Contract Formation

Agreement (equation)

Offer + Acceptance

Legally Enforceable Agreement (equation)

Agreement + Consideration

Established that an advertisement can be a serious unilateral offer where it promises a reward for a specific act and shows intent to be bound (like money set aside) (cases)

Carlill v Carbolic Smokeball

Carlill v Carbolic Smokeball

Facts: In an ad, it claimed a product was meant to prevent illness, and claimed that if someone got sick in spite of the usage they would be paid money, showed money set aside. The plaintiff got sick despite using the product and wanted the money.

Ruling: The unilateral offer was meant to taken seriously, shown with money set aside. A reasonable person looking at the ad would think that the ad was a serious offer.

Offer (definition)

“a clear and unambiguous statement of the terms upon which the offeror is willing to contract should the offeree decide to accept.”

Ads, items on display, are generally invitations to treat, not offers. (cases)

Fisher v Bell, Partridge v Crittenden, Pharmaceutical Society of GB v Boots, Pepsi Cola v Leonard

Exception to ads, items on display, are generally invitations to treat, not offers. (cases)

Carlill v Carbolic Smokeball Co., Lefkowitz v Great Mineapolis Surplus Store,

Fisher v Bell

Facts: A flick knife was on display, and thought of as an offering for sale.

Ruling: Item in a shop window wasn’t an offer, merely an invitation to treat.

Partridge v Critten

Facts: Bramble Finches on sale for 25 shillings each, but wild birds were illegal to sell. Was the ad an offer?

Ruling: The ad was an invitation to treat, the limited stock means that the ad couldn’t be an offer as the seller cannot sell more birds than he has.

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Facts: Under the Pharmacy and Poisons Act, if you were to offer medicines for sale, you must have a qualified pharmacist must supervise. Store didn’t have pharmacists watching sales.

Ruling: Items on a shelf are an invitation to treat, customer is the offerer as they want to make the purchase, and the pharmacist could accept or decline the offer.

Lefkowitz v Great Minneapolis Surplus Store

Facts: Store makes an ad that claims that on 9am on saturday, 3 fur coats worth $100 would be sold for $1. The following weekend, another ad advertising 2 mink coats worth $90 would be sold for $1. A man shows up to buy the coats, and the store refused to sell to him, claiming the sale was only for women.

Ruling: This particular advertisement constitutes an offer, it is clear and leaves nothing open for negotiation. Conditions for sale need to be explicitly stated in the ad.

Bilateral Contracts (definition)

A promise from one party is exchanged for an act from the other party.

Unilateral Contracts (definition)

A promise from one party is exchanged from an act from the other party, being that the party can be anyone as the offer is made to the world at large.

Pepsi Cola v Leonard

Facts: A company ran a promotion where people can exchange points for merchandise. Points were gotten from buying the companys product. Points could also be bought. The company advertises a fighter jet, and a man tried to get it.

Ruling: The ad was an invitation to treat, a reasonable person would’ve thought the fighter jet was meant to be taken as a joke.

Methods of offer termination (noncases)

Revocation, Rejection, Lapse of time. Death of the oferror.

Revocation (cases)

Dickinson v Dodds, Walker v Glass

Rejection (cases)

Hyde v Wrench

Dickinson v Dodds

Facts: Sale of a property offered for 800 pounds. Offer open until 9am, friday 9th of June. Offeree is told on Thursday that the property has sold. The offeree wants to buy the property, but gets declined. The offeree sues claiming the offer was still open.

Ruling: An offer can be effectively revoked if the offeree learns reliabily that the offeror has withdrawn or sold it to someone else, even if the offeror doesn’t personally communicate it.

Hyde v Wrench

Facts: Selling price of a property was 1,000 pounds. Plaintiff offered 950, it was declined. Plaintiff sued for breach of contract.

Ruling: The offeror declined, rejecting an offer terminates such offer.

Acceptance of an offer (definition and cases)

Defined as “a final and unequivocal expression of agreement to the terms of an offer.”

Parkgrange v Shandon, Lynch v. Governors of Saint Vincent’s Hospital

Parkgrange v Shandon

Facts: An offer was made to sell a property, the vendor signs contract to sell the property for tax advice, but didn’t show the contract to the otherside. The plaintiff finds it through discovery.

Ruling: The acceptance must be communicated to the other party, singing privately without communication is not acceptance.

Lynch v Governors of Saint Vincent’s Hospital

Facts: A doctors’ work contract expired, but a hospital wants to keep him and extend his hours. A first contract is given with blank space for service hours, later a second one is given with filled hours. The doctor fills the hours in the first contract and sends that one back to the hospital. The hospital wanted to decline due to lack of funding.

Ruling: The doctor was accepting a valid offer, the employment contract was binding.

Silence does not constitute acceptance (cases)

Felthouse v Bindley, Russel & Baird v Hoban

Felthouse v Bindley

Facts: An uncle wanted to buy a horse from his nephew, but was confused about the price. Price was confused between 30 pounds and 30 guineas (a shilling and a pound). Uncle said split the difference, 15 pounds and 15 shillings and if there was no reply then he assumed the horse was his.

Ruling: Silence isn’t an acceptance.

Russel & Baird v Hoban

Facts: The plaintiff sent a sale note offering to supply certain material with a condition that if the sale note were kept for 3 days then it would be held to have been accepted by the defendant.

Ruling: No person can impose such conditions upon another. The offer required acceptance, silence is not acceptance.

Exception to silence is not an acceptance (rule and definition)

The Postal Rule: where an offer can be accepted by post, then that acceptance is valid the moment the letter of acceptance is posted. (Only applies to acceptance and not revocation)

The Postal Rule (cases)

Kelly v Cruise Catering, exceptions: Byrne v Van Tienhoven, Holwell Securities v Hughes.

Kelly v Cruise Catering

Facts: A waiter was working on a cruise and got injured. She wished to sue in Ireland, but the employers were Norwegian. The employee signed his contract to work in Dublin and sent it back to Oslo.

Ruling: Under the postal rule, the offer is accepted as soon as the letter is posted, so plaintiff could sue in Ireland.

Byrne v Van Tienhoven

Facts: The defendant wrote a letter offering to sell tinplates to the plaintiff in New York. A week later, he sent a letter revoking the earlier offer. The first letter was later received by the plaintiff who accepted the offer, which was a valid acceptance.

Ruling: The court said that the Postal rule DOES NOT apply, and that there was a valid acceptance.

Holwell Securities v Hughes

Facts:The defendant offered the plaintiff a 6 month option to buy a certain property, given that it was in notice by writting. The plaintiff posted an acceptance, however it was lost in the mail and was never delivered to the defendant.

Ruling: There was no sufficient writing to form a contract. No intent to create a contract existed as no acceptance was known.

A contract cannot be accepted without knowledge of the contract. (cases)

R v Clarke

R v Clarke

Facts: There was a reward offered for giving information leading to the arrest and conviction of a person for the murders of two police officers. The plaintiff was arrested and charged with murder of one of the police officers, and gave information leading to the conviction relating to the murders and later attempted to claim the reward.

Ruling: Plaintiff could not accept and offer he knew nothing about.

Rules of consideration (noncases)

Consideration must move from the promisee, consideration must not be past, Consideration need not be adequate, consideration must be sufficient

Consideration must not be past (cases)

Roscorla v Thomas, Re McArdle

Consideration need not be adequate (cases)

Haigh v Brooks, ISC Building Society v Grant

Consideration must be sufficient (cases)

White v Bluett, O’Neill v Murphy, Pando V Fernandez, Chappel v Nestle

Roscorla v Thomas

Facts: A horse was on sale for 30 pounds and a contract was concluded. The vendor indicated that the horse was healthy, when it actually was not.

Ruling: The court said the warranty was unenforceable, as it wasn’t supported by consideration. Consideration happened after the sale and therefore the breach of contract didn’t happen.

Re McArdle

Facts: Property owned by multiple family members, and work is done on the house. The family doesn’t pay for the work. The renovation person wanted to sue.

Ruling: The consideration was doing the renovations. The consideration was before the promise. Past consideration is no consideration.

Haigh v Brooks

Facts: The defendant requested, and received, a worthless piece of paper in return for a promise to pay 10k euros.

Ruling: The piece of paper was held to constitute good consideration. The consideration doesn’t need to reflect the market value of the item being sold.

ICS Building Society v Grant

Ruling(no facts?): People can enter bad bargains, the law never enquires into the adequacy of any consideration for a contract. A company can be sold for a billion euros or ten euros.

White v Bluett

Facts: A father promised to discharge his from from debt if the son didn’t complain as much about his distribution of his property against his children.

Ruling: This was not supported by consideration because refraining from making complaints is of no economic value.

O’Neill v Murphy

Facts: A builder did work for a parish in return for praters to be said for his family. He wrote a letter claiming the prayers would be sufficient to the priest if prayers were arranged for him and his family.

Ruling: Prayers do not constitute consideration as they do no have economic value.

Pando v Fernandez

Facts: A man bought a ticket for a lady, and claims the lady said that if he said prayers to Saint Eligia to cause her to win, she would share the money with him. The ticket was the 2.8 million jackpot. He wanted half the money, claiming his consideration were the prayers.

Ruling: Prayers are not sufficient consideration.

Chappell v Nestle

Facts: If you sent a sum of money + 3 chocolate bar wrappers, the chocolate company would send you a record. Royalties were owed.

Ruling: Chocolate wrappers had economic value and were part of the consideration, as the wrapper symbolizes the sale of choclate.

Illusory consideration is not sufficient (cases)

Revenue Commissioners v Moroney

Revenue Commissioners v Moroney

Facts: A father sold his son his pub for 16k pounds. The revenue commissioners knew it would never be paid, they were trying to avoid the gift tax.

Ruling: Illusory consideration is not consideration.

Forbearance or a compromise may be good consideration. (cases)

Hamer v Sidway

Hamer v Sidway

Facts: A man is enrolling in university, and his uncle promises that if he forbode drinking, smoking, swearing, and gambling until he was 21 he would give him 5,000 dollars. The man succeeds and graduates, but the uncle died before money could be given.

Ruling: Forbearance is good consideration, the money could be given.

Performance of an existing does not constitute consideration (Cases)

Collins v Godefory, exceptions (for police:) Glasbrook v Glamorgan, Harris v Sheffield United Football Club.

Collins v Godefory

Facts: A person was subpoenaed and told they would be given 6 guineas (a pound and a shilling) to show up and testify.

Ruling: Because they were legally required to testify, the money wasn’t owed.

Glasbrook v Glamorgan

Facts: Miners were at a strike, and the company wanted police to be there in fear the miners would damage the mine. Police wanted payment, but they refused to pay as it was there legal obligation.

Ruling: As this was beyond their basic public duty, the police had to be paid.

Harris v Sheffield United Football Club

Facts: A football club didn’t want to pay for police to be present, but still wanted police present. They claimed it was the polices obligation.

Ruling: As this was beyond their basic public duty, police needed to be paid.

Intention to create Legal Relations Definition

When a contract is made with relatives or friends, the courts presume that the parties do not intend the agreement to be legally binding.

Husbands and Wives (on intention to create legal relations) Cases

Balfour v Balfour

Balfour v Balfour

Facts: A government worked (the husband) was transferred, but the wife couldn’t leave England for health reasons. He promised a monthly allowance of 30 pounds.

Ruling: There was no intention to make a legal relationship.

Other familial situations in intention to create legal relations (non husband/wife) Cases

Jones v Padavaton, Haggar v De Placido, Coleman v Mullen.

Jones v Padavaton

Facts: Mom was living in Trinidad, the daughter in Washington. The mom says that if the daughter returned to England and studied law there, she would pay her an allowance. The mom initially financially supported her, but when the daughter started failing in school she evicted her. Daughter sues for break of contract.

Ruling: There was no intention to make a legally binding contract. There was one dissent arguing this was a contract!

Haggar ve De Placido

Facts: The plaintiff was injured in a road traffic accident and agreed to pay his mother and prother a weekly amount, 12 guineas (12 shillings and 12 pounds) as compensation for nursing him. He wanted the allowance to be paid by the person who caused the accident. There was a detailed contract formed between the son and his mother and brother.

Ruling: In this instance, as there was a very detailed contract, there was intention to create legal relations.

Coleman v Mullen

Facts: A neighbor of an elderly childless widow assisted the widow with errands, cooking, etc, up to 20 hrs/week for multiple weeks. When the widow dies, she wants compensation from the widow’s estate. She wanted Quantum-meruit payment: A claim you’ve done work and believe you are to be payed.

Ruling: Lower courts gave her money, but the High court ruled that there was no intention to create a legal relationship.

Commercial Agreements Definition

Parties are usually presumed to intend to create legal relations: they operate at an arm’s length from each other and act purely in their own interest.

Commercial Agreement Cases

Blue v Ashley, Simpkins v Pays, Walsh v Walsh

Blue v Ashley

Facts: Defendant is the founder of Sports Direct and owned New Castle United at some point. He holds a business meeting about getting new brokers for Sports direct. Lots of drinks are consumed. The plaintiff claims that the defendant told him that if he could get the shares of Sports direct over 8 pounds, he would give him a 15 million bonus. He only gets a 1 million bonus and sues.

Ruling: When engaging in pubchat, there was no intention to create legal relationship.

Simpkins v Pays

Facts: A grandmother, granddaughter and a lodger share a home and bet on a newspaper competition for money. They win 750.

Ruling: Money was split between the three, as there was intention to create legal relations.

Walsh v Walsh

Facts: On a 3.4M jackpot ticket, multiple people signed the ticket. The step mother picks up the prize, the step son sues.

Ruling: There was intention to create legal relations in this situation.

Express exclusion of enforceability (definition + case)

Where parties have decided to expressly exclude enforceability of their agreement, the courts will recognize that decision.

Rose & Frank v Crompton

Rose & Frank v Crompton

Facts: Defendants gave the right to the plaintiff to sell tissues in the US and Canada. It was an Honourable Pledge, meaning not a legal contract.

Ruling: Courts will respect if parties want to not take things into a legal contract,

Letters of Comfort (definition)

A term given to some assurance provided by a parent company in relation to a subsidiary company, or by some government body or state agency in relation to a related body.

Letters of Comfort Cases

Kleinwort Benson v Malaysia Mining Corp Bhd, Banque Brussels Lambert SA v Australian National Industres

Kleinwort Benson v Malaysia Mining Corp Bhd

Facts: A bank made a load to a subsidiary company, and gets a letter of comfort. The loan isn’t repaid, and the company liquidates. The bank sues defendant.

Ruling: There wasn’t a legally enforceable contract. The letter of comfort should use language in future tense.

Banque Brussels Lambert SA v Australian National Industries

Facts: A bank gives a loan looking for a guarantee, doesn’t get it, then looks to get a letter of comfort. The bank gets a letter of comfort.

Ruling: The letter of comfort was legally enforceable.

Contractual Capacity Definition

If one party does not have capacity to enter the contract, then the contract isn’t enforceable.

Circumstances in which a contract is not enforceable

If a person is/has: underage, intellectual disability, intoxicated, imprisioned

Contracts binding on minors (types)

Contracts for necessities, Beneficial Contracts for services

Contracts for Necessities (cases)

Nash v Inman, Skrine v Gordon

Beneficial Contracts for services (cases)

Keays v Great Southern Railway, Chaplin v Leslie Frewin, Toronto Hockey Club v Tonnely, Doyle v White City Stadium Ltd & British Boxing Board of Control

Nash v Inman

Facts: A student at Oxford purchased waistcoats, argued contract wasn’t enforceable.

Ruling: While clothes is a necessity, the student had lots of waist coats already.

Test was established:

Is this item capable of constituting a necessity? Are the items a necessity for this particular person?

Skrine v Gordon

Facts: A young man went to a ball, had some drinks, and bought a horse on his way home. He attempts to evade the contract.

Ruling: It is not a contract for necessities and is therefore not enforceable. Amusements are not a necessity.

Keays v Great Southern Railway

Facts: A girl had a train ticket to bring her to school, but due to the train companys’ negilgence, the girl was injured. The company has an exclusion clause taking away liability for injuries suffered.

Ruling: If the contract contains unfair terms to a minor, the minor has the ability to reject the contract. The girl could sue.

Chaplin v Leslie Frewin

Facts: The son of a famous figure is married and has a child on the way but is poor. He decides to write an autobiography, and gets a ghost writer to write it for him. The son changed his mind about wanting the book after the ghost writer finished writing it.

Ruling: It was a beneficial contract for services, it enabled the son to earn money and become a published author. The contract was enforceable.

Toronto Hockey Club v Tonnely

Facts: A promising hockey player was 17 when he entered a 3 year contract with minimal pay at a amateur hockey club. If he went professional, for the first three years he would give 20% of his salary back to the amateur club. The boy can only accept the second contract once the first one expires. The contact benefits the club as a whole.

Ruling: It wasn’t beneficial to the boy enough for it to be enforceable.

Doyle v White City Stadium Ltd & British Boxing Board of Control

Facts: Plaintiff was a famous boxer and entered a contract. The fight was controlled under the boxing board, ge agrees to take the fight and get paid. He gets disqualified for punching below the belt, his payment gets taken away. He challenged it (while under 21).

Ruling: The rule of not allowing punching below the belt benefitted the plaintiff, as it promoted fair fighting. Plaintiff could not get payment.

Voidable Contracts

A voidable contract is one that was never made. Voidable means it can be avoided but must take necessary steps to avoid it. The contact can continue to exist.

O’Keeffe v Ryanair

Facts: A woman was stopped in Dublin Airport, and was asked to do a promotion for being the one millionth passenger of an airline and get a prize. She got free flights for life. Later, she was being told that flights were full when they weren’t. She sued the airline, the airline claimed gifts aren’t legally enforceable, and that there was no intention to create a legal relationship.

Ruling: The airline offered her free flights for life, cover fees of flights she took on other airlines while suing them, and covering her legal fees. She declined, and got 67.k in total awarded. It was deemed she benefitted the airline through the promotion, and showed that promotional events could be legally binding contracts.

Implied terms - by different methods

Terms implied by fact, Terms implied as a matter of law, Terms implied by custom

Terms implied by fact - subsections

Business Efficacy Test, Officious Bystander Test, Exceptions to Officious Bystander Test, Moving away from both business efficacy and officious bystander tests.

Businesse Efficacy Test (cases)

The Moorcock 1889, Murphy Buckley & Keogh v Pye, Dakota Packaging v Wyeth Medical, Kelly v Calliman

The Moorcock 1889

Facts: The defendant allowed the plaintiff to unload his shop at his wharf, the ship settled on a ridge of a rock and was damaged. The plaintiff sues for breach of contract.

Ruling: It was an implied term that there would be reasonable care so that the wharf wouldn’t endanger the vessel.

Murphy Buckley & Keogh v Pye

Facts: The defendants were selling a factory in Dundrum on a sole agency basis. They sold it to purchasers not introduced by the plaintiffs. The plaintiffs were deprived of their commission, claiming there was an implied term.

Ruling: Such a term would be commercially sensible, but not required. It was needed as an implied term in a contract.

Dakota Packaging v Wyeth Medica

Facts: A contract was made to provide specialist packaging for medicine. The plaintiff chose to stop overnight, but did. Defendants wanted an implied term that If they wanted to take away their business they must give notice.

Ruling: This was not the intent of both parties, so no implied term.

Kelly v Calliman

Facts: Two people were in a personal and business relationship and split up. Contract requires that the plaintiff has to pay certain liabilities. Also that the defendant will sell their property and reimburse plaintiff 120k euros. But the property won’t sell. An implied term is thought of, that the plaintiff will get reimbursed even if the property isn’t sold.

Ruling: Plaintiff will get reimbursed even if the property isn’t sold.

Officious Bystander Test (cases)

Shirlaw v Southern Foundries, Kavanagh v Gilbert

Shirlaw v Southern Foundries

Established the Officious Bystander test. Test: If a bystander were hypothetically present while making a contract and suggests a term that would be very obvious or implied, the parties would say, “oh, of course!”

Kavanagh v Gilbert

Facts: An auctioneer agreed to sell the plaintiff’s farm. The auctioneer conducts the auction and accepts the highest bid, but fails to draw up a memorandum of agreement.

Ruling: A written agreement isn’t needed to make a contract enforceable. There is an implied obligation on the auctioneer to use care and skill in concluding a binding contract.

Exceptions to officious bystander test

Prongs

• Contracts that have to be in writing (contract for the sale of land)

• If one of the parties would either not have agreed to the term, or was unaware of the term which is sought to be implied.

• If implying the term would either destroy the contract or would have far reaching and unwanted consequences.

Carna Foods v Eagle Star Insurance, MR v TR

Carna Foods v Eagle Star Insurance

Facts: An insurance company canceled its coverage of a food company without reason. The food company claims its an implied term that to give reason for cancellation. Insurance company claims they would never have agreed to this. The insurance company canceled because they thought the food company was going to commit arson, but that would lead them to a defamation case.

Ruling: If one party would never agree to the term, it can’t be implied. There would be far-reaching and unwanted consequences of implying that term.

MR v TR

Facts: A couple had a baby through a fertility clinic and had frozen eggs. They had one successful child and 3 remaining frozen eggs. The couple split up but the ex-wife wanted to use the frozen embryos.

Ruling: Because they were split up, its obvious there was no shared intention to have a child.

Moving away from both business efficacy test and the officious bystander test (cases)

AG of Belize v Belize Telecom Ltd, Marks and Spencers Plc v BNP Paribas Securities Services Trust Co.

Ag of Belize v Belize Telecom Ltd

Facts: Certain categories of shareholders can appoint directors. The shareholders who appointed the directors were bought out and no longer exist, a director can only be removed by certain shareholders who no longer exist.

Ruling: A term allowing for the directors to be shifted was successfully implied into the contract. Lord Hofman believed that: When considering whether terms are implied, the court cannot imply terms simply to make a contract more reasonable or more efficient. The court should consider the construction of the agreement as a whole, and discern what the contract as a whole means. If the agreement is silent as to a particular provision, it can be implied only if the court finds the parties must have intended it to be incorporated.

Marks and Spencers Plc v BNP Paribas Securities Services Trust Co.

Facts: Lord Hofman’s beliefs didn’t change the law. (M&S) wanted a refund of rent paid in advance for a period after the lease ended via a break clause.

Ruling: Despite the potential commercial anomaly, the lack of an express term for a refund meant one could not be implied. This case highlights the importance of thoroughness in drafting commercial contracts to avoid relying on implied terms to rectify oversights. Just because a term is reasonable isn’t enough; it needs to be necessary.

Terms implied as a matter of law - subsections

Terms implied by the courts, terms implied under statute, terms implied under the constitution