Law Of Contract PDF

LAW OF CONTRACT DEFINITION OF CONTRACT A contract is defined as a promise or set of promises which the law will enforce where a party fails to perform his part of the bargain. The law of contract therefore allows the parties who had received goods and services or o...

LAW OF CONTRACT DEFINITION OF CONTRACT A contract is defined as a promise or set of promises which the law will enforce where a party fails to perform his part of the bargain. The law of contract therefore allows the parties who had received goods and services or other benefit to enforce the promise or obtain remedy for breach of contract. The aim of the law of contract is to generate confidence in commerce and trade as opposed to domestic arrangements. Treitel in The Law of Contract, 11thedn(Sweet& Maxwell, 2003) defines a contract as: an agreement giving rise to obligations which are enforced or recognized by law. The factor which distinguishes contractual from other legal obligations is that they are based on the agreement of the contracting parties. Beatson, in Anson’s Law of Contract, 28thedn (Oxford University Press, 2002) takes his definition a little further than this, by defining contract as: A legally binding agreement made between two or more persons, by which rights are acquired by one or more by one or more to acts or forbearances on the part of the other or others. In S.G.B Nig. Ltd V SSLM(1998) 5 NWLR (Pt 548) 168, it was held that the term “contract” is an agreement between two or more persons which creates an obligation to do or not to do a particular thing. For it to be legally binding, it must entail competent parties, subject matter, a legal consideration, mutuality of agreement and obligation. Equally, in BCC PLC V SkyInd.Nig. Ltd. (2002) 7 NWLR (Pt 795) 186, the court stated that a contract is said to be valid when the following elements are present. (a.) That it is an agreement which consist of offer and acceptance, meeting of the minds, consensus ad idem (b.) Consideration which is some right, interest or benefit accruing to one party or some forbearance, detriment, loss, responsibility given, suffered or undertaken by other at his request. (c.) Intention to create legal relations ( inferred from presence of consideration) CLASSIFICATION OF CONTRACTS Contracts are classified according to the nature and terms of agreement reached by the parties. Contracts may be classified into different categories. First, contracts may be classified as contracts under customary law and contract at common law. There are two types of contracts under common law which are contract under seal (formal contract) and simple contract. Contracts may also be classified as express contracts and implied contracts. Lastly, contracts may be categorized as bilateral and unilateral contracts. a. Contracts under Customary Law Contracts under customary law are contracts which are wholly govern by applicable customary law. They are always made orally and not in writing. See Ogunbambi v. Abowab(1951) 13 WACA 222 at 225, Farmers Supply Com Kds Ltd v Mohammed (2009) LPELR 8196 (CA) b. Formal Contract This is a contract made by deed or under seal. It must be in writing, signed, sealed and delivered; it need not be supported by consideration for it to be enforceable. It is enforceable by the party in whose favour it is executed in the absence of consideration or agreement. E.g conveyance of a legal estate in land or any interest in land, and contracts made by companies. At common law, contracts under seal sometimes referred to as contracts of specialties e.g bond and deed, take the form of written instruments to which a person attaches his seal and delivers it to another person and liability is thereby incurred by the person who fixes his seal. It was common practice but not necessary requirement for the instrument to be executed and attested to by one or two persons. Its form secures its validity and consideration though it may be present, it not essential to the creation of a contract under seal, the important ingredients being writing, sealing, and delivering. However, due to the dynamics of social and commercial life, the form of a formal contract has been altered in Britain and the general requirement of sealing has been completely abolished. Electronic signature has been introduced into the perfection of contract by deed in Britain. There, the Land Registration Act 2002 made provisions that enabled the electronic signature to create interest in registered land instruments. But while sealing is of no legal relevance, the old form of delivery is very much relevant and ground the validity of a deed, but any act of the party which clearly indicates his intention of handing over the deed as binding on him is sufficient. Thus a deed will be very much valid if after writing, signing and attesting; the person making the deed keeps it to himself; without handing it over to the party on whose behalf an obligation was created. ‘Delivery’ in this connection does not mean ‘handed over’ to the other side. It means delivered in the old legal sense, namely, an act done so as to evince an intention to be bound. While the requirement of sealing has not been abolished in Nigeria, it has long not been of much legal importance as emphasis has by various laws, notably Property and Conveyance Law of the Western Region of Nigeria 1959 and Registered Land Act 1965 been on signature and mark of the person making the deed.The Supreme Court inAwojugbagbe Light Ind. Ltd v Chinukwe&Anor. (1995) 4NWLR (Pt. 390) 409 per Onu JSC illuminated the true legal effect of sealing by citing Section127 of the Evidence Act Cap 112 Laws of the Federation,1990 which provides: “When any document purporting to be and stamped as, a deed appears or is proved to be or to have been signed and duly attested, it is presumed to have been sealed and delivered although no impression of a seal appears thereon” c. Simple Contract: All other contract other than formal contract is a simple contract. It could be in writing or oral. The law sometimes prescribes that certain category of contracts must be in writing otherwise they will not be enforceable; e.g a contract of Hire- Purchase, transfer of interest in land, promissory note, contracts of gurantee, contract of loan by a money lender and contract of marine insurance. The essential requisite of a simple contract is that it must be founded on a consideration, (Inducement or price paid for the other’s promise). In simple contract only a person who has furnished consideration can bring an action to enforce the contract. d. Express Contracts Express contract is a contract whereby the parties clearly and explicitly spelt out the terms of the contract.In other words, where the terms of the contract are expressly agreed and stated by the parties. e. Implied contracts In implied contracts, the terms are not spelt out clearly. The court construes the existence of a contract from the conduct of the parties and other circumstances rather than from the terms of the contract. E.g boarding a bus f. Unilateral Contracts A contract is said to be unilateral contract when consideration, which is an integral part of any binding contract, consists of actual performance in return for a promise (reward). Unilateral contracts are better illustrated by reward cases where the offeror or promisor offers a reward for information leading to recovery of a lost object, or arrest and conviction of criminals. In such a situation, the offeree “accepts” the offer by actually providing the information or locating the missing object and re-uniting it with the offeror. The act of finding or giving the relevant information constitutes the consideration furnished by the offeree. Another example of unilateral contract is sales promotion offers where consumers are promised prices by manufacturers of i.e sparkling drinks if they could produce a bottle cap containing a particular symbol or a series of bottled caps which can be put together for a particular word. The promotional advertisement constitutes an offer to the whole world which matures into a contract when any consumer fulfils the terms of the offer by producing the requisite cap or caps. Thus, in a unilateral contract, only one party, the offeror or promisor, is under a contractual obligation at any relevant period g. Bilateral Contracts A contract is bilateral when each of the parties to the contract promised to do something in exchange for the promise of the other to do something else in return. It is otherwise known as exchange of promises by parties to a contract. In this type of contract, it is compulsory that promises must flow from each of the parties to the other. The consideration in this type of  contract is the mutual promise. And this is referred to as executory consideration. For example, if A promise to sell his car in return for B to pay him 1M Naira. This can be regarded as a bilateral contract. FORMATION OF A CONTRACT Generally speaking, not every agreement entered into by parties has legal consequences so as to make it enforceable in law. To constitute a binding contract between the parties there must be a meeting of the minds often referred to as consensus ad idem. Parties must agree in minds and in deeds that the agreement entered into must have legal consequences. For an agreement to qualify as a binding contract, it must consist of certain elements recognized by law. An agreement only becomes binding on parties and enforceable in law when it consist of offer, acceptance and is supported by consideration. Hence the elements of a binding contract are offer, acceptance, consideration, intention to create legal relation and capacity to enter into contract. OFFER An offer is an expression of readiness to contract on terms specified by the offerror which if accepted by the offeree gives rise to a binding contract. It is not a contract but a negotiation which may mature into contract. It is a definite promise to be bound if it is accepted in the terms specified. It must be definite, clear and final. An offer may be made orally or in writing, or implied by the conduct of the person making the offer, namely the offeror. Furthermore, the offer may be made to a specific person or group of persons or to the world at large. In the famous case of Carlill v Carbolic Smoke ball Co. (1892) 2QB 484, it was argued that it was not possible to make an offer to the world at large. In this case, the plaintiff bought a medical preparation called ‘The Carbolic Smoke ball’ on the basis that the defendant advertised that they would pay 100 Pounds to any person who contracted influenza after using the smoke ball in the prescribed manner and for a specified period. Further the defendants stated that to show their sincerity they had deposited 1000 Pounds with Alliance Bank. The plaintiff bought one of the smoke balls and used it in the manner prescribed and promptly caught influenza. She sued for the 100 Pounds. The defendants contended that there was no agreement between them and used considerable ingenuity in promoting this contention. One of the defences was that it was not possible to make an offer to the whole world since this would enable the whole world to accept the offer which was clearly beyond the realm of commercial reality. The Court of Appeal had no difficulty in rejecting this defence. Bowen L.J stated the position very clearly as follows: It was also said that the contract is made with the whole world- that is, with everybody and that you cannot contract with everybody. It is not a contract made with the entire world. There is the fallacy of the argument. It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? …Although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement. OFFERROR = the person making the offer OFFEREE= the person to whom an offer is made. There are some types of statement which on the face of things appear to be offers but in fact do not so comprise. Offers compared with other types of transaction Offers distinguished from invitations to treat It has been seen that according to the various definition of an offer, an offer is an expression of a willingness to be bound by the terms of the offer should the offer be accepted. Clearly the implication here is that the statement of offer is the final statement of an individual who wishes to be bound by those terms; it is a person’s final declaration of his readiness to be bound. It follows that if an individual is not willing to implement the terms of his promise but is merely seeking to initiate negotiations then this cannot amount to an offer, such statements being termed ‘invitations to treat’. An invitation to treat is declaration of willingness to enter into negotiation, preliminary communication before an offer is made. The distinction between an offer and an invitation to treat is not an easy one to make since it very often revolves around that elusive concept of intention. It may be that a statement amounts to an invitation to treat even though the statement is said to make an “offer” and vice versa. The easiest way of making the distinction is by analyzing how the law deals with the problem within certain stereotypical transactions, bearing in mind that the courts will look at the surrounding circumstances and the intention of the parties and will not necessarily have regard to the actual wording of the statement. (a) Advertisement and others notices An advertisement of sale of goods is an offer to negotiate which may lead to a contract. Exhibition in supermarkets, notice of scholarship, advertisement of goods in catalogue or in newspaper constitute an invitation to treat. It is not an offer but an invitation to the general public. It has already been seen that the advertisement in the Carlill case amounted to an offer, though a unilateral one. In the words of Bowen LJ: It is not like cases in which you offer to negotiate or you issue advertisements that you have got a stock of books to sell, or houses to let in which case, there is no offer to be bound by any contract. Such advertisements are offers to negotiate-offers to receive offers- offers to chaffer… The decision in the Carlill case that the advertisement was an offer is peculiar to a situation where the statement is a conditional promise, a unilateral offer. A similar situation would result if an individual placed an advertisement offering a reward to the finder of a lost wallet. In such a case there is clearly a conditional promise and the advertisement would amount to an offer. Most advertisements do not fall into this category and hence they are held not to be offers but statements inviting further negotiations and invitations to treat. An example of such situation can be seen in the case of Harris v Nickerson (1873) LR 8QB 286, where an auctioneer advertised that certain goods would be sold at a certain location on a certain date. The plaintiff went to the sale but all the lots he was interested in had been withdrawn. He sued the auctioneer for his loss of time and expenses. It was held that the claim must fail as the advertisement of the auction was merely a declaration of intent to hold a sale and did not amount to an offer capable of being accepted and thus forming the basis of a binding contract, that is, that the advertisement merely amounted to an invitation to treat. (b) Display of goods for sale The most common example of the occurrence of invitations to treat is in the case of goods displayed either in shop windows or within a shop itself. The issue that arises here is that if the display of the goods in question amounts to an offer then a customer may enter the shop and purport to accept that offer, thus creating a binding obligation on the shopkeeper, to sell the goods at the stated price. If however, the display of goods only amounts to an invitation to treat, then it is the customer who makes the offer to the shopkeeper, who is free to accept or reject that offer as he wishes. The court has adopted the latter approach and there are several judicial authorities reiterating the fact that the display of an article in a shop window is merely an invitation to treat and not an offer capable of being accepted. The principle was illustrated in Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952) 2QB 795. The defendants owned a chemist shop organised in a self service system. A customer selected a drug with poisons in it, which the law required to be sold under the supervision of a chemist. Although the shop had a resident chemist, who was authorized to prevent customers from removing dangerous drugs without proper authority, the question is whether the display of the drugs on the shelves was an offer, in which case, acceptance took place when a customer put the drug in the shopping tray. The Court of Appeal held that goods are merely displayed to enable customers to choose what they want and that the contract is not completed until the shopkeeper accepts the offer. What the court is saying in essence is that the display on the shelves constitute an invitation to treat, the customer makes an offer when he selects the goods and the shopkeeper accepts by receiving payment from the customer. (c) Auction sales A notice of sale of property by auction is an invitation to treat or a call for offers and not an offer. The bid itself is the offer and an acceptance occurs when the auctioneer’s hammer falls. The status of the call for bids by an auctioneer was considered in the case of Payne v Cave (1789) 3 Term Rep 148. In this case, it was decided that a call for bids amounts to an invitation to treat, the bids themselves amounting to offers which the auctioneer is free to accept or reject as he wishes. This situation is given implied authority in the Sale of Goods Act, Section 57(2) which provides that a sale in an auction is completed by the fall of the hammer and each party is allowed to withdraw up to this time. In the case of UBN PLC V IRONBAR (2010) LPELR 5057CA, it was held that in a sale by auction, the public notice to that effect is not an offer to any bidder at the sale. The notice of auction, like the display of goods for sale in a self-service store is an invitation to treat, an invitation to the general public to come forward and offer to buy the goods at the price on the tag on the goods in case of a self- service store or at the price or bid at which the hammer falls in auction sale. Auction sales can take two forms, in that goods may be sold with or without a reserve price. Where the goods are put up for sale with a reserve price, it has been held (in McManus v Fortescue 2KB1) that no contract results if the auctioneer purports to accept a bid that is lower than the reserve price. In Adebaje v Conde(1938) 19NLR 57 the plaintiff was the highest bidder for the sale of land auctioned on behalf of the defendants. The court held that where the vendor has fixed a reserve price, as long as the purchaser has no notice of this, the auctioneer has implied authority to sell without reserve. A sale below the reserve price where the reserve price is not disclosed is binding on the vendor and the vendor cannot enforce it against the buyer a limitation of the auctioneers ostensible authority not made known to the buyer. Where the auction is held without reserve no contract of sale materializes between the owner of the property and the highest bidder if the auctioneer either refuses or otherwise fails to accept the highest bid. In Warlow v Harrison (1859) 1 E &E 309 it was stated that in such a case, there is a collateral contract between the auctioneer and the highest bidder, whereby the auctioneer in calling for bids is offering to accept the highest bid and that this offer is accepted by bidding. Thus, if the auctioneer refuses to sell to the highest bidder he, himself, will be sued for breach of contract. This is because there was a collateral contract between the auctioneer and the claimant. The measure of damages will be the difference between the contract price and the market price as set out in the Sale of Goods Act S. 51(3) (d) Invitation to tender It was held in Spencer v Harding (1870) LR 5CP561 that a statement that goods are to be sold by tender is not normally an offer, and that thus no obligation is created to sell to the person making the highest tender. Similarly, an invitation for tenders for the supply of goods or services is not generally an offer but an invitation for offers to be submitted which can be accepted or rejected as the case may be. In some circumstances, however, an invitation to tender may be held to be an offer. In the case of Blackpool and Fylde Aero Club Ltd. v Blackpool Borough Council 3 All ER 25, the Council owned and managed an airport, raising money by granting a concession to an operator to run pleasure flights from the airport. Shortly before the concession was about to expire in 1983 the council invited tenders for the right to run the concession, invitations being sent to the plaintiffs and six other interested parties. The terms of submission of bids were that they were to be submitted in an envelope provided, which was to bear no mark which could identify the sender. Furthermore, the tender had to be submitted no later than 12 noon on 17th March 1983. The plaintiffs’ tender was put in the Town Hall letter-box at 11am on 17th March. However, although the box should have been cleared at noon, this did not occur. The plaintiffs’ tender was subsequently marked down as being submitted late and was therefore not considered. The plaintiffs sued the Council for breach of contract on the basis that it had warranted that had a tender been submitted by the deadline it would be considered and that the Council had acted in breach of that warranty. It was held on appeal, that in certain circumstances an invitation to tender could give rise to binding obligations. This was such an instance since tenders had been sought from a number of parties, all of them known to the Council, who had also imposed strict rules of compliance on them. It was thus implied that a person submitting a tender in compliance with those rules had the right to have his tender opened and considered along with the others. Tenders may take two possible forms. They may be specific tenders or standing-offer tenders. The former comprises a tender for a definite quantity of goods to be delivered or sold at a specified time. Here the person requiring or selling the goods makes an invitation to tender, the person wishing to deliver or buy them making the offer, which will be converted into a trading contract when accepted by the first party. The second type of tender arises when a person invites tenders for the supply of goods or services which may be required within a specified time at some future date. An example of such a tender may be where a company invites tenders for the supply of stationery as and when, or if and when, required. Here acceptance of the tender (i.e.the offer) does not create a binding contract. The supplier whose bid is successful is in fact making a standing offer which is accepted every time an order is placed for stationery. At this point the supplier is obliged to meet the order or be in breach of contract, though he is free to revoke his standing offer at any time prior to an order being placed with him, though he is bound to fulfill orders already received.  (e) E- commerce Most of us have heard of the possibility of buying goods via the internet, even if they we have not actually had experience of this commercial phenomenon. But what is the status of a supplier’s website- does it represent an offer or an invitation to treat? Many of the electronic or virtual shopping sites are set out to resemble real stores, so that the potential purchaser browses through the products for sale in much the same way as one would do in a shop or supermarket. As the purchaser finds a product he wants to buy he places the item into his virtual shopping basket. When the purchaser has completed his ‘shopping trip’, the purchaser then submits details of the products he `has selected, his identity( if has shopped there before, otherwise he will have to register) and the details of his credit/debit card to the seller. The transaction is thus analogous to the situation seen in Pharmaceutical Society of Great Britain V Boots Cash Chemists (Southern) Ltd. The goods on the website will constitute an invitation to treat, as in Fisher v Bell, the offer arising when the buyer submits his details to the seller. The analysis above is of course dependent on the contents of the website, in appropriate cases it may be possible to argue that the site in fact constitutes an offer, possibly even unilateral offer of the type seen in Calill v Carbolic Smoke Ball Co., where the purchaser accepts the offer by simply pressing a button. Clearly website developers have to exercise great care in designing their websites to avoid such a situation from arising. (f) Ticket cases One problem that has recurred time to time again concerns the giving of a ticket during the course of entering into the contract. The problem revolves around whether the ticket is a contractual document, thereby rendering the parties subject to the terms and conditions printed or referred to on the ticket, or not. Two factors can influence the role of tickets in contracts; first whether it was intended that the ticket should amount to a contractual document and secondly, the mode and timing of the issue of the ticket. In Chapelton v Barry UDC 1KB532 the Court of Appeal considered that a sign by some deck-chairs for hire constituted an offer, which the plaintiff accepted when he took two of the chairs. The tickets amounted to no more than mere receipts with the result that the terms and conditions on them formed no part of the contract since they were handed out after the contract was concluded. With regard to timetables and passenger tickets, however, the law is not at all certain. Tickets have been held to be contractual documents on the basis that the proffering of the ticket by a bus conductor or ticket office clerk is an offer which is accepted by the taking of the ticket, as suggested in Cockerton v NavieraAznar SA 2 Lloyd’s Rep 450. Another view is that a timetable amounts to an offer which is accepted by a passenger either by applying for a ticket or by boarding the bus. The latter problem was discussed in the case of Wilkie v London Passenger Transport Board [1947 1 All ER 258. In the Wilkie case Lord Greene considered that on a bus a contract is made when the intending passenger ‘puts himself either on the platform or inside the bus’. The implication here is that the company makes an offer of carriage by running the bus which the passenger accepts by boarding. The fact that a contract arises here despite the fact that no fare has been paid, nor ticket issued, renders the statement open to doubt. A better solution will surely be that the company makes an invitation to treat by virtue of its advertisement or sign on the front, the passenger making an offer when he gets on the bus, which is accepted by the conductor’s taking his fare and issuing the ticket. The question then arises as to whether the ticket issued is a contractual document or a mere receipt, but no doubt this is one for the court top answer in the circumstances of a particular case. (g) Sale of Shares: The Companies and Allied Matters Act, 1990 defines ‘shares’ as the interest in a company’s share capital of member who is entitled to share in the capital of the company. S. 650 (1) of the Companies and Allied Matters Act 1990. A company in commercial language makes an offer to the public. Any member of the public is asked to subscribe for shares in the company, but it does not in law amount to an offer to sell the shares. It merely invites the members of the public to offer to buy them and the company can accept or reject such offer at its discretion. Offers distinguished from requests for information Very often, particularly in commercial transactions, substantial negotiations may take place before the terms of the contract are agreed by the parties concerned and the contract itself is entered into. During the period of negotiation one of the parties may simply require further information before he can place himself in the position of being able to enter the contract. Such a situation is very common where negotiations for the sale of land take place since there may be many questions of detail to be investigated before a formal contract can be entered into. In Harvey v Facey AC 552, for example, where the appellants sent a telegram to the respondent which read, ‘Will you sell us Bumper Hall Pen? Telegraph lowest cash price’, the respondent replied, ‘Lowest price for Bumper Hall Pen, 900 Pounds’. The appellants then telegraphed, ‘We agree to buy Bumper Hall Pen for 900 Pounds asked by you. Please send us your title deeds in order that we may get early possession.’ The appellants received no reply and thereupon brought an action for specific performance. It was held that the action must fail since the respondent’s reply was not an offer to sell but simply a statement as to the minimum price required should he decide to sell; his reply was a mere response to a request for information. The appellant’s final telegram amounted to the offer to buy, which was not accepted by the respondent. So far the distinction between offers and requests for information is fairly straight- forward, though one wonders if some of the earlier decisions can be considered correct. Would the decision in Harvey v Facey, for instance be the same today? If A walks up to B and says, ‘How much do you want for your car?’ and B replies 3,500 Pounds, is this not a contract? Surely the situation is likely to be that if B does not wish to sell he will reply, 3,500 Pounds, but it’s not for sale’ or simply, ‘the car is not for sale’. The surrounding circumstances of the case will be important in this type of situation but on the face of things there would appear to be a binding contract today. In Altotrin Ltd v Attorney- Gen. of the Federation (1996) 9 NWLR (pt, 475) 643SC, the Supreme Court again stated the essential ingredients of a valid contract. The court said that to constitute a binding contract, there must be an agreement in that the parties must be in consensus ad idem with regard to the essential terms and the conditions thereof, the parties must intend to create legal relations and the promise of each party, in a simple contract, not under seal, must be supported by consideration. There must be a concluded bargain, which has been settled. There will be no valid contract enforceable at law if these ingredients are not present. Communications of Offers The general rule is that an offer takes effect from the moment it is communicated to the offeree. From this rule raises the question whether the person who is unaware of an offer can successfully institute an action in reliance on his performance of the requested act. Since a contract requires mutual assent of the parties, it becomes difficult to appreciate how a person can assent to an offer which he does not know of his existence. In Fitch v Snedakar (1868) 38 N.L 248, a reward of 200 dollars was offered for the apprehension of a criminal. The plaintiff unaware of the reward apprehended the criminal and claimed the reward. The claim failed for the court held that it can only act on an offer he is aware of. The timing of the communication of the offer can be of importance when determining the time within which it can be accepted by the offeree. From the above case, it is clear that acceptance can only take place when the offer has been received; however, if the offer specifies some date by which the offer must be accepted and that date has passed when the offer is received, then the offeree is not able to accept the offer. Similarly, it may be that there has been a very long delay in the transmission of the offer to the offeree, and in these circumstances it may well be the case, depending on the subject matter of the offer, that offer has in fact lapsed, rendering it incapable of acceptance. One problem that arises in the latter context is what happens where the delay in the transmission of the offer is the fault of the offeror himself. In Adams v Lindsell(1818) 1B&Ald 681, the defendants offered to sell wool to the plaintiffs. Their letter was wrongly addressed so that it reached the plaintiffs two days later than the defendants could, in normal circumstances, have expected it to arrive. The plaintiffs, on receiving the letter, immediately accepted the offer and it was held that they were entitled to do so, creating a binding contract despite the fact that the defendants had considered that the offer had lapsed by the delay and sold the wool to a third party. It would seem from the case that the significant factor was the negligence of the defendants in addressing the letter and that if the delay had been caused by some other factor then it is possible that the decision could have been the reverse. Termination of Offer An offer remains open until terminated in one of these ways: 1. Revocation 2. Rejection 3. Lapse of time 4. Death of one of the parties 1. Revocation: The general principle is that an offer may be revoked at any time before it is accepted. A revocation may be regarded as an act of the offeror, prior to the moment of acceptance, which shows a present intention to retract the offer. Any attempt to revoke an offer after acceptance must of necessity be a prima facie breach of contract. The principle is not even affected by the fact that the offeror expressly stipulated a period of time within which the offeree should accept or reject the offer. In Routledge v Grant (1828) 4 Bing 653, Grant offered to purchase Routledge’s house, allowing 6weeks within which the latter was expected to give a definite answer. Gant withdrew his offer before the end of the 6weeks. It was held that the defendant was entitled to retract his offer even within the 6weeeks if the offer had not yet been accepted. The only way the plaintiff could have held the defendant to his promise was if he had actually purchased an option, whereby the defendant would be bound by a separate, binding contract to keep his offer open for the stipulated period. Any attempt to revoke within the period in this instance would give rise to an action for breach of the option contract. In order for the revocation to be effective, notice of the withdrawal of the offer must be communicated to the offeree. It should be noted that the postal rule has no application here. In Byrne v Van Tienhoven (1880) 5 CPD 344, the defendants posted a letter in Cardiff on 1 October offering to sell a quantity of tinplate to the plaintiffs in New York. The offer was received by the plaintiffs on 11 October, and they immediately accepted it by telegram and confirmed their acceptance by a letter posted on 15 October. On 8 October the defendants had posted a letter withdrawing their offer but this was not received by the plaintiffs until 20 October. It was held that a contract had come into existence when the telegram was sent on 11 October and that the letter of revocation sent on 8 October had no effect on the validity of the contract since it was only effective when received on 20 October, after a legally binding contract had already come into existence. There are two exceptions to the rule that revocation must be communicated to the offeree. First, the rule may be overturned where revocation would have been received by the offereebut for his being negligent in some way, as for example, by the offeree failing to inform the offeror of a changed address. A second exception occurs where an offer has been made to the general public. For example, if an offer had been placed in a newspaper it would be clearly impossible to communicate the revocation to every person who had read the offer. In these circumstances it would seem that revocation will be effective if the offeror takes all reasonable steps to bring the notice of the revocation to all those who potentially may have read the offer. In the case of our example of the offer in the newspaper it might be that a similar sized notice in the same newspaper on the same day might well pass this test of reasonableness. 2. Rejection: The rejection of an offer terminates the offer. The offeree’s right to accept cannot be exercised anymore. The offeree cannot subsequently accept the offer and it is immaterial that the offer was left open for a stipulated time. Rejection is usually effected by express intimation of such intention to the offeror. But it is also possible to constitute a rejection by making a counter –offer since a counter –offer is said to destroy the offer. Thus it was held in Council of Yabatech v Nigertec (Contractors) (1989) 1.NWLR (Pt 95) 99 that a counter offer apart from failing to be an acceptance, amounts to a rejection of the original offer which cannot be accepted subsequently. 3. Lapse of time: An offer cannot last indefinitely and a point must arise at some time when the offer ceases to exist. It may be that the offer is expressed to last only for a certain period and that if not accepted within that period the offer will lapse. Where no express provision is contained in the offer it will in any event lapse after a reasonable time. What constitutes a reasonable time depends largely on the subject matter of the offer. For example, an offer to sell a quantity of perishable goods, say tomatoes, would lapse after a fairly short period of time compared to the time reasonable for a quantity of steel. Some items, while they are not perishable in that sense, may, nevertheless, be highly volatile in other respects and this again would cause the offer to lapse in a fairly short period of time. 4. Failure of a condition precedent: Apart from an offer only being effective for a stated or reasonable period of time, as discussed above, the offer may only be effective while certain conditions exist. An offer may expressly provide that it will determine on the  occurrence of some condition. Any acceptance subsequent to the occurrence of the stated condition will therefore be ineffective. Such conditions precedent may also be implied in an offer. For example, it is implied in an offer that to purchase goods that they will remain in substantially the same condition as they were in when the offer was first made. 5. Death: The effect of death on an offer is, unlike death itself, not quite so certain, at least where it concerns the death of the offeror. Where the contract requires the personal services of the offeror then death will automatically terminate the offer. Where, however, the contract does not require the personal services of the offeror, then it may be the case that the personal representatives will have to employ some other person to carry out those services. What is a relevant consideration here is whether notice of the death of the offeror was brought to the attention of the offeree. If the death of the offeror was brought to the attention of the offeree prior to his accepting the offer then the offer will cease to exist. Where the offeree has no notice of the death of the offeror then, on acceptance, the offeror’s estate will be bound by the ensuing contract. ACCEPTANCE Acceptance may be defined as a final and unqualified expression of assent to all the terms of the offer. In Orient Bank (Nig) Plc v. Bilante International Ltd, acceptance was defined as the reciprocal act or action of the offeree to the offer in which he indicates his agreement to the terms of the offer as conveyed to him by the offeror. Acceptance could also mean an act of compliance on the part of the offeree with the terms of the offer. Acceptance may be demonstrated in the following ways: i. By conduct of the parties ii. By their words iii. By documents passed between them iv. By a prescribed mode of the offer For an acceptance to be valid there must be an external manifestation of assent. Thus acceptance must be notified to the offeror. A mere intention to accept or silence cannot constitute an acceptance. Felthouse v Bindley (1862) 7 L.T 835, 142 also Orient Bank v Bilante Int’l INVALID TYPES OF ACCEPTANCE 1. Counter –Offer: An acceptance must correspond with the terms of the offer. Any qualification or amendment will constitute a counter –offer which cancels the original offer. The acceptance therefore becomes a fresh offer which is now open to the original offeror to accept or reject. It was stated in Orient Bank’s case that for an acceptance to be operative, it must be plain, unequivocal, unconditional, and without variance of any sort between it and the offer. In the case of Hyde v Wrench (1840) 3 Beav.334 the defendant offered to sell a farm to the plaintiff for 1000 Pounds. In reply, the plaintiff offered 950 Pounds. The defendant rejected this offer. Later the plaintiff purported to accept the original offer for 1000 Pounds which the defendant rejected. In an action brought by the plaintiff, the court held that there was no contract. The counter –offer of 950 Pounds was a rejection of the original offer and it was no longer capable of acceptance. In Major-General George Innih (RTD) & Ors v Ferado Agro and Consortium Ltd (1990) 5NWLR a clear distinction between an acceptance and a counter-offer was made. In that case, the 1st appellant was the chairman of the Assets Disposal Commission of a Federal –Government owned Company called Nigerian Palm Produce Board. He wrote a letter to the respondent company offering to sell off the assets of the Palm Produce Board to the respondent for three million, five hundred and fifty thousand naira. Provided payment was made within the next three days. The respondent requested that the period of payment should be extended to 3 weeks. The appellants sold the assets to a 3rd party immediately. The respondent brought an action that the sale to the 3rd party was null and void. The trial court entered judgement in favour of the respondent. On appeal, upholding the appeal, the court stated that for an acceptance to be operative, it must be plain, unequivocal, unconditional and without variance of any sort between it and the offer. However, a counter-offer like any other type of offer creates an obligation once it is accepted by the offeree. In Oni v Communications Associates (Nig) Ltd. Unreported High Court of Lagos Lamb J. Suit No. LD /625/71 delivered on January 8, 1973. After a series of preliminary negotiations, Major Oni offered to lease two flats to the def. coy at 2000 Pounds each per annum. The defendant accepted the offer provided that two air- conditioners per flat are installed. The air conditioners were immediately installed by  the plaintiff. When the defendants failed to take up the flats, the plaintiff brought an action for breach of contract. It was held that there was a valid contract between the parties and the defendant had committed a breach of it. 2. Acceptance Subject to Contract: Acceptance subject to contract is a conditional acceptance which is not a valid or binding acceptance. Any acceptance which is made subject to a condition cannot create a binding contract until that condition has been met or fulfilled. In Maja Junior v U.A.C Unreported. Sept 3, 1973. The court held that an agreement subject to contract was not binding in spite of the full payment of the contract price. Also in U.B.A V Tejumola&Sons Ltd (1988) 2 NWLR Pt 79 P. 662 the Supreme Court held that it had long been established that once the term “ subject to contract” is used in an agreement, the incidence of liability is postponed until a formal document is drawn up and signed by both parties. In other words, an agreement subject to contract is not binding. Other may be used to convey the meaning presently attached to the term “subject to contract” e.g tentative agreement without engagement” , subject to a satisfactory survey e.t.c. the significance of the term used will depend on whether or not the parties contemplate further negotiation, agreement or document before they are willing to bind themselves. (b) Provisional acceptance: The term provisional acceptance means that the agreement between the parties has not ripened into a contract. Until a condition is fulfilled e.g. Signing of a bound in AGF v Awojoodu 3. Acceptance of Tenders: An invitation to tender is usually an invitation to treat. The tender therefore constitutes an offer and acceptance occurs when the advertiser selects the supplier. In a situation where the tender does not specify the quantity of goods but merely required the supply of goods in such quantity as may be ordered from time to time or as and when required, then the acceptance of tender does not constitute a contract. 4. Cross- Offers: Where A shouts an offer to B across a river and A does not hear the reply because of the noise of an aircraft flying over head, in such as situation, there is no contract. COMMUNICATION OF ACCEPTANCE The general rule here as re-stated in Howell Securities Ltd v Hughes (1974) 1 WLR 155, is that some external or objective manifestation of the acceptance must be communicated to the offeror. The principle is also well illustrated in the case of Powell v Lee (1908) 99 LT 284, where the defendant decided to appoint the plaintiff as headmaster of a school. The terms of the appointment were never communicated to the plaintiff. It was held that there was no contract since the defendant’s acceptance of the plaintiff’s offer of service had not been communicated to him. The need for communication of acceptance is because it would cause substantial hardship if the offeror were to be bound by the terms of his offer without first knowing that his offer had been accepted. It should not only be communicated but must be received by the offeree. Entores v Miles Far East Corporation (1955) 2QB. 327 However, there are some instances where the offeror may waive the requirement of communication of acceptance. This happens only in unilateral contracts. Carlill v Carbolic Smoke Ball Co. THE POSTAL RULE The rule that acceptance must be communicated to the offeror is overturned when acceptance is sent via the post. Since here the rule is that acceptance takes place as soon as the letter is validly posted. In Adams v Lindsell (1818) 1B&Ald 681, the defendants wrote to the plaintiff on 2nd September offering to sell some wool on certain terms and request a reply ‘in course of post’ the letter containing the offer was wrongly addressed and only received on 5th September. As a result, the letter of acceptance was received on 9th September, two days later than it should have been reasonably expected by the defendants. On the day before the letter of acceptance was received, the defendants sold the wool to a third party, no reply having been received from the plaintiffs. The question which arose was whether a contract of sale had been entered into before 8th September, when the wool was sold to the third party. Clearly, if the acceptance was effective only when it arrived at the address or at the latest, when it was brought to the attention of the defendant, then no contract would have been entered into, revocation of the offer being effected at that time by the later sale to the third party. The court held that however that the offer had been accepted as soon as the letter of acceptance had been posted. The contract was thus in existence before the sale of the wool to the third party even though the letter of acceptance had not been received by the defendant who was thus liable for breach of contract. Adams and Lindsell was one of the earliest cases in this area but the decision in the case were upheld in Household Fire and Carriage Accident Insurance Co. v Grant (1879) 4 Ex.D 216. One theory often promoted as a reason for the existence of the postal rule is that if the offeror, either expressly or impliedly, indicates that postal acceptance is sufficient, then he should bear the consequences of the postal rule. Exceptions to the rule in ADAMS V LINDSELL (a) Where a particular mode of communication is prescribed. Manchester Diocesan Council of Education v Commercial and General Investment Ltd (1969) 3 All ER 159 (b) Where the terms of the offer expressly or implicitly indicate that acceptance must reach the offeror before there can be a binding contract. (c) Where the application of the rule will produce manifest inconvenience and absurdity. Howell Securities Ltd v Hughes (Supra) (d) Where the letter of acceptance is wrongly addressed (e) Where the letter was not properly posted. Re London and Northern Bank, exp.Jones. It was held that handling the letter to the postman outside G.P.O was not a posting as to constitute acceptance. As the bank was unable to prove that the letter was properly posted before 9.30am when Dr Jones letter of withdrawal was opened. It was held that Jones had actually withdrawn his offer. REVOCATION OF ACCEPTANCE The general rule is that acceptance can be revoked at any time before it is accepted. In acceptance by post, acceptance cannot be revoked once it has been posted. There is a binding contract immediately the letter of acceptance is posted. There are some situations where the law is not settled. In some situations, revocation may be accepted or taken into consideration determining damages for the breach so that the offeror is not prejudiced.  CONSIDERATION Consideration is an essential element of a valid contract. It is only a party who has furnished consideration that can enforce a contract. An agreement made without consideration is void and the law will not enforce a promise unless the other party gives something i.e consideration. Consideration is an exchange either of a promise for a promise or exchange of a promise for an act. There must be reciprocity. If the promisor receives nothing in return for his promise, the promise is gratuitous and not enforceable in law. Hence, consideration is the price for which the promise of the other is bought. In Curie V Misa (1875) LR 10 Ex 153 consideration was defined as: A valuable consideration in the eye of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other This definition was adopted in the case of Udechukwu V Ngene (1992) 8 NWLR (Pt 261) 565.C.A. Consideration was said to be the purchase price for the promise. For instance, in a contract of sale of land, the seller’s consideration is the promise to transfer or the actual transfer of title to the buyer while the buyer’s consideration is the promise to pay or actual payment of the purchase price. Consideration is a benefit to the promisor, it always consist of a detriment to the promisee because of the rule that consideration must move from the promise to the promisor. Types of Consideration Consideration may be executed or executory. i. Executed consideration occurs when one of the parties has done all that he is required to do under the contract, that is, he has ‘executed’ his own side of the bargain. For instance, A receives Twenty thousand naira in return for which he promises to deliver goods to B. Here the money A receives is the consideration for the promise he makes to deliver the goods. A’s consideration (to deliver the goods to B) which is still unperformed remains executory in that it remains to be completed in future. ii. Executory consideration occurs where there is an exchange of promises to perform acts in the future. E.g A promises to purchase B’s car on credit, delivery to take place  next week. Here both A and B’s consideration is to be performed in the future- it is executory. Some general rules on consideration 1. Consideration must be legal. An illegal consideration makes the contract invalid. E.g when A ask B to beat C for which he promise to pay B N500, the consideration for this promise is illegal and the contract is not enforceable in law. 2. Consideration need not be adequate: Consideration need not be adequate or equivalent to the promise but it must be of some value. Once consideration is of some value (economic value) the court will never interfere on the ground of inadequacy of consideration unless fraud is proved. This is because inadequacy of consideration may be an evidence of fraud. The term ‘adequacy’ is used to describe the reciprocal elements of the bargain that is, whether an individual has made a ‘good’ sale or purchase in economic terms. In Gaji V Paye (2003) 8 NWLR (Pt. 823) 583. The issue was whether the Court is competent to question the adequacy of consideration. The Court of Appeal said that it is not open to a court to enquire into the adequacy of consideration of a contract. In principle, no consideration is too small or too much. 3. Consideration must be sufficient: The term ‘sufficiency’ of consideration describes not the economic value of the consideration but whether the consideration can exist as such in the eyes of the law as supporting a simple contract. The consideration must contain some elements which can be regarded as the price for the promise made and must be of a type recognized by law. Where a person promises to do something which he is already bound to do because the law has imposed that obligation on him, then that promise does not furnish sufficient consideration to support the simple contract. Here are some of the situations where the law finds the consideration insufficient i. Where there is a performance of an existing obligation There are so many instances where parties might want to use performance of an existing obligation as consideration for a contract. Some of the instances are a. Where a public duty is imposed by law: The carrying out of public duties imposed by the law is not recognized as consideration for a simple contract. In Collins V  Godefroy(1831) 1B & Ad 950 where the plaintiff attended and gave evidence at a civil trial by reason of a subpoena issued by the defendant. Afterwards the defendant promised to pay him a fee of six guineas. It was held that the plaintiff could not recover the moneys owed since he had furnished no consideration for the promise since he was already legally obliged to attend the trial. His consideration in other words was insufficient to support the promise of the defendant. b. Where the plaintiff is bound by the provisions of an existing contractual obligation owed to the defendant. A plaintiff provides insufficient consideration to support a promise made by the defendant if the defendant merely performs, or promises to perform, an obligation already owed by the plaintiff to the defendant by virtue of the previous contract made between them. In Stilk V Myrick (1809) 2 Camp 317, the plaintiff entered into a contract to sail a ship from London to the Baltic and back. During the voyage two crew members jumped ship and subsequently the captain promised to divide the wages due to these two men between the rest of the crew since the ship was now short- handed as he had been unable to find replacements. On returning to London the captain refused to pay extra wages and, when sued, alleged that the plaintiff had done no more than that which he was already contractually obliged to do, and that this could not therefore amount to sufficient consideration for the extra wages. The court agreed with this reasoning and found for the defendant. The decision in this case would have been different if the plaintiff could have shown that he did something over and above his pre- existing contractual obligation. 4. Consideration must move from the promisee to the promisor: The rule that consideration must move from the promisee means that a person can only enforce a promise made to him if he himself can show that he has provided consideration for that promise. An example of the principle can be seen in Price v Easton (1833) 4 B & Ad 433 where Price owed the plaintiff 13 Pounds and agreed to work for the defendant who promised to pay Price’s wages to the plaintiff, but in the event failed to do so. It was held that the plaintiff could not recover the 13 Pounds from the defendant as no consideration had moved from the plaintiff. The implication of this principle is that only parties to a contract can enforce the contract against the other, in order to be a party to a contract one must be a party to the bargain and therefore also provide consideration.  5. Consideration must not be past: Past consideration is no consideration. In defining consideration we have seen that consideration for a promise has to be given in return for a promise, in other words there must be a casual link between the two promises in other for the contract to be enforceable. If a party makes a promise subsequent to some action carried out by the other party, without fresh consideration, then that promise can only be regarded as an expression of gratitude, a gift, and nothing more. An example of past consideration may be seen where A paints the outside of B’s house as a voluntary act while B was on holiday. When B returns from holiday he is pleasantly surprised by A’s kindness and promises to pay N10, 000. If B refuses to pay, can A claim his N10, 000? The answer here must be that his action will fail since A’s consideration of painting the house is past in relation to the promise to pay made by B and, of course, past consideration is no consideration. Put another way, there is no casual link between the actions of A and B in that the act of painting the house was not made in response to a promise to pay for that act. It should be noted carefully that past consideration means past in relation to the promise that the plaintiff is seeking to enforce and not in relation to the time at which the plaintiff is seeking to enforce the defendant’s promise. In the above example, if B had promised A N10,000 if he painted his house, then A can only claim the N10,000 once he has carried out his own part of the bargain, that is, his consideration is executed in that it has been carried out in response to a promise to pay B. It is true, however, that A’s consideration here is past in that it has already been completed but here it is past in relation to the time of enforcement rather than to the promise made by B.In Akenzua II Oba of Benin V Benin Divisional Council (1959) WRNLR 1, the plaintiff and the council had successfully obtained the release of some forest areas. The plaintiff subsequently requested that the council should release one of these areas for his exclusive exploitation. The council did not consent to it and the Oba instituted this proceeding for breach of contract. The court held that the Oba’s consideration in obtaining the release of the forest was therefore past. Past consideration is however enforceable under the following circumstances. 1. If the act was done at the request of the promisor and it was implicit that both parties understood that the promisee’s service will be paid for. An example of this could be  found in the case of Re Casey’s Patents(1892) 1 Ch 104, where there were joint owners of certain patent rights who wrote to the plaintiff, ‘In consideration of your services as the practical manager in working our patents, we hereby agree to give you one- third share of the patents’. It was contended by the defendants that the promise was made in respect of the plaintiff’s past services and therefore the plaintiff could not enforce the promise against them because he himself had supplied no consideration for it. The judge found for the plaintiff, stating that there was an implied promise that the plaintiff’s services would be paid for and that the share of the patents would be regarded as such payment, despite the lack of a previous request by the defendants for the plaintiff to supply his services. 2. If it was the agreement or understanding of the parties that the act would be paid for. 3. A promise to perform an existing obligation is no consideration. If a party is under a duty to perform a duty, that party cannot use performance of such a duty as a consideration. However, if he performs more than his legal obligation, then he has furnished consideration. INTENTION TO CREATE LEGAL RELATIONS So far it has been seen that a contract must contain an element of agreement supported by consideration. The mere presence of these elements does not necessarily mean that a legally binding contract has come into existence. An agreement will not constitute a binding contract unless it intended by the parties to it that it should give rise to legal relations. The will of the participants is important, if they do not consent to the creation of a legal relationship then no contract that is legally enforceable will emanate from the relationship of the parties. Whether there is an intention or not depends on the type of contract and the facts of each case. In commercial matters, the courts presume that the parties intend to create a legal relationship while in agreements of a social or domestic nature, no such presumption is made. In either case, however, the presumption may be overturned by actual evidence to the contrary. Social and Domestic Arrangements Most social and domestic arrangements do not amount to binding contracts since they are not intended to be such. To agree to take a friend out for a meal or a drink is clearly not intended to confer on the friend rights of action before the courts should one fail to carry out When one’s commitment. Cases that amount to social / domestic arrangements tend to fall into two broad areas: a. Family arrangements: The case of Balfour V Balfour (1919) 2KB 571, forms a leading authority in this area. In the case a husband who was a civil servant based in Sri Lanka, brought his wife to England. Eventually he had to return but his wife had to stay in England for medical reasons. He agreed to pay her 30 Pounds per month maintaince during his absence. When he failed to pay the allowance she sued. Her action failed on two grounds: first, she had not provided any consideration 30 pounds per month and, secondly, the parties had no intention of creating a legally binding agreement. The court stated that where the parties were husband and wife the burden was on the plaintiff, the wife, to rebut the presumption that there was no intention to create a contract. There are instances where agreements between husband and wife could produce legally binding consequences. In Merritt V Merritt (1970) 1WLR 1121, the husband left the matrimonial home to live with another woman. At a meeting with his wife he agreed in writing to pay her 40 Pounds per month maintenance from which she had to repay the mortgage and, when the repayment was completed, to transfer the house into her sole ownership. The wife did in fact pay off the mortgage but the husband then refused to transfer the house to her. The Court of Appeal held that there was an intention to create a legal relationship and therefore held the husband to his agreement. The reasoning enunciated in the Court of Appeal was based largely on the fact that the agreement took place in response to a marital breakdown. In Balfour, on the other hand, the arrangements were made on the basis of an amicable agreement. The Merritt case illustrate that the courts will take all factors into account in deciding existence or non- existence of the intention to create legal relationship. Similar problems of intention also occur in relations between parents and children. In the case of Jones V Padavatton (1969) 1 WLR 328 a mother agreed with her daughter that if the latter gave up her job in the USA and read for the Bar in England, the mother would pay her an allowance of 2000 Dollars a month. On this basis the daughter came to England and began her legal studies in November 1962. In 1964 the mother bought a house for 6,000 Pounds, whereupon the earlier agreement was now varied so that the daughter, instead of receiving her allowance, would live in part of the house and let the rest, using the rent to cover expenses and her maintenance. In 1967 the parties had an argument and as a consequence the mother brought an action for the possession of the house. The mother based her claim on the allegation that the agreement was not made with the intention of creating legal relationship. A majority of the Court of Appeal held that there was no intention to create legal relationship between the parties and gave the mother possession of the house, Lord Salmon agreed with the decision but arrived at it on different grounds. He considered that the first agreement was a binding contract that was intended to last for a reasonable time in order to allow the daughter to pass her Bar Finals. When five years had gone by and she had still not passed them, he considered the contract had lapse. The second agreement concerning the possession of the house he considered to be so ambiguous and uncertain as to be incapable of being described as a contract. Lord Salmon based his decision regarding the first agreement on the fact that he thought it inconceivable for the daughter to give up a lucrative job without there existing an enforceable promise of financial support. b. Other social arrangements Questions such as those discussed above may also occur in agreements other than those between husband and wife and parent and child, that is in everyday social arrangements. Similarly the presumption is against a finding of an intention to create legal relationship, though this may be rebutted by evidence to the contrary. A factor that can be very influential here is the notion of mutuality. In Simpkins V Pays (1955) 3 All ER 10 the defendant owned a house in which she lived with granddaughter and the plaintiff, a paying lodger. The three regularly took part in a competition in a Sunday newspaper. Whilst entries were entered under the defendant’s name, all of them contributed to the competition, though there was no regular arrangement as to the payment of postage and other expenses. One week the entry was successful but the defendant refused to pay the plaintiff his share of the prize and claimed that there was no intention to create legally binding relationship. It was held that the plaintiff was entitled to his share , the judge stating that there was sufficient mutuality in the arrangements between the parties to establish a legally binding agreement to share any prize that might be won.  2. Commercial Agreements In these types of agreements there is a strong presumption that there is an intention to create legally binding relationship. This presumption can of course, be rebutted but in fact very strong evidence is required to do this. One way of rebutting the presumption is by inserting an express statement to this effect in a written statement. In Appleson V H Littlewood Ltd. (1939) 1 All ER 464 and in Jones V Vernon’s Pools Ltd. (1938) 2 All ER 626 the plaintiff in both cases attempted to claim moneys which they had alleged had been won in a football pool. The words ‘Binding in honour only’ were contained on each coupon. It was held that the words were sufficient to rebut the presumption and the plaintiffs thus failed in their action. Another exception to the presumption of an intention to create a legal relationship in commercial agreements lies in the case of advertisements. In order to protect advertisers who make flamboyant claims regarding the products advertised, the law assumes that there is no intention to create a legal relationship, thus preventing some disappointed individual who finds the claims exaggerated from taking any action. Such exaggerated claims are reffered to as mere ‘puffs’, in that they ‘puff’ the product up in order to make it more attractive and thereby induce consumers to purchase it. Very often such claims are gross exaggerations and no one really expects the products to produce the effects envisaged by the advertiser. The Case of Carlill V Carbolic Smoke Ball Co.., already discussed, provides a classic example of such a case.