The Rules of

Contract law Favour

the Stronger Party
Business Law

Korene Till
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Contract law is one of the oldest forms of law, and is described by Keenan (2001, p56) as
the most important legal mechanism for business activity. In contract law, the agreement of
two parties is what differentiates it from other legal obligations. When we enter into contract
with another party we do so without the assistance of the courts, however, common law and
statute law are sometimes used to interfere directly in our freedom to contract in order to
strengthen the weakest parties stance. This is evident in Professor Willistons argument in
1957: the views of parties as to what are the requirements of a contract, as to what mutual
assent means, or consideration, or what contracts are enforceable without a writing, and what
are not, are wholly immaterialthe law not the parties fixes the requirements of a legal
obligation. (Cited by Clark (2008), p96).
A contract is an agreement enforceable at law between two or more parties whereby rights
are acquired by one or more parties in return for certain acts or forbearances on the part of the
other or others (Keenan, 2001, p56). In business today, every aspect is regulated by the
principles of contract law, whether it is buying a newspaper (non-verbal), buying a house
(written) or buying your train ticket on-line (electronic). All contracts need to satisfy the
same elements in order to make a contract binding: Offer and acceptance, consideration, an
intention to create legal relations, capacity to contract and a law purpose of a contract. To
argue the question of which party is favoured in contract law I will look specifically at the
laws governing the sale of land and contracts.
Clark (2008, p5) defines an offer as a clear and unambiguous statement of the terms upon
which the offeror is willing to contract, should the person or persons to whom the offer is
addressed decide to accept. Keenan (2001) explains that there is a difference between an
offer and simply giving information or a statement of intention.
An offer must be firm; this is evident in case of Harvey v. Facey [1893] AC 552.
The claimant sued Facey, asking the courts to provide an order for specific performance,
claiming there was a contract between himself and Facey to purchase Bumper Hall Pen. The
courts step in and protect the owner: Lord Morris stated Their Lordships are of the opinion
that the mere statement of the lowest price at which the vendor would sell contains no
implied contract to sell at the price to the persons making the enquiry (Sited in Corns &
Boucher 1993, p5). Corns et al also go on to explain that the courts are hesitant to treat a
statement as a definite. Facey was simply answering the question posed by Harvey.
Keenan (2001, p61) explains that if a person states that they intend to perform some
act, and ultimately they do not carry out the stated intention, no rights may be conveyed on
another party who may suffer loss due to non-performance. In Mackay v. Jones [1959],
Judge Deale refused to classify the promise of land as unequivocally binding. Clarke (2008,
p98) explains that this case can only be explained as one where the court refused to find that
the promisor intended his promise to be binding
An offeror may also retract an offer at any time before it has been accepted. Keenan (2001,
p62) explains that This is true even when the offeror undertakes that the offer shall remain
open for acceptance for a specified time, unless by a separate contract (an option) the
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offeror is given consideration in return for keeping the offer open for the whole of the
specified time. In the case of Routledge v. Grant [1828], the courts held that the offeror was
entitled to revoke his offer as there was no option agreement, leaving the offeree no form of
discourse.
Keenan (2001) also points out that revocation in force if it is properly
communicated by the offeror or a reliable third party: In Dickinson v. Dodds [1876,] the
courts held there was no contract and that the offer to sell the property was revoked by
implication. The implication being it was sold to a third party, leaving the original offeree
without any discourse.

Acceptance must match the offer: For a contract to come into existence a contractual offer
must be accepted by the other party.(Davenport, 2012, p138). Davenport expands by saying
that acceptance can be oral, written or inferred. If the acceptance does not match the offer it
is not viewed as an acceptance, but rather as a contractual negotiation. In the case of Hyde v.
Wrench [1840], Hyde sued for breach of contract when Wrench refused to sell him his
property. The courts ruled that that Hydes offer of 950 was indeed a counter-offer and
effect a rejection of the initial offer.
Acceptance should be communicated to the offeror, except in the case of the postal
rule. In Henthorn v. Fraser [1892,] The court of Appeal held that where the circumstances
are such that it must have been within the contemplation of the parties that, according to the
ordinary usages of mankind, the post might be used as a means of communicating the
acceptance of an offer, the acceptance is complete as soon as it is posted(Corns et al
1993,p6) Due to Henthorn posting his acceptance approx. 1 hour before he received the
notice to revoke the offer, the courts ruled he was entitled to an order of specific
performance. Corns (1993) also points out that This rule (the postal rule) is one of
convenience, and if the offeror does not wish to be bound without immediate notice he can
specify in his offer that he will require actual notice of acceptance if postal communication is
used. Alternatively, the offeror can specify some instant form of communication. Thus the
offeror can avoid the problems of the postal rule if he wishes
In the case of the sale of land and buildings, both parties can prevent a binding
contract by using the phrase subject to contract. This phrase can be used to prevent the
contract from being binding until such time as a formal contract is drawn up and signed. Lord
Denning summarized it as the effect of the words subject to contract is that the matter
remains in negotiations until a formal contract is executed (cited by Clark, p44). The
subject to contract phrase was originally established to protect the purchaser as seen in the
case of Thompson v. The King [1920]: it can be used by both sides (purchaser and seller).
It is also possible for both parties to agree to stipulate that an agreement not be
binding in certain situations. For example in OMullane v. Riordan [1978], the purchaser
agreed to buy, subject to planning permission being obtained. In such cases until planning
permission is given the contract is said to exist but it is unenforceable. If planning permission
is not given the purchaser is not bound to purchase but he can waive this term (if property
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values have risen he may do this) at which point the contract becomes enforceable (Clarke,
p44).
Davenport (p143) argues that if a binding contract has already come into existence a
letter or a statement which is later added stating that the arrangement is subject to contract
will not undo the contract Clarke adds that this is an important distinction between English
and Irish contract law. To illustrate this he uses the case of OFlaherty v. Arvan Property
[1976]. Furthermore, the Supreme Court decision in Kelly v. Park Hall Schools [1979]
stated that if the phrase subject to contract is deemed meaningless then in can be ignored.
Clarke (2008, p49) also makes note that only in extreme circumstances will subject to
contract be ignored: If the words appear by mistake and do not reflect the intention of the
parties they will be ignored. If, on the true construction of the contract, the words were not
intended to render the agreement still under negotiation a binding contract will be upheld...
It is important for both parties to note that Acceptance is judged in an objective
sense. The court will assess whether a reasonable person would interpret a response as being
an agreement to buy the goods at a price, or whether the response was a rejection of an initial
offer and a counter-offer requiring acceptance by the other party. What the court is looking
for is the concept of agreement between the parties.(Davenport, p140).

Sir Frederick Pollok defined consideration as An act or forbearance of the one party, or the
promise thereof, is the price for which the promise of the other is bought, and the promise
thus given for value is enforceable (cited by Clark, p53). In our everyday contracts; buying
newspaper, groceries or petrol, this consideration is in the form of a currency exchange: A
price. Davenport (2012) explains that a promise alone, however, does not constitute as a
contract, but that there needs to be an additional element. The courts do recognise other
forms of consideration; the case of OKeefe v. Ryanair Holdings plc [2003] gives us an
example of how broadly the courts view consideration.
Davenport (2012, p145) also points out that consideration must be sufficient, but
need not be adequate In the case of land or property contracts, this means that the
consideration needs to be of some value, but it does not necessarily have to be the true market
price of the land or property. It is clear that the law contract is not there to protect people
from making a bad deal, and all prospective buyers need to be aware: The principle of caveat
emptor buyer beware is still used today. Davenport (2012, p145) does make reference to
statutory provisions designed to protect consumers but states that the price paid for goods, in
the absence of fraud, misrepresentation or undue influence, is generally still the responsibility
of the parties. Clarke (2008) also agrees, saying that even if the terms of the contract favour
one party more than the other, for example the price paid is not proportionate to what he
gains in return; consideration can be seen as being inadequate. He goes on to say that it is not
the courts position to investigate the adequacy of consideration. In Manners L.Cs
summation at Grogan v. Cooke [1812] he said If there be a fair and bona fide consideration
the Court will not enter minutely into it, and see that it is full and ample (Cited by Clark,
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p56). This was later enforced in the case of Kennedy v. Kennedy [1983] where Ellis J. said
once there is consideration its adequacy in this sort of case is irrelevant to its validity and
enforceability (Cited by Clarke p 56).
It is important to note that consideration cannot be construed in an illegal contract.
The courts will not recognise or enforce an illegal contract like a contractor who reneges on
building a house where there is no formal building permission. Also a court will not enforce
a contract where consideration is seen to be unclear or impossible to perform as this is an
indicator to the courts that there was no authentic agreement between the parties.

The law upholds agreements, not only because of the consideration involved, but also
because the parties intended to create legal relations. Otherwise, there is no binding contract
(Keenan , 2001 , p78) It is also important to understand that what matters to the courts in
these cases is not whether the contracting parties intended in their minds to create a legal
relationship; but rather if the reasonable person would conclude that there is an intention to
contract. Davenport (2012) explains there is difference between the commercial and family
context. In a commercial context the courts will usually accept there would be an intention to
be contractually bound unless it is expressly denied. In a family context the court is of the
opinion there is no intention to be contractually bound and these agreements are therefore
recognised as being unbinding.
An agreement between family members is generally presumed not to have an
agreement to create legal relations. In Mackay v. Jones [1959], it was the position of the
courts that there was no written contract to leave the land to the plaintiff and that the words of
the deceased where only a statement of his intentions. However, Clark (2008) argues that in
the case of McCarron v McCarron [1997], the Supreme Court made an order of specific
performance, saying that the plaintiff had worked for the deceased without any compensation
for 16 years. Clark (2008, p98) explains the courts decision, saying, compensation had
been promised in the form of promises to make the young man rich one day He goes on to
argue: The courts are wary of readily inferring agreements in the absence of some proof of
prejudicial or detrimental reliance, although in appropriate cases there are Irish decisions that
demonstrate a willingness to grant equitable relief when the facts are persuasive enough, even
absent a contract
Clarke (2008) further outlines that the closeness of the family relationship also plays a
role in the courts decision. It is also important to note that the length the promisee might
have gone in reliance on the word of the promisor. If the promisee had moved from one end
of the country to another or sold land because of a promise, the courts might find there was
an intention to create a legal relationship. The opposite is also true, or if the promisee would
have acted in the same way regardless if the promise was held: the courts might infer there
was not an intention to create a legal relationship. Furthermore if the promise is vague,
unclear or made in haste the courts might more readily accept that there is no legal intent.

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In Beaudoin v. Waters [1998], Fruman J. dismissed the claim saying Had they
wanted to properly document their contractual arrangements they had ample opportunity to
do so. Human emotions being somewhat predictable, people who are closely connected
should take extra care to properly document their business arrangements in contemplation of
the day that the romance dies and with it, the willingness to pay (cited Clark, p100).

Both parties to a contract must have capacity to enter a contact for the contract to be legal
and enforceable (Davenport 2012, p150). However: Minors (under 18s), people suffering
from mental incapacity and those who are under the influence (drunk) have a limited capacity
to enter into a contract.
Minors are seen by the law as any persons under the age of 18 and it is the policy of
the law to protect minors in their contractual relationships. In Section 2 of the Sale of Goods
Act 1893, minors are allowed to enter into binding contracts for necessities. Our
understanding of the term necessities has changed over the years: In terms of old common
law rules, many of the cases were dealing with purchase of horses and clothing, in todays
terms many minors enter into legal contracts when buying small electronics or selecting
mobile phone services.
Contracts voidable by a minor are contracts whereby a minor acquires interests of a
continuing nature and undertakes obligations incidental to them. These include: contracts
involved in land, e.g. leases; purchases of shares in a company; partnership agreements; and
marriage settlements. (Keenan, 2001, p123) However; even though a minor can rescind the
above contracts, the minor cannot recover any money or property which the minor might
have paid while under contract, unless no considerations was received. In Blake v.
Concannon [1871], the courts held that the defendant was permitted to rescind the lease, but
had to pay the rent up to the date of the withdrawal.
Contracts entered into by people who are of limited mental capacity might also be
seen as voidable by the courts. Davenport (2012, p152) explains that the contract may be
binding unless the party to the contract knew at the time of contract that the individual was
not capable of entering the contract. We see this in the case of Noonan (A Ward of Court)
v. OConnell [1987]. Lynch J. held that there was a gross inequality between the plaintiff
and defendant and that the details of the transaction had not been properly explained to the
plaintiff.
Similarly, when a person is under the influence when entering into a contract they can
argue that they were incapable of making a good decision due to being intoxicated.
Davenport (2012) however does point out that when this argument is made, the person must
prove that they were incapacitated and that the other contractual party was aware of their
limited capacity at the time. In the case of Hassard v. Smith [1872], the courts held the
contract to be a bona fide transaction, and that the defendant had no prior knowledge of the
plaintiffs mental state before entering into the contract.

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Do the rules of contract favour the stronger party? On the face of it, it does seem that this
statement is still true today. Even with the courts and governments putting regulation and
laws in place to better the position of the weaker party, it is evident that they are slow to
replace the old age notion of caveat emptor; buyers beware. If we are free to enter into
contract then it is also our responsibility to make enquiries into the nature of these contracts.
In the event of misrepresentation, fraud or undue duress the weaker party does have a course
of redress through the court system: There are many cases that help the weaker party in the
form of precedence and where the common law false short, legislation (which is slower) has
helped to plug the hole. Even if we are much further down the road to protecting the
weaker parties involved in contract law, we still have a long and slow way to go until we can
fully disclaim this statement.

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References
Clark, R. 2008. Contract law in Ireland. Dublin, Ireland: Thomson Round Hall.
Corns, D. and Boucher, E. 1993. Casebook on business law. London: Pitman.
Davenport, R. 2012. Fundamentals of Irish law. Dublin: Gill & Macmillan.
Keenan, A. 2001. Essentials of Irish business law. Dublin: Gill and Macmillan

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