Nature of Contract: Essential Elements & Types

Nature of Contract

• A contract requires: offer, acceptance, consideration, intention to create legal relationships, and capacity.
• Lord Denning suggests that the circumstances as a whole determine a contract's existence (C Butler Machine Tool).
• Three contract types: unilateral, bilateral, and collateral.
• Unilateral contracts involve one party paying another for an action, often through rewards or advertisements (Carlil v Carbolic Smoke Ball).
• Advertisements can be invitations to treat but become offers in unilateral contracts, not needing acceptance by the offeree.
• In unilateral contracts, knowledge of the reward offer is essential for the reward to be granted.
• Acceptance in unilateral deals happens when the required action is done, and the offer can be pulled back before the act's completion
• If the offeree has significantly performed, the offer can't be revoked (Errington v Errington).
• Bilateral contracts need action from both parties.
• Collateral contracts: secondary agreements that run parallel to the main one, independent and separate; can be spoken or written, made between original or third parties to overwrite, supplement, correct, or add to the main contract.

Offer

• An offer is a definite proposal by one party (offeror) to another (offeree) promising something.
• Offers can be made in words, writing, or conduct, to an individual, group, or the public.
• Offers must be clear, precise, and capable of acceptance.
• The wording determines if it's an offer; a price statement isn't an offer (Harvey v Facey).
• Offers require communication to the offeree for acceptance.
• Knowledge of the offer is essential for a reward in unilateral contracts.
• An offer can be withdrawn before acceptance but becomes binding upon acceptance.
• Unilateral offers can't be withdrawn during offeree performance.
• Revocation must be communicated with clear intent (Bryan v Van Tienhoven); revocation is ineffective after acceptance.
• Revocation can be made through a reliable third party (Dickinson v Dodds).
• Offers are different from invitations to treat, where one party invites negotiation.
• Advertisements are invitations to treat (Partridge v Crittenden).
• Displaying goods is an invitation to treat (Fisher v Bell).
• At a cash desk where a pharmacist was present was held to be the point when contract was formed (Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd).
• Indicating an acceptable price isn't an offer (Clifton v Palumbo).
• Auction sales are invitations to treat via the auctioneer's bid invitation.
• The bidder makes the offer, accepted when the auctioneer strikes the hammer.
• Auctions without reserve prices imply an offer from the auctioneer, accepted by the highest bidder (Warlow v Harrison).
• Tenders are invitations to treat where the tenderer makes the offer (Harvela Investments), but a request to a specified party may be a unilateral offer.
• Offers must be certain to be accepted/performed, but a reasonable price can be implied based on the contract's history (Foley v Classic Coaches).
• Promises to keep offers open need consideration to be binding; this is an optional agreement.
• Offers can be terminated before acceptance (Routledge v Grant).
• Offers end upon acceptance/rejection by the offeree.
• Offers end after a time lapse; if no specific time is stated, a reasonable time is implied, dependent on the subject matter (Ramsgate Victoria Hotel Co.Ltd v Montefiore).
• Offers end on either party's death; if the offeree knows of the offeror's death, it ends; if not, it can be accepted.
• Offers end if a condition isn't fulfilled.
• Offers end if something is added/changed (Hyde v Wrench).

Acceptance

• Acceptance means agreeing to all terms of an offer positively and without conditions.
• Acceptance must mirror the offer exactly; otherwise, there is no contract.
• Courts consider if an affirmation at the offer time is a counteroffer or a request for data.
• Like offers, acceptance requires proper communication to the offeror.
• Only the intended offeree can communicate acceptance, unless authorized.
• Acceptance requires communication to the offeror.
• Communication can be in writing, words, or conduct, following the offeror's specified methods.
• Silence isn't acceptance (Felthouse v Bindley), unless the offeror waives communication.
• Waivers can be expressed/implied, often in unilateral contracts (Carlil v Carbolic Smoke Ball).
• The postal rule states that acceptance is effective when posted (Adams v Lindsell).
• It doesn’t matter if the offeror receives the letter or not.
• The postal rule applies when required/reasonable, unless excluded by the offeror (Howell Security v Hughes).
• Postal rule applies if not excluded (Household Fire Insurance v Grant).
• Instant communication requires clear implications for when/where the contract is formed (Entores Ltd v Miles Far East Corporation).
• Acceptance is effective once the office is reopened (Brinkbon Ltd v Stahag Stahl).
• E-mail acceptance rules aren't clear, with the postal rule potentially not applying (Thomas and Another v BPE Solicitors).
• The 'battle of forms' arises with conflicting standard contracts. The 'last shot principle' (Butler Machine Tools Co. Ltd v Ex-Cell-O Corp (England) Ltd) dictates that the final accepted terms prevail.

Intention to Create Legal Relations

• Courts use two presumptions to determine intent: commercial agreements presume legal relations, and social/domestic don't.
• No strict rules exist; decisions are fact-based.
• Business promotions indicate legal intent (Esso Petroleum Co. Ltd v Commissioner of Customs and Excise).
• Explicit statements can negate legal intent (Rose and Frank v J.R.Crompton and Bros Ltd).
• Statutes can deem contracts non-binding. Engagement doesn't guarantee a legally binding contract (Law Reform (Miscellaneous Provisions) Act 1970).
• Social/domestic arrangements: generally, agreements lack legal intent (Balfour v Balfour).
• Separated parties may intend legal relations (Merritt v Merritt).
• Parent-child contracts depend on the agreement's purpose (Jones v Padavatton).
• Social arrangements presume against legal intention, but this can be rebutted if money changes hands (Simpkins v Pays).
• This is not always rebutted (Wilson v Burnett)
• Domestic/social parties consider contracts rarely, while commercial deals imply strong legal relations and a heavy rebuttal duty.

Consideration

• Consideration, essential to a contract, might be money, services, objects, or promises.
• Consideration involves a right, interest, or benefit to one party against another's detriment, loss, or responsibility (Curia v Misa).
• Consideration can be executed (one party fulfills their part) or executory (both parties fulfill their parts).
• Consideration must be sufficient (tangible value) but need not be adequate.
• Courts aren't concerned with the contract's objective fairness.
• Chocolate bar wrappers were held to be good consideration (Chappell v Nestle).
• Past consideration is not valid; it must follow the contract (Re McArdle).
• Past consideration is valid if an implied/expressed request was made or a benefit was promised (Lampleigh v Braithwait).
• Consideration must come from the promisee, meaning a non-party can't sue (Tweddle v Atkinson).
• Contract (Rights of Third Parties) Act 1999 allows third parties to sue if the contract says so or confers a benefit.
• Performing a public duty isn't valid consideration (Collins v Godfrey).
• Doing more than the existing public duty is valid (Glasbrook Bros v Glamorgan County Council).
• Performing an existing contractual duty isn't valid (Stilk v Myrick).
• It can be if one exceeds existing duties (Hartley v Ponsonby).
• Performance of a contractual duty is valid if it gives practical benefit to the other party (Williams v Roffey Bros and Nicholls Contractors Ltd).
• Part payment of debt isn't valid consideration to forego the balance (Foakes v Beer).
• Pinnel's Case confirmed this rule.
• Claimants could recover because of this rule (D and C Builders Ltd v Rees).
• Exceptions: Accord and Satisfaction: discharging a contract for a different consideration (British Russian Gazette v Associated Newspapers).
• Promissory Estoppel prevents claimants from reneging on promises if relied upon (Central London Property Trust Ltd v High Trees House Ltd).
• Four conditions for the doctrine: existing contract, claimant waives rights, defendant's reliance, and reliance resulting in contract.
• It must be used as a defense and not as a cause of action (Combe v Combe).

Capacity (Minors)

• Minors, the insane, and the intoxicated can't form valid contracts.
• Laws protect vulnerable individuals from exploitation.
• The Family Reform Act 1969 reduced the age of majority from 21 to 18.
• Minors can make three types of contracts: Contracts for necessaries, beneficial contracts of service and voidable contracts.
• Contracts of necessaries are those essential for a minor's station in life (Chapple v Cooper).
• Goods must be appropriate and supplied (Nash v Inman).
• According to s3 Sale of Goods Act 1979, minors must pay a reasonable price for delivered goods.
• Beneficial contracts of service may be beneficial (Clements v London and North Western Railway Company).
• Principles were extended when a minor boxer was made binding because it was beneficial to the minor making him a proficient boxer (Doyle v White City Stadium Ltd).
• Voidable contracts can be rejected during minority or within a reasonable time after turning 18.
• They involve permanent features like property, leases, shares, partnerships, and marriage settlements.
• Timely repudiation is fact-dependent (Edwards v Carter).
• Minors can't be bound to future debts (Steinberg v Scala (Leeds) Ltd).

Remedies Against Minors

• Minors aren't generally liable for contracts.
• They become liable if they ratify the contract.
• If they perform, they cannot recover conferred benefits.
• The Minors' Contracts Act 1987 states minors aren't bound, but the other party is and minors can recover money without paid consideration.
• They may confirm after 18 and, such may be implied in continuing with the contract.
• According to s2 of the Act, the guarantor has liability will is not avoided.
• Under S3 of the Act, Courts can require a minor to transfer property gained if just.

Express Terms

• In oral contracts, a judge determines the parties' terms and representations.
• Terms are duties.
• To be a term, statements must be included in the contract.
• Express terms must be agreed at contract formation.
• Express terms are simple to find, but oral contracts are tough. Courts analyze objectively to consider the parties' reasonable minds when contracts are formed.
• The court considers six factors in this regard: timing, term importance, party knowledge and skills, signed forms, and the parole evidence rule.
• Longer intervals mean less willingness to include the term (Routledge v McKay).
• The representee’s belief that they would not enter the contract without that term, the more likely that the term can be included (Bannerman v White).
• Oral statements count (Couchman v Hill).
• Skilled persons' statements are included. Less skilled persons statements are not (Oscar Chess Ltd v Williams).
• The statement of persons with special knowledge and skills are incorporated into the contract (Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd).
• Excluding or from written means excluding from a part of the contract.
• Courts may consider earlier statements as part of contracts (Birch v Paramount Estates (Liverpool) Ltd).
• Signing includes contract terms.
• Parole Evidence Rule: adding, changing, or contradicting written terms is inadmissible due to potential uncertainty, but applies if there is evidence, such as custom, trade usage operative until something happened, when incapacity or when there is a collateral contract.

Terms Implied by The Consumer Rights Act 2015

• The Consumer Rights Act 2015(CRA) updated consumer contracts.
• The CRA is applicable where a trader is trading goods, digital content or services with a consumer.
• Conditions are implied by The Sale of Goods Act 1979, such as the statutory rights entitled to consumers and pre-contract information, concerning payment, is an implied term of contract.
• consumers buy for the purpose of not a business and vise versa for the non- consumer.
• Under S9 (1) CRA, goods must be satisfactory.
• Under S9 (2) CRA, quality should be satisfactory in the eyes of a reasonable person based on the goods description, price, and circumstances.
• S9 (3) CRA covers goods' purpose, appearance, finish, defects, safety, and durability and seller expertise needed. If good are inadequate it will clear breach (Grant v Australian knitting Mills Ltd)
• S9 (4) CRA does not include unsatisfactory goods that is made known before the contract where a consumer can reveal the fault or if it will become apparent once examined
• S10 (1) CRA where the consumer makes known of any good he is buying.
• S10 (3) CRA includes the term of goods being fit for purpose
• S10 (4) CRA S9 (3) will not apply if the goods doesn't lie with the consumers skill.
• S11 CRA must correspond to seller selected goods (Beale v Taylor).
• Refund must be made within 14 days, where the trader can't impose change (Ss 20 and 22), request faulty repair or replace (S23).
• Right to reduction for any repair if can not replace (Ss 20 and 24).
• CRA 2015 replaces Supply of Goods and Services Act 1982
• Services is covered in 49 CRA implying supply of service.
• Service must be performed with care and skill (s49) (Lawson v Supansink Ltd).
• Service is reasonable (s51).
• Service fulfilled in reasonable measure (s52) in (Charnock v Liverpool Corporation).
• Any statement by the pre-contractual for any information that is influenced after is a implied firm.
• S55 CRA trader must provide with reasonable care and skill if he hasn't done so already or to conform with what he said or may have to complete it again.
• S56 CRA consumer can claim a price drop up to 100% depending on the breach.

Status of Terms

• Depending on reference is a term. With these types: conditions, warranties or nominate.
• Conditions are key to the central to the contract with damages (Poussard v Spiers and Pond).
• Warranties are secondary to the contract that does not allow the aggrieved damages (Bettini v Gye)
• Innnominate term are neither for the importance of contact relying on the aggrieved consequences (Long Kong Fir case).