Contract Law Notes

Contract Law

Contract law is crucial in business for deals, agreements, and negotiations. It seeks a legally enforceable agreement that creates rights and obligations, fostering trust. Breach of contract can lead to court action for termination or damages (Week 6).

Essential Elements

Preliminaries
  • The basic elements of a contract will be covered, distinguishing between promises that are contracts and those that aren't.
  • Not all promises are contracts; there must be something given in return, and the promise must not be off-the-cuff.
  • Agreements between individuals may not be legally enforceable due to issues like intention.
  • Negotiations involve terms and conditions, but the final contract should clearly define the agreed-upon terms.
  • A contract won't always result from negotiations.
  • Contracts can be verbal or implied through conduct (e.g., buying something in a shop).
  • The essential elements of a contract are agreement, intention, consideration, capacity, and legality.
Agreement
  • The first determinant of a contract’s existence is whether there is an agreement; assignments/exams may test this.
  • Address the key issue directly; if agreement is obviously present, acknowledge it briefly rather than exhaustively analyzing it.
  • Agreement requires a meeting of minds or mutual understanding.
  • Agreement consists of offer and acceptance, with the acceptance being communicated.
Offers
  • Offers can be written, verbal, or through conduct.
  • Offers can be one-on-one or to the world at large.
  • Advertisements are generally invitations to treat, not offers, allowing the seller to refuse a sale.
  • Carlill v Carbolic Smoke Ball Company: An advertisement promising a reward (£\pounds100) for using a product and getting sick was considered an offer to the world because it specified what was required to claim the reward.
Rejection and Revocation
  • An offer can be rejected, which cancels the original offer. The offerer is not obliged to offer it again at the same price.
  • An offer can be revoked (taken back) by the offerer at any time, unless an option (consideration paid to keep the offer open) exists.
  • Offers lapse due to time, depending on the reasonableness of the time in the circumstances. (Ramsgate Victoria Hotel Co v Montefiore)
Invitation to Treat
  • Advertisements (TV, newspaper, brochures) are generally invitations to treat, not offers.
  • Partridge v Crittenden: An ad in a bird catalog was deemed an invitation to treat, not an offer, so selling the bird wouldn't necessarily be illegal until an offer was made by a customer.
  • Pharmaceutical Society of Great Britain v Boots Cash Chemists: Display of goods in a self-service store is an invitation to treat. The customer makes the offer when presenting the items at the cashier, and the agreement occurs when the cashier accepts the offer.
Auctions and Tenders
  • Traditional auctions without reserve prices are invitations to treat. Bidders make offers, and acceptance occurs when the hammer falls.
  • Auctions with a reserve price may constitute an offer if the reserve is met.
  • Online auctions (Smythe v Thomas) may have specific terms and conditions that dictate when an offer is accepted. (Collateral contracts will be covered in Week 6).
  • Vending machines are considered a standing offer; inserting money constitutes acceptance.
Acceptance
  • Acceptance must be communicated to the offeror and can only be accepted by the intended person.
  • A counteroffer means the offeree becomes the offeror, and the original offer is canceled and cannot be returned to.
  • The offeror can specify the method of acceptance or waive the need for communication.
  • Exceptions to the communication rule: ongoing commercial relationships or reward offers that require only performance.
  • The postal rule: acceptance is deemed to occur when the acceptance is posted (though its reliability is questioned with current postal services).
Electronic Transactions
  • Most websites are invitations to treat.
  • Acceptance depends on the website's terms and conditions (e.g., confirmation messages).
  • Offer plus acceptance equals a contract at the location where the acceptance occurs.
Jurisdiction
  • The location of contract acceptance is important, particularly in international transactions.
  • English courts are often chosen for contractual dispute resolution.
  • Terms and conditions should specify where disputes will be resolved, especially in international dealings.