LAW 151 LECTURE 1 copy.pptx

Formation of a Contract Elements of a valid Contract What is a contract? A contract according to Sir Federick Pollock is a promise or set of promises which the law will enforce. The American Restatement of Contracts 1981 defines contract as a promise or set of promises for the breach of which the la...

Formation of a Contract Elements of a valid Contract What is a contract? A contract according to Sir Federick Pollock is a promise or set of promises which the law will enforce. The American Restatement of Contracts 1981 defines contract as a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognises as a duty. Therefore the central notion of contract is the concept of bargain What is a contract… Thus, every contract by definition involves at least two parties and consist of exchange of promises or the exchange of a promise for an act. Is it every promise that is enforceable in law? E.g promise made in church, to the community etc What then makes promise enforceable in law? Elements of a valid contract For a contract to be valid the following elements must be met;  There must be an agreement (offer and acceptance)  Capacity to enter into a contract  Consideration  Intention to create legal relations Offer and Acceptance There must be a valid offer followed by a valid acceptance. This is however not the case in all instances The law defines/stipulates what constitute a valid offer An offer may be defined as a statement of an intention to be bound, on terms which are certain, made by one party to another, which upon acceptance by the other party, forms a binding contract. Valid Offer Date-Bah JSC in the case of NTHC Ltd v Antwi SCGLR 117, 125 defined an offer;  “an indication in words or by conduct by the offeror that he or she is prepared to be bound by a contract in terms expressed in the offer, if the offeree communicates to the offeror his or her acceptance of those terms…”  “A valid offer: Must be communicated, so that the other party may accept or reject it.”  In most cases, there are series of negotiations, statements. Counter statements leading to the agreement  The court will usually interrogate the various statements to ascertain at what point the offer is made  The offer must be communicated to the offeree; Valid Offer  In Taylor v Laird (1856), the master of a ship gave up his command during a voyage, but helped to sail the ship home. It was held that the owners did not have to pay for his assistance; an offer to assist had not been communicated to them, so they had not had an opportunity to accept or reject. Offer…. The offer may be communicated in writing, Orally or by conduct. The offer may be made to a particular person, group of person or the world at large.  In Carlill v Carbolic Smoke Ball Company (1893), the defendants, who manufactured ‘carbolic smoke balls’, issued an advertisement in which they offered to pay £100 to any person who used one of their smoke balls and then succumbed to influenza within a specified time. Offer….  Mrs Carlill, after seeing the advertisement, bought and used the smoke ball and promptly went down with influenza. She sued the defendants for the £100. The defendants argued, inter alia, that an offer to the ‘whole world’ was not possible in English law. It was held that an offer can be made to the ‘whole world’. Offer…  The offer must be definite  If must be final and complete Distinction between Offer & Invitation It is important to know what statements amount to an offer and what amounts invitation to treat or invitation to do business An invitation is an indication that the person making the invite is willing to enter into negotiation but is not yet prepared to be bound. Example in Gibson v Manchester City Council (1979); the Council letter stated ‘we may be prepared to sell you’ Distinction… A response to an invitation does not result in an agreement The response be an enquiry or an offer The distinction between offer and invitation to treat is the intention of the party. However the courts have established the following instances as invitation to treat situations; See NTHC Ltd v Antwi SCGLR 117 Circumstances confirmed as invitation to treat Goods on display in a shop windows or on supermarket shelves;  Generally goods on display in a shop window or on supermarket shelves is an invitation to treat. a. PHARMACEUTICAL SOCIETY OF GB v BOOTS 1 QB 401. Under the Pharmacy and Poisons Act 1933, s.18, (UK) specified drugs could only be lawfully sold under the supervision of a registered pharmacist. 1. Goods on display  The defendants, called Boots, operated a selfservice supermarket, with such a pharmacist on hand to supervise at the cash desk any transaction involving a drug to which the 1933 Act applied. Two customers selected such drugs from the shelves and put them in a wire basket provided by the defendants. The Pharmaceutical Society brought an action alleging an infringement of the 1933 Act. If the display of the goods on the shelves constituted an offer which the customer accepted by selecting goods, Boots would be in breach of the statute. Goods on display…  Held: In a self-service shop the customer offers to buy goods at the checkout. That offer is then accepted by the shopkeeper  In effect - The shop owner is not bound to sell the goods at the price indicated - A customer cannot demand to buy a particular item on display Goods display…  See also FISHER v BELL 1 QB 394. Advertisement of goods in newspapers, radio or television;  Generally advertisement of goods is an invitation to treat.  PARTRIDGE v CRITTENDEN 2 ALL ER 421; The appellant put an advertisement in the periodical Cage and Aviary Birds which stated, ‘Bramblefinch cocks, bramblefinch hens, 25s. each’. 2. Advertisement…  A reader wrote in for a hen, which Partridge sent to him. The appellant was charged with unlawfully offering for sale a wild live bird contrary to the Protection of Birds Act 1954, s.6.  Held; his conviction was quashed by the Divisional Court on the ground that he had made no offer for sale, merely an invitation to treat; a concept which section 6 did not catch. Advertisement…  However if the advertisement is unilateral and bears finality, it will be seen as an offer; Carlill vs. Carbolic Smoke Ball Co. Ltd  Also in Lefkowitz v Great Minneapolis Stores (1957), the advertisement stated ‘Saturday 9 am sharp. Three brand new fur coats worth £100. First come first served. £1 each.’ The US court held that this was a unilateral offer. Advertisement… Held: per Justice Murphy: “Whether in any individual instance a newspaper advertisement is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances. We are of the view on the facts before us that the offer by the defendant of the sale of the Lapin fur was clear, definite, and explicit, and left nothing open for negotiation. The plaintiff having successfully managed to be the first one to appear at the seller's place of business to be served, as requested by the advertisement, and having offered the stated purchase price of the article, he was entitled to performance on the part of the defendant. We think the trial court was correct in holding that there was in the conduct of the parties a sufficient mutuality of obligation to constitute a contract of sale.” Invitation to treat… Price list, catalogue and brochures;  Generally these are invitations to treat; In Grainger & Son v Gough (1896), it was held that price lists, catalogues and brochures were invitations to treat. Auction Sale;  Generally lots in an auction sale is invitation to treat 3. Auction Sale…  Also the goods showed at the auction are invitation to treats and it is rather the bids made by persons in attendance that are offers to buy the items.  The offer made can be withdrawn before the fall of the auctioneer’s hammer.  PAYNE v CAVE (1789) 3 Term Rep 148; Auction sale…  Cave withdrew his bid at an auction before the fall of the auctioneer’s hammer. It was held that the bid constituted the offer, the auctioneer having made an invitation to bid. As Cave’s offer had been withdrawn before the auctioneer had accepted it, there was no contract.  In HARRIS v NICKERSON (1873) LR QB 286; Auction sale…  An auctioneer advertised that certain goods were to be auctioned at a specified time and place. Harris went to the sale but the goods in which he was interested had been withdrawn from the sale. He sued the auctioneer for the loss of his time and expenses in going to the sale. Auction…  Held; that an advertisement that goods will be put up for auction does not constitute an offer to any person that the goods will actually be put up, and that the advertiser is therefore free to withdraw the goods from the auction at any time prior to the auction.  See Sale of Goods Act, 1962 (Act 137 ) See Auction Sales Law, Auction…  Auction sale could be in two forms; a. Auction sale without reserve price or b. Auction sale with reserve price  A sale without reserve price may constitute an offer to the highest bidder  WARLOW v HARRISON (1859) 29 LJ QB 14; the Plaintiff had bid for a pony for sale at the defendant’s auction ‘without reserve’. It was however sold to the owner. The Plaintiff challenged the sale; Auction sale…  Held; Baron Martin stated there is a contract between the auctioneer and the Plaintiff and that he is entitled to recover the item.  See also Barry v Davies 1 WLR 1962 Auction Sale under the Auction Sale Act  Section 4 stipulates; 1) In the case of a sale by auction — (a) where goods are put up for sale in lots each lot is prima facie deemed to be the subject of a separate contract of sale; (b) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; Auction Act… (c) until such announcement is made any bidder may retract his bid and, subject to paragraph (d), the seller may withdraw the goods; (d) where the sale is expressed to be without reserve the highest bona fide bidder shall be entitled to buy the goods at the price bid notwithstanding that the auctioneer refuses to accept his bid or to complete the sale; Auction sale… (e) the seller or any one person on his behalf may bid if a right to bid is expressly reserved, but, subject to paragraph (f), not otherwise; (f) where the sale is notified to be subject to a reserve price it shall be lawful for the seller or any person on his behalf to make one bid and no more; and such bid shall be openly declared at the auction before any other bid is received. Auction sale….  Section 17; sale with or without reserve price  Section 25 “Subject to subjection (2) of this section the advertisement of an auction is merely intimation of an intention to sell and in the absence of fraud, intending purchasers who attend an auction have no right of action if the property is not put up for sale or where the property put up for sale is withdrawn.” 4. Invitation to tender Tender notices;  A request for tenders is generally an invitation to treat  However if it is stated that the lowest or highest bidder will get the contract, it will amount to an offer.  Harvela Ltd v Royal Trust of Canada (1985) 2 All ER 966 Tender notices…  It was held that if the request is made to specified parties and it is stated that the contract will be awarded to the lowest or the highest bidder, then this will be binding as a unilateral offer. It was also held that a referential bid, eg the highest other bid plus 10% ‘was not a valid bid’. Tender notices…  See also Blackpool and Fylde Aero Club v Blackpool BC (1990) 3 ALL ER 25  It must be noted that the determination of whether a particular statement amounts to invitation to treat varies from case to case. TERMINATION OF AN OFFER An offer may terminate or be terminated in the following ways; – Rejection of offer/Counter offer – Revocation – Lapse of Time – Failure of a condition subject to which an offer is made – Death i. Rejection of offer/Counter offer As a general rule, an offer may be terminated by a rejection or counter offer duly communicated to the offeror. Such communication of a rejection or counter offer effectively cancels out the possibility of acceptance of the offer. ii. Revocation It is possible for the offeror to revoke the offer any time up until acceptance At Common law it makes no difference that offeror has promised to keep the offer open. This promise will be revoked along the original offer unless there is a binding contract to keep it open. Routledge v Grant (1828) 4 Bing 653 Revocation Contd The common law principle laid down in Routeldge v Grant has been modified by Section 8 of the Contract Act, 1960 (Act 25) Revocation Contd Revocation is ineffective unless it has been communicated to the offeree and when sent by post, it is effective when it arrives. BRYNE v VAN TIENHOVEN (1880)5 CPD 348 The offeror need not himself inform the offeree of the revocation; this can be done by some reliable third party DICKINSON v DODDS (1876)2 CH D 463 Revocation Contd. Unilateral contracts may cause some problems in relation to revocation. Should it be possible for the offeror to revoke the offer once the offeree has begun to accept, ie fulfill the stipulated condition. If the general rule as to acceptance was applied, acceptance would not be complete until the act was fully performed leaving the offeror free to revoke at Possible solution to this problem is the two contract theory ie offer accompanied by another implied offer not to revoke provided the offeree begins the task within reasonable time. The English cases turn on the intentions of the parties and the circumstances of the case. iii. Lapse of time An offer may lapse either after the lapse of a fixed period for which it was left open or after reasonable length of time has elapsed; RAMSGATE VICTORIA HOTEL v MONTEFIORE iv. Failure of Condition subject to which the offer was made An offer may be conditional and if the condition in the offer is not satisfied, the offer will not be capable of acceptance FINANCING v STIMSON 3 ALL ER 386 v. Death It is clear that the offeree cannot accept an offer after he/she has been notified of the offeror’s death. However if the offeree is ignorant of the offeror’s death, it seems he may only validly accept if it is the kind of contract that is capable of performance after death i.e not a contract for personal services; BRADBURY v MORGAN (1862)1 H & C 249 Where it is the offeree who dies, it is thought that the offer terminates automatically