General Contents
Contract Law Theories...
Feminist Analysis of Contract Law...
Agreement.....
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Offer……….....
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Termination of Offer...
Ø
Acceptance...
Consideration……….....
Intention to Create Legal Relations...
Certainty and Completeness......
Formalities......
Capacity………...
Privity………...
Alternative Avenues for Finding a Remedy...
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Part Performance...
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Constructive Trust...
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Estoppel...
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Restitution...
Elements of a simple/binding contract
1) There must be an
agreementbetween the parties
ØSometimes known as ‘offer and acceptance’
Ø
Sometimes identified from the relationship and dealings between the parties 2) Each party must provide
‘consideration’Ø
Each party must be giving something in exchange for the promise of the other 3) There must be
intention to create legal relationsØ
The parties must intend to be legally bound by the promise 4) The agreement must be
complete and certainØ
Court must be able to identify what the parties have agreed to
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1) Agreement
Traditional Approach to Agreement:
General principle: agreement is reached when acceptance of an offer is communicated to the offeror.
This approach determines if there is:
o
An
offermade by one party (offeror), and
o
The
acceptance of that offerby another party (offeree)
Why is the moment of agreement important?
Traditional approach: it is the point that the parties become legally bound by their promises Modern approach: in practice, the law will intervene to impose obligations on parties in the
absence of an agreement, or before an agreement has been reached:
- Estoppel - Restitution
- ACL - misleading and deceptive conduct, unconscionable conduct
It also determines:
- Time of contract formation
- The jurisdiction where the contract is formed
- Terms & scope of contract - terms of the contract need to be determined before agreement takes place
Can agreement be inferred?
Courts will infer that an agreement has been formed from conduct in some circumstances:
•
The conduct of parties may indicate that they have entered into a contract, even in the absence of a formal agreement or written document
Ø Relevant when a dispute arises several years after the formation of a contract, and no evidence of the contract exists
•
Offers that are made but not expressly accepted or rejected, but the conduct of the offeree is consistent with an intention to accept the offer
(Empirnalll v Machon Paull)•
The correspondence, conversations, conduct and other behaviour of the parties
indicates that they have formed an agreement
Offer
MUST demonstrate a WILLINGNESS to be BOUND without further negotiation
Overview:
An offer is a clear indication by one person to another of willingness to enter into a contract on certain terms, or, a definite promise to be bounded upon certain terms.
o Needs to be a definite willingness to be bound (Gibson v Manchester City Council) o OR sincere promise (Carlill v Carbolic) → tested objectively
2 aspects to an offer:
1) A willingness to be bound by the promise without further negotiation and that a binding agreement would form on acceptance
Ø Clear from the words or conduct of the promisor
2) Propose an exchange: commitment to carry out promise in return for sth specified.
Ø May be a completed act by the promise, or
Ø A return promise by the promise to do/refrain from doing something
Offer determined objectively
• Would a reasonable person think an offer was being made?
• Smith v Hughes (1871) LR 6 QB 597 at 607 per Blackburn J:
“If whatever a man’s real intention may be, he conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other part and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound if he had intended to agree to the other parties terms”
In a unilateral contract, the same act may be both acceptance and consideration (Carlill)
Distinguishing an offer from:
Supply of information / Preliminary negotiations
o Supply of information does NOT represent an offer (Harvey v Facey)
o Inquiry of information does NOT represent an offer that is open to being accepted. The buyer has not manifested the intention to be legally bound → offer remains open (Gibson v MCC.)
Mere Puffs:
o Exaggerated statement used to induce another to enter into a contract will not result in a contractual offer.
o Determined by an objective test → They must be so exaggerated that a reasonable person would not believe that they were true.
Ø Must read the offer “in it’s plain meaning, as the public would understand it”, “how would any reasonable person reading this document construe it?” (Carlill v Carbolic)
Ø Is there something that demonstrates the sincerity of the offeror in making the offer - e.g.
the money in the bank in [Carlill v Carbolic]
o Could be considered a misleading and deceptive statement under the ACL
Invitation to Treat:
o Expression of interest to invite other parties to make an offer
o Person responds to ‘invitation to treat’ → makes the offer which may be accepted or rejected o Display of goods on shop shelves is an invitation to treat - The offer is made when the
customer takes from the shelf and presents to the cashier and the cashier via receiving payment makes acceptance (Pharmaceutical Society v Boot Cash Chemists)
Can the offer be made to the world?
o Offers (e.g. unilateral contracts) can be made to the world at large (Carlill v Carbolic) o It is an offer to anyone who performs the conditions named in the advertisement, and
anyone who performs the conditions accepts the offer (Carlill v Carbolic)
Statements of Policy and Conditional Gifts:
o Letters cannot be read as an offer or offers to contract when they contain statements of policy (Australian Woollen Mills v Commonwealth)
o In cases that involve the government, the court will usually find in their favour otherwise the government would not be free to amend and dissolve policies.
NOT an offer - an offer must include or propose an exchange [quid pro quo] between the offer and the consideration – something for something (Aus Woollen Mills v Cth)
o Example: “I will give you $1000 if I win the lotto tonight” (conditional gift)
Termination of an Offer
An offer will CEASE to be EFFECTIVE when it has been REVOKED (withdrawn)
Revocation/Withdrawal of Offer:
“an offer may be withdrawn at any time before acceptance” (Goldsbrough v Quinn)
Revocation is only effective when it has been communicated to the offeree (Stevenson v McLean)
• Exception: where an ‘option’ has been created for consideration (Goldsbrough v Quinn) Holding offers open: An offer cannot be revoked if the offeror has promised to keep the offer open for a stipulated period of time and consideration was provided for this by the offeree – an ancillary contract (option) is then made. (Goldsbrough v Quinn)
Revocation when no consideration: If NO CONSIDERATION is provided, the offer may be REVOKED PRIOR to ACCEPTANCE (Stevenson Jaques v McLean)
Revocation of a unilateral contract offer: An offer is revocable at any time before the completion of performance (an offer may be revoked when performance is partly completed), unless there is an implied contract not to revoke the offer. There is no universal rule as to whether the offer can be revoked. (Mobil Oil)
Third party Communication of Revocation: Revocation of an offer may be communicated by a 3rd party if they are a reliable source (Dickenson v Dodds)
Implied Revocation: Revocation can be implied by an offeror acting inconsistently with the offer on the table (Dickenson v Dodds)
When is an offer irrevocable? Once an offer has been accepted, it is irrevocable (Great Northern Railway Co. v Witham (1873))
Lapse:
If an offer lapses, it will CEASE to be EFFECTIVE
• If offer is stated to be open for a specified period, it will lapse on expiry of that time period.
• If no time period is specified, offer will lapse after a ‘reasonable time’(Diocesan v Commercial)
• If an offer is stated to be subject to a condition it lapses if the condition is not satisfied. (eg. I offer to purchase your house for $500K subject to a satisfactory past inspection report)
Rejection + Counteroffer:
An offer will CEASE to be EFFECTIVE when it has been REJECTED
• Rejection of an offer by the offeree terminates the offer
• The making of a counteroffer by the offeree operates as a rejection of the original offer and extinguishes the original offer (Hyde v Wrench)
Acceptance
What is acceptance?
• An unqualified assent to the terms of the offer. Tinn v Hoffman & Co (1873)
• Signature = manifestation of acceptance, even if party signing hasn’t read contract Test for what acceptance is:
An objective test into the external manifestations of both parties and what a reasonable person would draw from this (Toll Pty Ltd v Alphapham Pty Ltd)
Principles governing acceptance
1) Nexus - acceptance must be of the offeror and in response to the offer 2) Communication - acceptance must be communicated to the offeror 3) Correspondence - acceptance must correspond with the offer
Nexus of acceptance:
Acceptance must be of and in response to the offer (The Crown v Clarke)
• There must be a ‘meeting of the minds’ – a joint declaration of the will of the parties.
• If 2 people make an offer at the same time, they cancel each other out
• Bilateral Contract - Nexus issues rarely arise in bilateral contracts. Parties exchange promises, one for the other
• Unilateral Contract - Nexus issue more commonly arises in unilateral contracts Ø The offeree must be aware of the offer (Crown v Clarke)
Ø The offeree must perform the act in response to the offer (Crown v Clarke)
Communication of acceptance:
Acceptance is only effective to form an agreement when it has been communicated to the offeror (Carlill v Carbolic) (this is the moment where the court can identify a meeting of minds)
• Until acceptance is communicated, the offeree is free to withdraw its offer - Communication of acceptance requires some “external manifestation of assent to an offer” (Empirnall) Prescribed mode of acceptance:
Offeror can, within terms of offer, stipulate the specific manner in which the offer is to be accepted
• A contract results as soon as the offeree does the stipulated act, whether or not it has come to the notice of the offeror.
• (Diocesan v Commercial) “Where, however, the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding … acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract”
