Common Law Assignment 1

Rachel Moran

Common Law Assignment 1

I have been asked to advise a client on considering contracting with a building company to build new head offices in the area. I will explain the rules of offer and acceptance. Rules of intention, legal capacity, specific contract terms, standard form contracts and exemption clauses.

Offer

An offer is a definite promise to be bound on specific terms. (BPP Common Law 1994)

The offer has to be specific in order to actually constitute an offer. For example in the case of Gunthing V Lynn 1831 the facts of the case were the offeror to pay a further sum for a horse if it was ‘lucky’. The offer was too vague so the judge said it was not specific enough to constitute an offer. It could constitute an offer if the offeror said that he/she would buy the horse if it wins the 2.30pm race at Oxford.

Invitation to treat

An invitation to treat is an indication that someone is prepared to receive offers with the view to forming a binding contract. It is not an offer in itself. (BPP Common Law 1994)

There are four types of an invitation to treat.

1. Auction sales

At an auction the bid itself is an offer and then the auctioneer can either accept or reject the offer. A good example of this is the case of Payne and Cave 1789, the defendant made the highest bid for the plaintiff's goods at an auction sale, but he withdrew his bid before the fall of the auctioneer's hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer.

1. Advertisements

This is an attempt to induce offers and is therefore classified as an invitation to treat. A very good example of this is the case of Partridge V Crittenden 1968. Mr Partridge placed an advertisement for selling a protected species of bird in a magazine. Then RSPCA then brought a prosecution of the Birds Act 1953 but the case was quashed as Mr Partridge was not making an offer as it was the advertisement constituted an invitation to treat.

1. Exhibition of goods for sale

This is displaying goods in a shop such as Tesco etc. this constitutes inviting customers to make offers to purchases such items or invitation to treat. An example of this is the case of Fisher V Bell; a shopkeeper was prosecuted for offering for sale an offensive weapon by exhibiting a flick knife in his shop window. Displaying an item with a price in a shop window is an invitation to treat so he was inviting offers from potential buyers which the shopkeeper could either accept or reject the offer.

1. An invitation for tenders

A tender is an estimate submitted in response to a prior request. When a person tenders for a contract he is making an offer to the person who has advertised a contract as being available. An example would be if you wanted to borrow a loan you might obtain tenders from three different banks, you therefore receive three different offers and you then decide which one to accept.

An example of invitation to treat is if you see goods for sale in a shop window for far less then the usual retail price and go into the shop to make your purchase. The shopkeeper then tells you that she has made an error on the price; therefore there is no offer it’s merely an invitation to treat.

Offeror and offeree

An offeror is the negotiating because he controls the terms and conditions of the offer i.e. he controls the price and how long the offer stands.

An offeree is the person who is prepared to accept the offer.

Termination of an Offer

The way in which an offer can be terminated is if it is accepted, therefore creating an agreement. The diagram below shows how an offer can be terminated.

Death Rejection

Termination of offer

Failure of Revocation Lapse of time

condition

(BPP Common Law 1)

Rejection

An outright rejection can cancel an offer also a counter-offer terminates the original offer made. An example of this is the case of Hyde V Wrench 1840. Wrench offered to sell his farm for £1000. Hyde offered £950 (counter-offer) which Wrench rejected. A few days later Hyde said he would buy the farm for £1000. Wrench refused to sell and Hyde maintained that they had a contract. The counter-offer of £950 had rejected the original offer to sell of £100 so therefore the offer was rejected and there was no contract.

Lapse of time

An offer may be expressed to last for a certain period of time but if there is no express time limit set, it expires after a reasonable time. What is a reasonable time depends on the circumstances of the case. (BPP Common Law 1994) An example of this is the case of Ramsgate Victoria Hotel Company V Montefiore 1866. Montefiore applied to Ramsgate Victoria Hotel Company in June for shares and paid a deposit to the companies’ bank. At the end of November the company sent him a letter of acceptance of the allotment and requested payment of the balance due. Montefiore persevered that his offer had expired and could no longer be accepted. The offer was for a reasonable time only, so the offer had lapsed.

Revocation by the offeror

An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree, although not necessarily by the offeror. This raises two important points.

While posting a letter is a sufficient act of acceptance, it is not a sufficient act of revocation of offer. The case of Byrne V Tienhoven 1880 is an example of this. The defendants were in Cardiff; the claimants in New York. The sequences of the events follow.

1 October Letter posted in Cardiff, offering to sell1,000 boxes of tinplates.

8October Letter of Revocation of offer posted in Cardiff.

11 October Letter of offer received in New York and telegram of acceptance sent.

15 October Letter confirming acceptance posted in New York.

20 October Letter of revocation received in New York. The offeree had meanwhile resold the contract goods.

The outcome of the case was the letter of revocation could not take effect until received (20 October). Simply posting a letter does not revoke the offer until it is received. Therefore there was no binding contract.

While acceptance must be communicated by the offeree, revocation of offer may be communicated by any third party who is adequately reliable informant.

If the offer was made to the entire world, such as Carlill’s case, the revocation must take form that is similar to the offer. However, an offer may not be revoked if it has been summarised in an option. This is a unilateral contract as an offer was accepted ensuring that the offeree did there part which was to use the smoke ball three times daily for two weeks.

Failure of condition

An offer may be conditional. If the condition is not satisfied, the offer is not capable of acceptance. (BPP Common Law 1994) An example of this is from the case of Financings Ltd V Stimson 1962.The defendant wished to purchase a car, and on the 16th of March he signed a hire purchase form. The form, issued by the claimants, stated that the agreement would be binding only upon signature by them. On 20th March the defendant, not satisfied with the car, returned it to the motor dealer. On the 24th March the car was stolen from the premises of the dealer, and was recovered badly damaged. On 25th March the claimants signed the form. They sued the defendant for breach of contract.

The defendant was not bound to take the car. His signing of the agreement was actually an offer to contract with the claimant. There was an implied condition in this offer that the car would be substantially the same condition when the offer was accepted as when it was made.

Death

The offeror’s death terminates the offer unless the offeree accepts it in ignorance of the offeror’s death, and the offer is not of personal nature.

The death of an offeree terminates the offer.

Acceptance

Acceptance is a final unqualified expression of assent to all terms of the offer (Tretel, Law of Contract). It can be expressed by writing, orally or by action. For acceptance to be expressed orally it should be backed up in writing, for acceptance to be expressed as an action you would physically do the action for example if you have a job you would turn up at the job this is an action.

The case of Carclill V Smokeball Co 1893 expresses acceptance in words and action as I will explain.

“the manufacturers of a patent medicine published an advertisement by which they undertook to pay ‘£100 reward to any person who contracts influenza after having used the smoke ball three times daily for two weeks’. The advertisement added that £1,000 had been deposited at a bank ‘showing our sincerity in this matter’. The claimant read the advertisement, purchased the smoke ball and used it as directed. She contracted influenza and claimed her £100 reward. The manufacturers argued a number of defences, including the offer were so vague that it could not form the basis of a contract as no time limit was specified. Also it was not an offer, which could be accepted since it was offered to the whole world.” (Common law 1 BPP)

The outcome of the case was that there was an offer as it was specified of what to do and it was an offer to the public can be accepted so as to form a contract.

Acceptance must be unqualified agreement to the terms of the offer, an acceptance which claims to introduce any new terms is a counter-offer and if it is made the original offeror may accept it, but if he rejects it his original offer is no longer available for acceptance. Therefore a counter-offer may be accepted by the original offeror; this will have the effect of creating a binding contract. An example of this comes from the case of Butler Machine Tool Co V Ex-cell-O Corp (England) 1979. The claimant offered to sell tools to the defendant. Their quotation included the details of their standard terms and conditions of sale. The defendant accepted the offer enclosing their own standard terms which was different from the claimant terms. The claimant acknowledged acceptance by returning a tear-off slip from the order form. The outcome of the case was that the defendant‘s order was really a counter-offer. The claimant had accepted this by returning the tear-off slip.

Acceptance must be communicated to the offeror and is not effective until this has been done. There are four methods of communicating acceptance; there is reward, waiver and mode. There is the postal rule as well which has been discussed.

Reward

With reward cases it is whether contractual obligations arise if a party, in ignorance of an offer, performs an act which fulfils the terms of an offer. The case of R V Clarke 1927 is an example of reward cases.

“A reward of £1,000 was offered for information leading to the arrest and

conviction of a murder. Clarke, an accomplice, gave the necessary information. He claimed the reward, admitting that he had acted only to save his own skin.”

The outcome of the case was that his claim failed, although he had seen the offer, it was not present in his mind when he acted.

(Taken from Common Law 1 BPP.)

Waiver of communication

The offeror may, by his offer, dispense with the need for communication of acceptance. In Carlill V Carbolic Smoke Ball Co 1893 it was sufficient for the claimant to act on the offer with out acceptance of it first.

Prescribed mode of communication

The offeror may call for acceptance by specified means. But if the offeror stipulates that this is the only method of acceptance which suffices, then acceptance by some other means equally expeditious would constitute a valid acceptance: Tinn V Hoffmann 1873. A telegram or even a verbal message could be sufficient acceptance of an offer inviting acceptance ‘by return of post’. This would probably apply now also to acceptance by fax machine or e-mail. Taken from Common Law 1 BPP.

Consideration

The consideration of a contract is very vital as it is the third element in a contract. Consideration is the price for which the promise of the other is brought. It must be something of value which is recognised by the courts as amounting to consideration i.e. Detriment to the promise or benefit to the promisor. Consideration does not have to be money but there are sub principles when consideration is involved. These are as follows;

1. Consideration maybe executed or executory but not past. Executed is a performed act in return for a promise, if for example A offers a reward for the return of lost property, his promise becomes binding when B performs the act of returning A’s property to him. This was an example in Calill’s case. Executory is a promise given for a promise but is not a performed act for example a customer orders a product which the shop owner undertakes to obtain from the manufacturer, the shop owner promises to supply the product and the customer promises to accept and pay for the product. Neither of could withdrew from the contract with out the consent of the other, otherwise they will be in breach of the contract. Both of these considerations are provided at the time when the promise is given so it can not be in the past.
2. Consideration must move from the promise but not necessarily to the promisor.
3. Consideration must be sufficient though not necessarily adequate. This means that the consideration need not be of equal value to the parties to the contract, but it must be of some value to the parties involved, but does have to be financial. An example of adequacy was of the case of Chappell and Co V Nestle Co Ltd;

“The defendants made a special offer, whereby if people collected three wrappers from Nestle bars of chocolate and then sent then in with a small sum of money, they could get a copy of a record called ‘Rockin’ Shoes’. The case arose because the claimants owned the copyright to the music and the two parties were trying to calculate the amount of royalties payable to Chappell, on the basis of the value of the records. The argument hinged on whether the wrappers, which were merely thrown away on receipt by Nestle, constitutes part of the consideration and therefore should be included in the royalty calculation” (Taken from Common Law1 BPP)