Contract Law Examination Notes 2013: Offer, Acceptance, and Consideration, Lecture notes of Contract Law

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CONTRACT LAW A (LAW2CTA) EXAMINATION NOTES 2013 Sierra Callaway 2 CONTENTS Agreement 3 General principles 3 Offer 4 Invitation to treat 4 Forms of offer 7 Termination of offer 7 Acceptance 9 Who can accept an offer? 9 Acceptance must occur in response to the offer 9 There must be correspondence between the offer and acceptance 9 There must be communication of acceptance 10 Postal Acceptance Rule 10 Form of acceptance 10 Acceptance by conduct 11 Intention to Create Legal Relations 13 Social and domestic arrangements 13 Commercial arrangements 15 Preliminary agreements 15 Honour clauses 16 Heads of agreement 16 Government transactions 17 Consideration 18 Principles of consideration 18 Mutuality 19 Valuable need not be adequate 19 Executory/executed 19 Must move from promisee 19 NOT valid consideration 19 Illusory promises 19 Illegal promises 19 Past consideration 20 Performance of existing public duties 20 Performance of existing contractual duties 21 Estoppel 25 Where to use estoppel 25 Types of estoppel 26 Elements of estoppel 27 Assumption 27 5 AGREEMENT GENERAL PRINCIPLES: • Agreement is assessed objectively – What would a reasonable person infer or deduce form observing the exchange between the parties – contract or no contract? • “The subjective beliefs of the parties are generally irrelevant…” Brambles Holdings Ltd v Bathurst City Council • The legally relevant moment of offer + the legally relevant moment of acceptance = Agreement • As a general rule, a contract comes into being when and where an acceptance of an offer is communicated to the offeror • ‘Subject to contract’ – Very strong presumption that contractual relations will not be established unless and until a formal contract has been executed. Alternative Approach – The ‘Global’ Approach: • ‘Global’ approach – the court’s task is to ask whether, objectively and having regard to the totality of the dealings between the parties, they should be considered to have entered into a contractual relationship without inquiring too closely into the formalities of offer and acceptance. Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd; Gibson v Manchester City Council Tripartite Collateral Contract: • Courts are prepared to hold that a contractual relationship exists between A and B when A makes a promise to B who, in reliance on that promise, enters into a contract with a third party, C, when that contract is of some benefit to A. The consideration given by B for A’s promise is the indirect benefit that A derives from the contract between B and C. 6 OFFER An offer is a clear statement of the terms by which the person making the offer is prepared to be bound. The offeror must indicate their willingness to be bound immediately upon acceptance. This willingness is determined objectively, according to outward manifestations of intention (i.e. the offeror’s conduct). In determining intention, conduct is assessed from the perspective of the reasonable person in the position of the offeree. The existence of an offer is a question of fact determined on a case by case basis. It may be express (written or spoken) or implied (from the offeror’s conduct). In either case, the conduct alleged to amount to an offer must be promissory in nature. A contractually significant offer is: • A definite proposal • Giving a choice between acceptance and rejection • Indicating willingness to be bound without further negotiation • DEFINITE – CLEAR – FINAL • Objectively ascertainable Invitation to Treat An invitation to treat is an invitation for someone to make an offer. Invitations to Treat: 1. Advertisements Advertisements are generally regarded as invitations to treat, expecially where the advertisement occurs in a catalogue or newspaper. Offers in catalogues are invitations to treat, because no-one could ever offer to supply an infinite quantity of product to everyone – the offer will be made by the customer. OUTLINE OF OFFER: 1. Offer vs. Invitation to Treat 2. Forms of offer 3. Termination of Offer (a) Revocation (b) Rejected by offeree (c) Lapse of time (d) Death of either party 7 Placing an advertisement in a newspaper does not amount to ‘offering for sale’ because it is an invitation to treat 2. Display of goods Display of goods in shop windows with prices are merely invitations to treat. • In a self-service department store, the offer by the customer when they take their goods to the counter, at which point the shopekeeper decides whether to accept their offer (Boots Cash Chemists – see below) • Displays in shop windows are not ‘offers for sale’ but invitations to treat, even with a price tag affixed; the display is simply inducing offers for the listed price 3. Auctions An auctioneer’s call for bids is only an invitation to treat. Bidders make offers to buy at the asking price, which may be accepted ‘by the fall of the auctioneer’s hammer’ (Payne v Cave) However, goods offered for auction ‘without reserve’ implied the existence of a collateral contract that the goods will be sold – however, it still does not constitute a definite offer. 4. Tenders Tendering involves one party (who to buy, sell, or have work performed) calling for expressions of interest from other parties in respect of the price at which they are prepared to deal. The first party then reviews the tenders and is at liberty to decide whether any will be accepted. Announcement calling for tenders is an invitation to treat; offer comes from the submitter of an individual tender, and each tender is a separate offer (Spencer v Harding) Not Invitations to Treat: The essential difference between an offer and an invitation to treat is the offeror’s intention to be bound by any potential acceptance. Offers embody that intention. Invitations to treat do not. In determining whether a statement is an offer, the intention of the alleged offeror is determined by reference to three factors: i. Terminology used PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V BOOTS CASH CHEMISTS (1953) • Court held that the display of goods on a shelf in a store is an ‘invitation to treat’ • When a customer takes a product off the shelf to the cashier they make the offer. The cashier can then accept/reject that offer