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Common Law of Contract
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RECOMMENDED TEXT
McQueen and Thomson
Contract Law in Scotland 2012
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Definition
Contract
An agreement between two or more partieshaving the capacity to make it, in the formdemanded by law, to perform, on one side orboth, acts which are not trifling, indeterminate,impossible or illegal.
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Context A contract is freely entered into
Limited interference by the state
Good for commercial transactions
Good for parties to be held to theircontract
Generally there is mutuality
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Essential Elements for a valid contract:
agreement (consensus in idem) on
all material aspects
Capacity (e.g. age 16 with safeguardsto 18)
Form which is enforceable (containsthe essential elements)
Purpose not illegal etc.
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Contract formation in writing
Orally exchange of words
inferred from the actings of the
parties
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Enforceable FormEssential elements:
Offer and acceptance
Identity of the Parties
Proper identification of the subject matter (inconstruction what is to be constructed and where)
Highly desirable elements:
The Price or a method of determining it (in the absenceof an agreed price quantum meruit is a fall back)
Start date and time to complete or a method ofdetermining it(in the absence of agree times reasonable times can be
established)
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Offer
a proposal from one party
definite terms an offer must be distinguished from
an invitation to treat.
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Invitation to treat
An invitation to treat is not an offer.It is an indication of the partys
willingness to negotiate and not tobe bound by a simple acceptance-the distinction can be fine but
important. Advertisements are generally
invitations to treat (otherwise multipleacceptances would be possible but see Carlill v Carbolic
Smokeball Co)
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Cases
Harvey v Facey [1983] A.C. 522(intimation of lowest price which would be considered forthe sale of a property was an invitation to treat (ItT) not anoffer)
Philp v Knoblauch 1907 S.C. 994(price quoted for linseed was an offer not an ItT)
Carlill v Carbolic Smokeball Co (1893)1 QB 256 CA(advertisement to pay 100 if anyone caught flu
after using the smokeball found to be a contract not ItTbecause defendant had deposited money to cover claims)
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Tenders Invitation to Tender normally treated
as an Invitation to Treat
A tender or quotation (as opposed to anestimate) is usually regarded as anoffer, not an invitation to treat
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Acceptance The final unqualified agreement to
the terms stipulated in the offer
Usually in words but can be inferredfrom the positive conduct of theofferee
Silence is not normally enoughdemonstrate acceptance
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Modes of communication
of acceptance telephone
Fax
Post
All of above except post involveinstantaneous intimation.
Postal acceptance is a special case.
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Instantaneous Intimation
Telephone instantaneous but contract notformed if communication unintelligible forany reason.
Fax and E-mail generally considered tooccur when should have been picked read inthe ordinary course of business.
Acceptance occurs when communicated tothe offerror.
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Postal Rule Here the rule is that acceptance takes effect at
time of posting irrespective of when the letter isreceived (although the position is uncertain if
acceptance is never received)
Surprisingly, an acceptance can be withdrawnafter posting but before arrival. Countess ofDunmore v Alexander (1830) 9 S. 190 an
acceptance followed by a later revocationarrived simultaneously.
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If an offer is being revoked, revocation mustbe receivedby offeree BEFORE he accepts orposts acceptance (otherwise posting ofacceptance forms contract)
Jacobsen & Sons v Underwood(1894) 21R 654 (acceptance posted but not receivedbefore expiry of offer)
Implied revocation in one of three cases:
Time limit for acceptance in offer passeswithout reply, or, where none, a reasonabletime passes and no acceptance
Where counter offer received (see below)
Where either party dies or goes insane priorto acceptance
Revocation of offer
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Where a qualified acceptance isreceived (also known as a counter
offer), this kills the original offer. A qualified acceptance is one that
contains additional terms,contradictory terms or one in which
not all terms in the offer are acceptedSee, for example: Wolf and Wolf vForfar Potato Co. Ltd. 1990 S.L.T. 465
Counter offer
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Battle of the forms
Problems with offer and acceptance
Pre-printed terms
Conflicting standard terms
Use by parties as a matter of course
Last shot wins
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Error & Misrepresentation in
Formation of Contract Menzies v Menzies(1893) 20R HL
108
Lord Watson: "Error becomes essentialwhenever it is shown that but for it oneof the parties would have declined tocontract. He cannot rescind unless hiserror was induced by therepresentationsof the other contractingparty, or of his agent, made in thecourse of negotiation, and with
reference to the subject matter of thecontract"
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Statements not amounting to
misrepresentation Exaggerated/optimistic statements of
the nature of advertisement
Expressions of opinion
Expression of hope/expectation
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Types of Misrepresentation Innocent remedy reduction &
restitution parties put back totheir original position
Negligent or Fraudulent
reduction plus damages in delict.
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Fraudulent Misrepresentation Derry v Peek(1889) 14 AC 337
Lord Herschell: "fraud is proved
where it is shown that a falserepresentation has been made
(1) knowingly, or
(2) without belief in it's truth, or (3) recklessly, careless whether itbe true or false."
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