The modern Law of Contract Chapter 2 - Forming the agreement

What is a deed?

A formal legal document used to record a transaction

Must every contract be made by deed?

No. Some transactions require a deed, but parties may choose to use one for others.

What is the difference between an agreement and an enforceable agreement?

An agreement may exist, but it must meet relevant legal requirements to be enforceable by a court.

What formalities apply to contracts for the sale of land?

Under s 2(1) Law of Property (Miscellaneous Provisions) Act 1989, the contract must be written, contain all expressly agreed terms and be signed by or on behalf of each party.

Why does the law impose formalities on land contracts?

Land transactions are often complicated and valuable.

How did the land contract rules change in 1989?

The contract itself must be written and signed by or on behalf of both parties, rather than merely evidenced in writing.

Why are formalities required for consumer credit agreements?

To protect consumers by providing written evidence and allowing them to see the agreement's terms.

What is hire purchase?

An arrangement where someone obtains goods and pays for them over time under agreed terms.

What is the purpose of a written statement of employment particulars?

To give a worker written information about their employment terms.

What is a guarantee?

A promise to answer for another person's debt or failure to meet an obligation.

Who are the debtor, creditor and guarantor?

The debtor owes the money; the creditor is owed it; the guarantor promises to answer for the debt.

What formalities apply to a guarantee of another person's debt?

Under s 4 Statute of Frauds 1677, written evidence signed by the guarantor or their authorised representative is generally required for enforcement.

What did the Consumer Credit Act 2006 change?

It amended s 127 of the Consumer Credit Act 1974, giving courts greater power to permit enforcement in appropriate circumstances.

What is the key principle about contractual formalities?

An agreement may exist, but failure to satisfy required formalities can affect its enforceability.

What is a guarantee?

A promise to answer for another person's debt or default.

Who was Actionstrength?

Who was Actionstrength?

Why did Actionstrength claim against International Glass Engineering?

The main contractor became insolvent, so Actionstrength tried to recover payment under an alleged oral guarantee.

What does insolvent mean?

Unable to pay debts as they fall due, under the relevant legal test.

What does unconscionable mean?

So unfair or unreasonable that it would be wrong in the circumstances.

What is estoppel?

A legal principle that can prevent someone from going back on a position their words or behaviour led another person to rely on.

Which law governs guarantees of another person's debt?

Section 4 of the Statute of Frauds 1677.

What formalities does section 4 of the Statute of Frauds 1677 generally require?

A guarantee of another person's debt must be evidenced in writing and signed by the guarantor or their authorised representative to be enforceable.

Could Actionstrength use estoppel to bypass the writing requirement?

No, not on the facts of this case. The court rejected the argument that estoppel could be used to get around the statutory requirement.

What was the key legal principle established by Actionstrength?

Courts should not allow estoppel to be used simply to circumvent the statutory formalities required for guarantees.

Why is it important to put a guarantee in writing?

To satisfy the legal formalities required for enforcing a promise to answer for another person's debt.

What is the difference between an oral guarantee and a written guarantee?

An oral guarantee is spoken, whereas a written guarantee is documented. Under section 4, written evidence signed by the guarantor or their authorised representative is generally required for enforcement.

What is the objective approach to contract formation?

Asking what a reasonable person would conclude from the parties’ words and actions.

What does reasonable reliance focus on?

Whether the parties’ behaviour reasonably suggested that they were committed to a contract.

What is Collins’s argument about how courts identify contracts?

Courts look at whether the parties’ conduct reasonably indicated commitment, rather than searching for a private meeting of minds.

What is a “meeting of minds”?

Both parties privately intending or understanding the same thing.

Must courts prove both parties privately intended the same thing?

No. Courts assess objective evidence of agreement, not private thoughts alone.

What is the relationship between objective agreement and reasonable reliance?

They are closely related approaches with little practical difference.

Why does the textbook prefer the term “objective agreement”?

Because it reflects the language commonly used by courts.

What are smart legal contracts?

Contracts involving computer code that can automatically perform actions when specified conditions are met.

How does the law treat smart legal contracts?

Existing contract principles generally apply, although new situations may require legal development.

What is the key principle of objective contract formation?

A contract is assessed through the parties’ outward words and conduct, viewed objectively.

Who is the promisor?

The person who makes the promise.

Who is the promisee?

The person to whom the promise is made.

What is promisor objectivity?

Considering what a reasonable person in the promisor's position would have intended.

What is promisee objectivity?

Considering what a reasonable person in the promisee's position would have understood.

What is detached objectivity?

Assessing events from the perspective of an independent third party.

Which type of objectivity does Smith v Hughes illustrate?

Promisee objectivity.

What is the key principle illustrated by Smith v Hughes?

A party's conduct may bind them where it would lead a reasonable person to believe they assented to the proposed terms.

Are courts consistent in which type of objectivity they use?

No. Courts may use different types depending on the circumstances of the case.

What distinguishes the three types of objectivity?

The perspective used to assess the parties' words and conduct.

What are the key facts of Gibson v Manchester City Council [1979]?

Manchester City Council told Mr Gibson that it may be prepared to sell him his rented house. He applied to buy it, but the council later refused to proceed after a change in political control.

What did the House of Lords decide in Gibson?

There was no binding contract because the council had not made a sufficiently definite offer.

Why was the council's letter not an offer?

The wording “may be prepared to sell” was too uncertain to amount to a definite offer.

What was the legal status of the council's letter?

An invitation to treat, inviting Mr Gibson to make an offer to buy the property.

What was Mr Gibson's application to purchase the house?

It amounted to an offer to buy the property, which the council had not accepted.

What approach did Lord Denning favour?

Examining the correspondence and conduct of the parties as a whole to determine whether they had reached agreement on all material terms.

Did the House of Lords accept Lord Denning's approach?

No. The House of Lords rejected his approach and applied traditional offer-and-acceptance analysis.

Why might “are prepared to sell” differ from “may be prepared to sell”?

“Are prepared” sounds more definite, whereas “may be prepared” expresses uncertainty. However, the full context determines whether a statement amounts to an offer.

What is the key legal principle from Gibson?

A binding contract generally requires a valid offer and acceptance. Apparent agreement on the terms alone does not necessarily create a contract.

Why is Gibson important in contract law?

It illustrates the importance of precise wording when distinguishing an offer from an invitation to treat.

What is a tender?

A bid or quotation submitted in response to an invitation to tender.

What is the general rule for invitations to tender?

They are usually invitations to treat, not offers. The organisation is generally free to accept or reject the bids.

Must the highest or lowest bidder automatically win? (tenders)

No. The inviter is not normally required to accept any bid unless a contractual promise or other legal obligation requires it.

What happens if an organisation promises to accept the lowest conforming tender?

This may create a unilateral contract requiring the organisation to accept the lowest bid that meets the stated requirements.

What happened in Blackpool and Fylde Aero Club v Blackpool Borough Council?

The council wrongly ignored the flying club's tender, which had been submitted on time, because of an administrative mistake.

What contractual promise was implied in Blackpool and Fylde Aero Club?

The council had implicitly promised to consider tenders submitted on time and in accordance with the requirements.

Was the flying club automatically entitled to win the contract?

No. It was entitled to have its compliant tender properly considered, not necessarily accepted.

What does Warren v British Boxing Board of Control illustrate?

Clear wording in tender documents can preserve the inviter's discretion over whether to accept a bid.

Why is the wording of tender documents important?

It determines whether contractual obligations arise and how much freedom the organisation retains when choosing whether to accept a tender.