CONTRACT 1

Hilary Stone 2012

Brunel University UK
Lecture 4

CONTRACT

When:

We buy a tube of toothpaste

Or a bus ticket
Or time in the gym

We make a legally binding contract

The contract does not have to be
in writing
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CONTRACT

Business contracts can be simple eg

buying stationery
Or 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 UK

CONTRACT
A concurrence of intention in
two parties one of whom
promises something to the other,
who on his part accepts such
promise Blackburn 1845

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UK

ELEMENTS OF A
CONTRACT

Offer
Acceptance
Intention to create legal relations
Consideration

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University UK

TWO COMMON
MISCONCEPTIONS

Only a written agreement can

constitute a contract in law
That 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 shelf
Pharmaceutical Society of Great Britain v Boots Cash
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Stone 2012 Brunel University UK
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Chemists
Ltd 1952

INTERNET SALES

You browse a website, choose what

you wish to buy, order and pay for
it usually by credit card
Is the website an invitation to treat
or an offer to sell?
As a matter of law can the trader
refuse to serve you?
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OFFER

An 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
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UK
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was an agreement

OFFER

Now 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
UK

INVITATION TO TREAT

An invitation to treat is a preliminary

statement expressing a willingness to
receive offers
An invitation to treat MUST precede an offer

Advertisements
Auctions
Self service and shop window displays
Invitations to tender
Mere statements of price
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UK

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INVITATION TO TREAT

Partridge 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)

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UK

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TERMINATION OF OFFERS

Revocation (Byrne v Van Tienhoven

1880)

Lapse of time
Failure to comply with a condition
precedent
Death of one of the parties

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UK

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ACCEPTANCE

What 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
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UK of the offer
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with theUniversity
terms

ACCEPTANCE OR COUNTER
OFFER?

I will sell you my car for 1500

Thats too much. Will you take
1400?
No
Very well then make it 1500
(Hyde v Wrench 1840)

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UK

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COMMUNICATION OF
ACCEPTANCE

Although 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 offeror
If the offeror specifies a particular
way to communicate acceptance
that way must be followed.
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COMMUNICATION OF
ACCEPTANCE

An acceptance has no effect until it

is communicated to the offeror

(Entores v Miles Far East Corporation)

Silence cannot amount to

acceptance
Acceptance by conduct

(Brogden v Metropolitan Railway Co 1877)

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METHODS OF
ACCEPTANCE

The postal rule. It applies to:

Acceptance only
Not revocation

Telex, fax and email (Entores v

Miles Far East Corporation)
Non-instantaneous
communications (Brinkibon v
Stahag Stal 1983)
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MISCELLENEOUS POINTS

Contrast counter offer with request

for information Stevenson Jaques
& Co v McLean (1880)
Standard form contracts
Battle of the forms

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University UK

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CONSIDERATION

Generally 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
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value.(c)
UK
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CONSIDERATION

A 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)
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University UK

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PAST CONSIDERATION IS
INSUFFICIENT
CONSIDERATION

My 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
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UK

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PAST CONSIDERATION

Contrast with executory and executed

consideration
Executory consideration is given when
the contract will be completed in the
future
Executed 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
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offer and the consideration

PERFORMANCE OF AN
EXISTING DUTY

Consideration must contribute to the

agreement in some way
So 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
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consideration:
Glasbrook Bros v Glamorgan
CC
UK
23

CONSIDERATION MUST
MOVE FROM THE
PROMISEE

This rule has a twofold significance

A 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
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2012 Brunel University
-Price v(c)
Easton
1833
UK
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CONSIDERATION MUST
MOVE FROM THE
PROMISEE

The second point: at common law

an outsider or third party who is
not a party to the contract cannot
bring an action on that contract
This 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
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UK

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PRIVITY OF CONTRACT

The 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

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Wiltshier Northern
Ltd 1995)
UK
26

CONTRACTS (RIGHTS OF
THIRD PARTIES) Act 1999

So the common law position has been

modified
The doctrine is not abolished
Where 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 party
However he cannot do so unless the contract
expressly so provides s1(1)(a)
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UK

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CONTRACTS (RIGHTS OF
THIRD PARTIES) Act 1999

If 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 conferred
S1(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
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Stone
2012 Brunel
University
enforceable
by
the
third
party
UK
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AGENCY

Principal: the party on whose

behalf the contract is made and
who receives the benefits arising
under the contract
Agent: 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
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and not

AGENCY

Third 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
theUniversity
agent on his
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Stoneby
2012 Brunel
UK
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behalf

CONTRACTUAL TERMS

The majority of terms in a contract

are expressly agreed between the
parties
Some terms may be implied in
order to give effect to the
intentions of the contract
Or implied by custom or law
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REPRESENTATIONS AND
TERMS

Before a contract is formed the

parties will make various
statements in the course of
negotiations
These statements may form part of
the contract so it is necessary to
distinguish between contractual
terms and other statements
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REPRESENTATIONS AND
TERMS

A puff a boastful statement in

advertising
A 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
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the contract
itself
UK
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INCORPORATION OF EXPRESS
TERMS

What was the intention of the

parties?
Were the statements intended to
raise expectations which the
contract should uphold
Was there evidence of an intention
by one or both parties that there
should be a contractual liability in
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respect
UK of the accuracy of the
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CONTRACT IN WRITING

The statements in the contract are

generally terms not representations
If the statement is not in the contract it is
generally considered to be a
representation
The 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
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University UK

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CONTRACT IS SIGNED

If the contract is signed the parties

are considered to be in agreement
with everything in it even if
unread (LEstrange v Graucob 1934)

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RELIANCE ON SPECIALIST
KNOWLEDGE AND SKILL

Where 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)
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TIMING OF THE
STATEMENT

Where 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)

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University UK

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