4 business law

Terminology and legal principles regarding the formation of contracts, focusing on offer, acceptance, and relevant case law.

Contract

An agreement enforceable by law as defined in Section $2(h)$ of the Contracts Act $1950$, which imposes a legal effect where parties are bound to perform duties and honor agreed-upon rights.

Breach of Contract

The failure or refusal of a party to perform their duties under a contract, allowing the innocent party to take legal action.

Unilateral Contract

A one-sided arrangement where one party pays or requires another party to perform an action, such as a reward for a specific course of action resulting from an advertisement.

Bilateral Contract

A reciprocal arrangement where both parties promise to perform an act in exchange for the other party’s act.

Offer (Proposal)

Defined in Section $2(a)$ as occurring when one person signifies to another their willingness to do or abstain from doing anything with a view to obtaining the assent of that other.

Offeror / Promisor

The person who makes an offer or proposal to another party.

Offeree / Promisee

The person to whom an offer or proposal is made.

Invitation to Treat (ITT)

An invitation to others to make offers, such as the display of goods, auctions, or advertisements for jobs and tenders.

Pharmaceutical Society of Great Britain v Boots Cash Chemist [1953]

A court case establishing that the display of goods is an invitation to treat; the offer occurs when the customer places items in a basket and acceptance occurs at the cashier counter.

Carlill v. Carbolic Smoke Ball Co Ltd

A case where an advertisement was ruled as an offer rather than an invitation to treat because the advertiser showed a clear intention to be bound to the world at large.

Section 4(1) of the Contracts Act 1950

States that the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

Revocation

The withdrawal of a proposal, which under Section $5(1)$ may be made at any time before the offeree makes his acceptance.

Counter Offer

A response to an offer that rejects the original proposal and replaces it with a new one, as seen in Hyde v. Wrench where an offer of $\pounds 1000$ was rejected by a counter offer of $\pounds 950$.

Acceptance

Defined in Section $2(b)$ as occurring when the person to whom a proposal is made signifies his assent thereto.

Felthouse v Bindley [1862]

A case establishing the rule that silence does not constitute acceptance; the offeree must communicate their intention to the offeror to bind the contract.

Postal Rule

An exception to the general rule of acceptance, established in Adams v Lindsell $(1818)$, stating that acceptance is complete the moment the letter of acceptance is posted.