowest or highest tender or specifies any other condition – Spencer v Harding
MAKING AN OFFER
An offer can be made by anyone
Can be made to:
A named individual – Storer v Manchester City Council
A group of people
The world at large – Carhill v Carbolic Smokeball Co
ENDING AN OFFER
REVOCATION: An offer can be revoked any time before acceptance – Routledge v Grant. The offeror must communicate the withdrawal of the offer to the offeree – Byrne v Van Tienhoven. Communication can be via a reliable source – Dickison v Dodds
REJECTION: can be rejected in two ways: 1. specifically responding to the offer by saying ‘no’. 2. making a counter offer eg: a diff price or delivery date. Rejection through counter offer – Hyde v Wrench
LAPSE OF TIME : if a fixed period of the duration of the offer is stated, then as soon as that expires , there is no offer to accept. When no time is set, in this situation the time is a reasonable time which will vary on the nature of the offer. As seen in Ramsgate Victoria Hotel v Montefiore
DEATH: if the offeree dies then the offer ends. The executors or administrators of his estate can make a new offer as can the offeror. When an offeror dies, the acceptance can still take place until the offeree learn of the offerors death.
ACCEPTANCE
“an unequivocal expression of intention and assent to the terms of an offer, which is communicated to the offeror”
The acceptance must be positive. It cannot be made by silence alone – Felthouse v Bindley
The acceptance must be unqualidied, meaning you must agree to whole offer.
The acceptance must be communicated to the offeror – Entores v Miles
The contract will be valid when communication of the acceptance is received.
Information request = no acceptance – Harvey v Facey
If the offer includes a mandatory instruction on how the acceptance should be communicated there will be no acceptance if the other party uses a different method. If the instructions regardinf the acceptance are merely a suggestion and the offeree uses a diff method to what was suggested the acceptance will still be valid.
METHODS OF ACCEPTING AN OFFER
VERBAL : this is easily established as long the acceptance is clear and hears. Entores v Miles Far East
CONDUCT : through an agreed methos Carhill v Carbolic Smoke Ball
SILENCE : silence does not amount to an acceptance Felthouse v Bindley
THIRD PARY : a third party can communicate acceptance if they are authorised by the offeree Powell v Lee
THE POSTAL RULE
the postal rule is an exception to the general rule that acceptance is valid once received – Adamns v Lindsell. There are two rules:
Only applies if post is the usaul method of communication between the parties
The offeree must be able to prove the acceptance letter was posted. If you do not use a letterbox or post office it is invalid.
The postal rule does not apply to revoking an offer – Byrne v Van Tienhoven
The postal rule doesn't apply to telefax , fax , telephone and email. Here acceptance is valid once it is received.
CONSIDERATION
Required to make an offer and acceptance legally binding
Defined in Dunlop v Selfridge : idea that a promise is exchanged for another promise (exchange of promises)
Consideration must be sufficient. It must be real , be tangible and have some inherent value – Ward v Byham
Consideration need not be adequate. Not interested in what parties agreed to but more interested in the freedom of contract. If
Consideration must not be past consideration/ past consideration is unenforceable. So if a voluntary agreement is struck and there was no mention of payment, then a later promise to pay is unenforceable. Roscorla v Thomas. Exception to this rule in Lampleigh v Braithwaite when a party has requested where there is a reasonable implication that a payment be made , even though not stated in agreement.
Consideration must not move from the claimant
Performance of existing obligaitons
PRIVITY OF CONTRACT
A contract is only enforceable by the parties to the contract – Dunlop v Selfridge. Common law prevents a person who is not party to the contract from enforcing the contract even if it was for their benefit.The rule of privity is based on the rule that consideration must move from the promisee – tweddle v atkinson
The rule of privity is based on the rule that consideration must move from the promisee – tweddle v atkinson
The law of privity can be unfair and the courts will try and avoid it. Jackson v horizon holidays
Statutory exceptions stated in contracts act 1999
Section 1 states:
A person who is not party to a contract may in his own right enforce a term of a contract is:
The contract expressly provides that he may.
(2) the term purports to confer a benefit to him – Nisshin Shipping v Cleaves
Subesection 1(b) does not apply if the parties did not intend the term to be enforceable by the third party – Dolphin Martime v Sveriges
The third party must be expressly identified in the contract by name, as a member of a group or by a particular description.
Exceptions of the rule of privity