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CONTRACT 1 Hilary Stone 2012Brunel University UK

Lecture 4CONTRACTWhen:We buy a tube of toothpasteOr a bus ticketOr time in the gymWe make a legally binding contractThe contract does not have to be in writing

(c) Hilary Stone 2012 Brunel University UK2CONTRACTBusiness contracts can be simple eg buying stationeryOr very complex eg contracting for a new build factory Business contracts do not have to be in writing but the more complex the terms the more likely they are to be in writing.

(c) Hilary Stone 2012 Brunel University UK3CONTRACTA concurrence of intention in two parties one of whom promises something to the other, who on his part accepts such promise Blackburn 1845

(c) Hilary Stone 2012 Brunel University UK4ELEMENTS OF A CONTRACTOfferAcceptanceIntention to create legal relationsConsideration (c) Hilary Stone 2012 Brunel University UK5TWO COMMON MISCONCEPTIONSOnly a written agreement can constitute a contract in lawThat when you shop in a supermarket the offer is made by the supermarket displaying the goods on the shelf and accepted by you when you pick the goods from the shelfPharmaceutical Society of Great Britain v Boots Cash Chemists Ltd 1952

(c) Hilary Stone 2012 Brunel University UK6INTERNET SALESYou browse a website, choose what you wish to buy, order and pay for it usually by credit cardIs the website an invitation to treat or an offer to sell?As a matter of law can the trader refuse to serve you?(c) Hilary Stone 2012 Brunel University UK7OFFERAn offer is an expression of willingness to contract on specified terms made with the intention that it is to be binding as soon as it is accepted by the person to whom it is addressed (Treital)Originally the courts determined whether there had been a meeting of minds to decide whether or not there was an agreement(c) Hilary Stone 2012 Brunel University UK8OFFERNow it is an objective test as to the offerors intention so that if the offeree behaving reasonably believes that the offeror implied by his words or conduct that he intended to be bound this may be sufficient to bind the offeror(OT Africa Line Ltd v Vickers plc 1996)(c) Hilary Stone 2012 Brunel University UK9INVITATION TO TREATAn invitation to treat is a preliminary statement expressing a willingness to receive offersAn invitation to treat MUST precede an offer AdvertisementsAuctionsSelf service and shop window displaysInvitations to tenderMere statements of price(c) Hilary Stone 2012 Brunel University UK10INVITATION TO TREATPartridge v Crittenden (advertisements)Carlill v Carbolic Smoke Ball Company (1893) (advertisement containing a promise in return for an act)British Car Auctions v Wright (1972) (auctions)Barry v Davis (2000) (auction without reserve)Harvey v Facey (1893) (mere statement of price)

(c) Hilary Stone 2012 Brunel University UK11TERMINATION OF OFFERSRevocation (Byrne v Van Tienhoven 1880)Lapse of timeFailure to comply with a condition precedentDeath of one of the parties(c) Hilary Stone 2012 Brunel University UK12ACCEPTANCEWhat constitutes acceptance? What constitutes effective communication of that acceptance?An acceptance is a final and unqualified expression of assent to the terms of an offer(Treitel: The Law of Contract)Acceptance must correspond exactly with the terms of the offer

(c) Hilary Stone 2012 Brunel University UK13ACCEPTANCE OR COUNTER OFFER?I will sell you my car for 1500Thats too much. Will you take 1400?NoVery well then make it 1500(Hyde v Wrench 1840)(c) Hilary Stone 2012 Brunel University UK14COMMUNICATION OF ACCEPTANCEAlthough an offer may be made to the whole world Carlill v Carbolic Smoke Ball Co 1892 anyone accepting that offer must make it known to the offerorIf the offeror specifies a particular way to communicate acceptance that way must be followed.(c) Hilary Stone 2012 Brunel University UK15 COMMUNICATION OF ACCEPTANCEAn acceptance has no effect until it is communicated to the offeror(Entores v Miles Far East Corporation)Silence cannot amount to acceptanceAcceptance by conduct(Brogden v Metropolitan Railway Co 1877)

(c) Hilary Stone 2012 Brunel University UK16METHODS OF ACCEPTANCEThe postal rule. It applies to:Acceptance onlyNot revocationTelex, fax and email (Entores v Miles Far East Corporation)Non-instantaneous communications (Brinkibon v Stahag Stal 1983)

(c) Hilary Stone 2012 Brunel University UK17 MISCELLENEOUS POINTSContrast counter offer with request for information Stevenson Jaques & Co v McLean (1880)Standard form contractsBattle of the forms(c) Hilary Stone 2012 Brunel University UK18CONSIDERATIONGenerally a promise is not contractually binding unless it is either made by deed or supported by some consideration.A contract is a two way arrangement each party giving and receiving something of value.

(c) Hilary Stone 2012 Brunel University UK19CONSIDERATIONA valuable consideration in the sense of the law, may consist either of some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other (Lush J in Currie v Misa 1875) An act of forbearance or the promise thereof is the price for which the promise of the other is bought, and the promise thus given is enforceable (Pollack Principles of Contract (1876) approved by HoL in Dunlop v Selfridge) (c) Hilary Stone 2012 Brunel University UK20PAST CONSIDERATION IS INSUFFICIENT CONSIDERATIONMy neighbour mows my lawn while I am away. On my return I promise to pay him 20 for having done so. I fail to pay can he sue me?He hoped for payment, we did not discuss payment in advance of the service being performed

(c) Hilary Stone 2012 Brunel University UK21PAST CONSIDERATIONContrast with executory and executed considerationExecutory consideration is given when the contract will be completed in the futureExecuted consideration occurs where e.g a reward is offered for the return of a lost dog. The dog is found and that act is both acceptance of the offer and the consideration

(c) Hilary Stone 2012 Brunel University UK22PERFORMANCE OF AN EXISTING DUTYConsideration must contribute to the agreement in some waySo if A is already under an obligation to B is this valid consideration?A duty imposed by general law cannot be good consideration however if more than the legal duty is done then this may be consideration: Glasbrook Bros v Glamorgan CC 1925(c) Hilary Stone 2012 Brunel University UK23CONSIDERATION MUST MOVE FROM THE PROMISEEThis rule has a twofold significanceA person to whom a promise is made can only enforce that promise if he has himself provided the consideration for it. So X can only enforce a promise made to him by Y if X can establish that he gave consideration for Ys promise -Price v Easton 1833

(c) Hilary Stone 2012 Brunel University UK24CONSIDERATION MUST MOVE FROM THE PROMISEEThe second point: at common law an outsider or third party who is not a party to the contract cannot bring an action on that contractThis is the doctrine of privity of contract - only a person who is a party to the contract can sue on it Dunlop v Selfridge 1915(c) Hilary Stone 2012 Brunel University UK25PRIVITY OF CONTRACTThe doctrine has been heavily criticised Current thinking:There is no doctrinal, logical or policy reason why the law should deny effectiveness to a contract for the benefit of a third party where there is the expressed intention of the parties (Lord Steyn Darlington Borough Council v Wiltshier Northern Ltd 1995)

(c) Hilary Stone 2012 Brunel University UK26CONTRACTS (RIGHTS OF THIRD PARTIES) Act 1999So the common law position has been modifiedThe doctrine is not abolishedWhere by virtue of a contractual agreement between A + B a benefit is conferred upon C C now has the right subject to certain conditions specified in the Act to enforce the agreement against the defaulting contracting partyHowever he cannot do so unless the contract expressly so provides s1(1)(a)

(c) Hilary Stone 2012 Brunel University UK27CONTRACTS (RIGHTS OF THIRD PARTIES) Act 1999If there is no express provision s1(1)(b) states that if a term of the contract purports to confer a benefit then the right to sue is conferredS1(2) provides that the provision will not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party(c) Hilary Stone 2012 Brunel University UK28AGENCYPrincipal: the party on whose behalf the contract is made and who receives the benefits arising under the contractAgent: a party to the contract with the third party. The agent has a direct contractual relationship with the third party but is making the contract on behalf of the principal and not on his own behalf

(c) Hilary Stone 2012 Brunel University UK29AGENCYThird Party: the third party enters into the contract with the agent. However the rules of agency provide that there is no contractual relationship with the agent. Instead the principal is bound by the contractual relationship with the third party which has been entered into by the agent on his behalf(c) Hilary Stone 2012 Brunel University UK30CONTRACTUAL TERMSThe majority of terms in a contract are expressly agreed between the partiesSome terms may be implied in order to give effect to the intentions of the contractOr implied by custom or law(c) Hilary Stone 2012 Brunel University UK31REPRESENTATIONS AND TERMSBefore a contract is formed the parties will make various statements in the course of negotiationsThese statements may form part of the contract so it is necessary to distinguish between contractual terms and other statements

(c) Hilary Stone 2012 Brunel University UK32REPRESENTATIONS AND TERMSA puff a boastful statement in advertisingA representation a statement which induces a party to enter into a contract (but does not form part of it)A term is a promise or undertaking which becomes part of the contract itself

(c) Hilary Stone 2012 Brunel University UK33INCORPORATION OF EXPRESS TERMSWhat was the intention of the parties?Were the statements intended to raise expectations which the contract should upholdWas there evidence of an intention by one or both parties that there should be a contractual liability in respect of the accuracy of the statement(c) Hilary Stone 2012 Brunel University UK34CONTRACT IN WRITINGThe statements in the contract are generally terms not representationsIf the statement is not in the contract it is generally considered to be a representationThe court will consider if the parties intended that the contract be partly oral and partly in writing (J Evans and Son Portsmouth Ltd v Andrea Mezario Ltd 1976

(c) Hilary Stone 2012 Brunel University UK35CONTRACT IS SIGNEDIf the contract is signed the parties are considered to be in agreement with everything in it even if unread (LEstrange v Graucob 1934)

(c) Hilary Stone 2012 Brunel University UK36RELIANCE ON SPECIALIST KNOWLEDGE AND SKILLWhere one party relies on a statement made with the specialist or skill of the other party in deciding whether or not to enter into a contract then the statement may be considered to be a term of the contract. (Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd 1965) (c) Hilary Stone 2012 Brunel University UK37TIMING OF THE STATEMENTWhere there is a significant lapse of time between the statement made and the formation of the contract the courts are more likely to treat the statement as a representation and not a term.(Routledge v McKay 1954)(c) Hilary Stone 2012 Brunel University UK38