Law of Contract PDF

***LAW*** ***OF*** ***CONTRACT*** ***I*** **[TOPIC I - HISTORICAL OVERVIEW AND CENTRAL DOCTRINES]** ***Contract Law encompasses the body of laws and principles that regulate the efforts to achieve and carry out voluntary agreements. It also involves the making of enforceable agreements. It is g...

***LAW*** ***OF*** ***CONTRACT*** ***I*** **[TOPIC I - HISTORICAL OVERVIEW AND CENTRAL DOCTRINES]** ***Contract Law encompasses the body of laws and principles that regulate the efforts to achieve and carry out voluntary agreements. It also involves the making of enforceable agreements. It is guided by principles that determine the validity of the contracts and the legal remedies that can be applied when issues arise.*** It is derived from Common Law, which is derived from English judges\' judicial decisions. Additionally, in Contract Law, you must know of Case Law, which refers to the case(s) whose judicial decisions lead to the establishment of these principles. They help you to see the principles in clear application and allow you to better use them to offer remedies to legal issues that arise in hypothetical ***problem questions.*** **TERMS IN CONTRACTS** +-----------------------------------------------------------------------+ | 1. 2. 3. 4. 5. | | | | - - - | | | | 6. | | | | - - | | | | 7. | | | | - - - | +-----------------------------------------------------------------------+ There are different types of contracts:- - - - And many others but Contract Law deals with ***general principles*** that apply to **all** contracts irrespective of the subject matter and content. - - **CENTRAL DOCTRINES** - "If there is one thing which more than another public policy requires it is that men of full and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore you have this paramount public policy to consider that you are not lightly to interfere with this freedom of contract" - 1. - **Issues that arise with this Doctrine** **I. Bargaining power deficiencies between parties -** An example is standard form contracts used by companies that individuals have little choice to agree to due to the necessity of the service being rendered. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- *Standard form contracts* are contracts drawn up by one party, used in the same form for all transactions of a particular kind without variation. For example, Coke has a standard form contract for the consuming of their product which could contain an exclusion clause from any liability in case of food poisoning or allergies. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- - **[THE ROLE OF THE COURTS IN CONFLICTS IN CONTRACT LAW]** **[(3 MAIN THINGS THE COURT ASSESSES AND WORKS WITH)]** 1. 2. 3. NB: What does legally enforceable loosely entail? The common law has long emphasized the commercial essence of contract and stressed the fact that the central notion of contract is the concept of a bargain. Contract law only enforces promises which are made as part of a bargain, i.e. promises which are given in exchange for something else. --------------------------------------------------------------------------------------------------------------------------------- A bargain has been defined as an agreement of two or more persons to exchange promises or exchange a promise for a performance. --------------------------------------------------------------------------------------------------------------------------------- ***Thus every contract, by definition, involves at least two parties and consists of an exchange of promises or the exchange of a promise for an act. Conventional learning establishes that a \"bare\" or \"naked\" promise, i.e., a promise for which nothing has been given or promised in exchange is not enforceable as a contract.*** **[TOPIC II - FORMATION OF CONTRACT]** **[Unit 1 - The Nature of Agreement]** What truly constitutes that one party has agreed to the terms of a contract? There are several indicators of agreement such as **outward appearance, oral agreement, written agreement, inferred agreement and combinations** of these various ones**.** The question now presents itself as to how the court decides on whether or not parties have entered into agreement. In Common Law, this fixed method is ***The Objective Test*** - - - **Benefits of The Objective Test** - - - ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ *"If, whatever a man\'s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that the other party upon that belief enters into the contract with him, then the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms."* - **Lord Blackburn J sitting for Smith v. Hughes** ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ - - - **Legal Principles under The Nature of Agreement** - - - - - **[Unit 2 - Offer and Acceptance]** Considering that contracts are bargains, the usual way for a bargain to work is that one party brings their terms and the other party accepts them. The court then finds itself in the position of determining agreement with a deeper lens of offer and acceptance, asking themselves if either was present. **What constitutes an Offer?** An offer may be defined as a statement or conduct indicating a ***willingness to contrac*t** on terms stated or on terms which can reasonably be inferred from conduct, and made with the intention that ***it will become binding as soon as it is accepted***. In the case of NTHC Ltd v.Antwi, an offer was defined as an indication in words or by conduct by an offeror that he or she is prepared to be bound by a contract in the terms expressed in the offer if the offeree communicates to the offeror his or her acceptance of those terms. - **Unit 1.2 Difference between an Offer and Invitation to Treat** The major difference lies in the *willingness to enter into a bargain*. In an offer, the terms carry a finality wherein if they are accepted, they become binding at once; see *NTHC Ltd v. Antwi and Tamplin v. James*. Whereas Invitation to Treat rather constitutes an attempt to *initiate* the bargaining process; terms are indefinite and will often be presented to many in hopes of offers from them. Common Examples of \"invitations to treat\" include: \(a) Tender notices \(b) Display of goods in a shop window with prices attached \(c) Advertisement of goods or services in a newspaper. \(d) Circulation of catalogues or price lists \(e) Auction notices **Unit 1.3 Bilateral and Unilateral Contracts** *Between two parties, a concluded contract is either: bilateral or unilateral.* The determining of what kind is dependent on the concept of promise. Wherein a contract is said to be unilateral when one promisor is making a promise in exchange for the performance of a stipulated act, meaning that the acceptance of the contract is only in effect once the action has been done. "I will give 20,000 dollars to anyone who washes my car", the other party cannot argue the contract as legally binding until the car is washed, intentions do not matter. Thereby, a bilateral contract is formed when one promisor makes a promise in exchange for another promise. In this case, acceptance happens when the promises are clarified and are legally binding from that point onwards. Additionally, the promises depend on the other being fulfilled. "I will pay 50 dollars for the makeup set if you deliver it in 3 days". I identify the difference in liability. Both parties make promises and are mutually liable from the moment the contract is formed. Failure to perform by either party results in a breach of contract. **Unit 1.4 General Offers** Classed into two kinds which is an offer to one person or the first person to perform the stipulated act OR an offer to several persons at once. A good example is *Carlill v. Carbolic Smokeball*. The importance of general offers is that they are unilateral and are often analysed in the context of the action being performed in response to a previous offer. **Unit 1.5 Acceptance** To constitute a contract, the offer must be accepted by the party to which it was presented. Acceptance is therefore defined as the final and unqualified expression of assent to the terms of an offer. It can be shown by ***words, conduct or in writing.*** **Acceptance by Conduct/Writing:** In the case of *Brogden v. Metropolitan Railway Co.* the parties submitted a written proposal to keep on buying and selling coal between themselves, though the agreement was drafted it was never submitted. However, the court found that since both parties had been acting in accordance with the stated terms, their conduct proved acceptance and the contract was legally binding. **Acceptance by Conduct (Waiver of Required Communication):** *Carlill v. Carbolic Smokeball* **Unit 1.6 Acceptance distinguished from Counter-Offers and Enquiries** In determining whether or not there has been an agreement, it must be final, unqualified and absolute assent to the terms proposed. Meaning, in the case where the offeree suggests modifications or proposes a new idea it is recognised as a counteroffer. The court then views the original offer as destroyed. Simply, take it or leave it, any attempt at changing how you can take it, will mean that no contract has been formed and is therefore not legally binding or enforceable. Cases: *Hyde v. Wrench, Degbee v. Nsiah & Antonnelli, Butler Machine Tool Co. Ltd. v. Ex-cell-o Ltd.* In both cases, the defendants made an offer to sell, and the plaintiffs responded with suggestions on changing the price. The court held that there need not be any specific performance as a contract did not exist. Therefore, as long as there are negotiations and terms have not been fully agreed on to the knowledge of both parties, acceptance cannot be proven. On the topic of **enquiries,** it becomes murky as this is distinguished from a counteroffer using interpretation. In one case, the plaintiffs had asked for details to pay for a product they had been offered and the offerors sold it to someone else. The court however held that a contract had existed and specific performance needed to be executed. In another case, there had been an agreement to sell but the discourse around the payment plan was unclear, using the contents of the agreement and conduct, the court ruled it an enquiry. What distinguishes an enquiry from a counteroffer is that an enquiry shows a willingness to contract and accept the terms, while a counteroffer seeks to initiate an entirely new agreement on the same subject matter and destroys and rejects the initial offer. **Unit 1.7 Communication of Acceptance** Simply, acceptance must be communicated in words, conduct or otherwise ***made known to the offeror***, it cannot be mental or intended. Several cases were cited, but what stood out to me is that many times, those in acceptance did not *communicate this effectively* to the offeror and therefore the contracts were void. Now, the communication of acceptance further discusses the effectiveness of an acceptance, meaning at what point does it take legal effect? Think of it as a pinky promise: If you say yes to me giving you gummy bears, that is the finality of acceptance, but the effectiveness of acceptance comes into play as soon as I receive an indication of acceptance from you, such as saying "yes." Court cases have argued effectiveness as well, settling on the general principle that if the offeror does not see a clear expression of assent, then the contract may be void. **Exceptions to the Rules** - - - - - **Unit 1.8 Prescribed Method of Acceptance** This concept simply allows that when an offeror makes a promise to an offeree and specifies a prescribed method of acceptance, this must be complied with to indicate acceptance. There are however variations on this. Firstly, if the offer prescribes a method but does not directly state that this is the only way through which it will be binding and the offeree uses any other means which is not less advantageous, it may be accepted. For example, a "return by post" agreement made by telegram which will take the same amount of time and ensure the same safety is considered as acceptance. In all, offerors must take care to prescribe methods when necessary and the offeree must respect that or act accordingly in any other circumstance. **Prescription of Silence as a Method of Acceptance** In the case where an offeror suggests that if there is no response from the offeree within a certain period, it counts as acceptance, there are many questions. In summary, an offeror is not generally allowed to proffer such a term. However on the flip side, are offerors legally bound when the offeree keeps silent but honours the term of the contract? Basically, yes they are, because they offered those terms and the offeree accepted. In the case of *Felthoude v. Bindley,* an uncle told the nephew that he should split the cost of a horse he was being sold and that his silence would be accepted as acceptance but an auctioneer accidentally sold the horse, the uncle was unable to sue as the nephew as such a term is prohibited. On the flip side, the nephew could have strongly countered by saying that he had accepted the offer of the uncle to sell the horse to him at that price, he could enforce those terms as his silence was by the terms. **Unit 1.9 Termination of Offers** This covers what happens when acceptance of a contract leads to no binding agreement based on circumstances. So what situations make acceptance void? - - **Unit 1.10 Problems of Communication Battle of Forms**