LAW2101 Final: Contract A- exam notes with case summaries and examples
WEEK 1- OFFER
Lecture1, 26th Feb
What is a contract?
: A formal (intention to create legal obligations) agreement between two or more parties
: Exchange- something given in return for the promise called ‘consideration’
: Promise or a set of promises
: Consent
: An agreement or set of promises that the law will enforce (i.e. for breach of which the law
will provide a remedy- usually money or can be ordering the person to do the task).
Contract law is unique in the sense that the parties themselves create obligations.
Underlying Themes-
: Freedom of contract- law says parties are free to create their own obligations
: Economic/ commercial efficiency
: Objective approach- not concerned with what the party was thinking
: Fairness- the law abhors certain types of conduct (such as deception, coercion,
unconscionability) in contracting
Issues in contract problem solving-
Is there a contract?
Requires 4 elements:
1.Agreement- establish through Offer and Acceptance.
• Offer made by one party (the Offeror)
• Offer accepted by the other party (the Offeree)
• Agreement occurs when acceptance is communicated by the Offeree to the Offeror
• The classical approach of offer and acceptance has been softened by developments in
the law of estoppel, misleading conduct, negligent misrepresentation and unjust
enrichment, which mean that parties in negotiation today clearly owe obligations to
one another before the moment of formation.
• The courts also find it difficult to fit the facts of some cases within offer and
acceptance framework.
• Even where the parties have clearly reached an agreement it can be difficult to
identify conduct that can be characterised as an acceptance on the other.
• There are limits to this approach and there may be agreement without Offer and
Acceptance
• Bilateral v Unilateral contracts-
Bilateral- most contracts. Both parties exchange promise for each to do something in
the future. Both A and B’s promises are executory (i.e. to be performed at some point
after the contract is formed. They haven’t’ been performed as yet).
Unilateral- still two parties. Called if contracts. Only 1 promise is paid. At time
contract formed, 1 promise is executory and the other has been executed. No need to
give notice of acceptance prior to agreement. It is one in which the offeree accepts the
offer by performing his or her side of the bargain. The offer is accepted by performing
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an act, and the performance of that act is all that the contract requires of the offeree.
[reward for last dog]
WHAT IS AN OFFER?
An offer may be described as the indication by one person to another of his or her willingness
to enter into a contract with that other person on certain terms.
A proposal only amounts to an offer if the person making it indicates that an acceptance is
invited and will conclude the agreement between the parties.
An offer is effective only if it identifies a valid consideration and manifests an intention to
create a legal obligation.
An offer can lead to a binding agreement only if the offer identifies the terms of the proposed
agreement with sufficient certainty.
In Brambles Holdings Ltd v Bathurst City Council, Heydon JA suggested in obiter that an
offer must take the form of a proposal for consideration which gives the offeree an
opportunity to choose between acceptance and rejection.
The courts use an objective standard- the view of a reasonable person in the offeree’s
position. It does not matter whether the offeror in fact intended to make an offer; the court
determines the offeror’s intention objectively, according to outward manifestations.
Gibson v Manchester Council (1979 HL)-
Gibson was a tenant in council house. Manchester CC wrote to Gibson proposing to sell
council housing. Gibson completed the application form and returned the form to the
Council.
Issue- was there a contract? Was there offer and acceptance?
Arguments- what did Gibson argue?- that there is a contract. He needs to show that there is
an agreement and that he accepted the offer (has a binding legal contract).
What did the Council argue?- this is not an offer, they didn’t give the acceptance.
Outcome- not an offer because looking at the wording, the application didn’t indicate an
offer.
Carlill v Carbolic Smoke Ball (1893 UK CA)-
Example of a unilateral contract. Distinction between offer and mere puff.
The defendants manufactured and sold a device called the “Carbolic Smoke Ball”, which was
claimed to prevent colds and influenza. They placed an advertisement in various newspapers
which said that a $100 reward would be paid to any person who contracted a cold or
influenza after having used the device 3 times daily for 2 weeks. The advertisement said:
“$1000 is deposited with Alliance Bank, Regent Street, shewing our sincerity in the matter.”
After reading the ad, the P purchased a smoke ball, used it for several weeks and then
contracted influenza.
The D refused to pay the reward. The English court of appeal rejected all the arguments.
Carbolic first argued that it was a mere puff, and no promise was intended. Court denied- not
a puff (why else the money), statement made it clear that promise was intended. Also argued
that it wasn’t an offer to a particular person- denied- an offer can be made to the world at
large and can be accepted by any person who performed the conditions on the faith of the ad.
Thirdly, the P had not notified her acceptance of any offer- court held that, although
acceptance of an offer must normally be notified to the offeror, the offeror may dispense with
that notification. Fourthly, the agreement was uncertain because it failed to stipulate a period
within which the disease must be contracted, court- a reasonable construction must be placed
on the ad, which made it sufficient to be certain. Fifthly, the P had supplied no consideration
for the D’s promise, court- the use of the ball constituted both a benefit to the D and a
detriment to the P.
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Lecture 2
An offer is often distinguished from an invitation to treat, which is an invitation to others to
make offers or enter into negotiations. Not an offer because lacks sufficient indication of
willingness to be bound.
An indication by the owner of property that he or she might be interested in selling at a
certain price, for example, has been regarded as an invitation to treat.
Typical categories-
• Advertisements e.g. catalogues
• Goods displayed in shops :
Pharmaceutical Society v Boots Chemist (1953) UKCA: they had a self-serve style store. At
the checkout there would be a pharmacist. Pharmaceutical society sued the chemist, took
action saying that boots was contravening legislation. Pharma argued that boots was making
a sale at an earlier point in time not when the pharmacist was supervising the checkout and
therefore they were contravening the UK.
Issue: when was the contract formed? When the offer was made and when there was an
acceptance?
Offer was displaying it on the shelf and acceptance was taking it off the shelf, pharma said
that is when the contract was formed and there was no one supervising.
Arguments weren’t successful. Boots’ argues were successful, when checkout, that is
contract.
Held:
▪ The goods being displayed on the shelves was an invitation to treat
▪ Customers make an offer to buy the goods at the checkout
▪ Pharmacists could either accept or reject the offer
▪ Boots therefore not in breach of the legislation
▪ Why? – It would be unworkable to say that taking the goods off the shelf was an
acceptance of an offer, because it implies that the customer could not have a change
of mind and return the goods to the shelf before paying for them
• Goods offered for sale online
An invitation to treat. The offer is made when customer orders it and the company accepts it
by completing the transaction.
Electronic Transactions (Victoria) Act 2000:
14B. Invitation to treat regarding contracts
1) A proposal to form a contract made through one or more electronic communications
that:
a) is not addressed to one or more specific parties; and
b) is generally accessible to parties making use of information systems
is to be considered as an invitation to make offers, unless it clearly indicates the intention of
the party making the proposal to be bound in case of acceptance.
1) Subsection (1) extends to proposals that make use of interactive applications for the
placement of orders through information systems.
• Property declared “on the market” at auctions
General rule is that:
o the auction is an invitation to treat;
o the bid is the offer; and
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Document Summary
: a formal (intention to create legal obligations) agreement between two or more parties. : exchange- something given in return for the promise called consideration". : an agreement or set of promises that the law will enforce (i. e. for breach of which the law will provide a remedy- usually money or can be ordering the person to do the task). Contract law is unique in the sense that the parties themselves create obligations. : freedom of contract- law says parties are free to create their own obligations. : objective approach- not concerned with what the party was thinking. : fairness- the law abhors certain types of conduct (such as deception, coercion, unconscionability) in contracting. Both parties exchange promise for each to do something in the future. Both a and b"s promises are executory (i. e. to be performed at some point after the contract is formed. At time contract formed, 1 promise is executory and the other has been executed.
