AFM231 Chapter Notes - Chapter 6: Standard Form Contract, Photocopier, Common Rule
18 May 2018
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Chapter 6
The Contract
• Several of the basic elements of a contract
• An agreement (i.e., composed of offer and acceptance)
• Complete (i.e., certain)
• Deliberate (i.e., intention to create legal relations is present)
• Supported by mutual consideration
An Agreement
• Agreement comes before contract, and agreement takes the form of offer and acceptance
Offer
Definition of Offer
• An offer is a promise to enter into a contract, on specified terms, as soon as the offer is accepted
• Jason from Tracker offered to supply steel tracking to Amritha. He listed price, terms of payments,
delivery data, and other essential matters. Amritha is entitled to accept this offer which forms a
contract.
Certainty of Offer
• A offe does’t hae to eet the stadad of pefet laity and precision in how it is expressed.
• If the parties intend to have a contract, the courts will endeavour to interpret the alleged
offer in as reasonable a fashion as possible and thereby resolve ambiguities
• It can leave certain matters to be decided in the future
• A court will not speculate, however, on what the parties would have agreed to had they complete
their negotiation
Invitation to Treat
• An offer is different from a communication that merely expresses a wish to do business
• The latter form of communication is called an invitation to treat and has no legal consequences.
• To deteie etee offe ad iitatio to teat depeds o the speake’s itetio, ojetiel
assessed. Subjective intent is of no legal relevance.
• E.g. if Jason had offered to sell takig duig egotiatio ut ithout poidig othe detail, that’s
an invitation to treat. He only demonstrated his wish to do business to Coasters.
• Common law has devised a number of rules to distinguish between offer and invitation to treat.
• A rule of particular significant to business relates to the advertising and display of goods for sale in a
store.
• Advertisement is an invitation to treat
• E.g. etail stoes adetise thei poduts. “oeties poduts a out, ut ustoes a’t
sue for breach of contract due to the shortage of goods.
• It is the customer who makes the offer to purchase the advertised goods. The owner can
then refuse the offer because of the shortage of goods.
• Similarly, display of a product in the store is not an offer as well. Same reason as advertisement.
find more resources at oneclass.com
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• Contract can be formed after length discussions or without negotiation e.g. if you go print paper
from a photocopier.
• The standard form contract A take it o leae it otat, hee the ustoe agees to a
standard set of terms that favours the other side) is entered into without any negotiations.
• Some businesses have set of terms developed over the years and offers no negotiation e.g.
rental service, banking service.
• Standard form contract is not inherently objectionable, however, since they help reduce
transaction costs and increase business volume, thereby potentially lowering price.
• When negotiation is complicated, its important for parties to know when an offer has been made,
since at that moment significant legal consequences arise, whether the parties intend them to or
not.
• A fundamental rule Is that a contract is formed only when a complete offer is unconditionally
accepted by the other side.
• An offer is made is when the purported offer is sufficiently comprehensive that it can be accepted
without further elaboration or clarification.
• The person who makes an offer is known as the offeror.
• The person to whom an offer is made is known as the offeree.
Termination of Offer
• An offer can be accepted only if it’s alie, eaig that It’s aailale to e aepted.
• The offe a e teiated o take off the tale :
• Revocation
• Lapse
• Rejection
• Counteroffer
• Death of insanity
Revocation
• Revocation (the withdrawal of an offer) of an offer can take place at any time before acceptance
simply by the offeror notifying the offeree of its withdrawal.
Revocation in the Context of a Firm Offer
• The law permits offerors to revoke their offers despite a promise to leave the offer open for a set
period of time (called a firm offer).
• Such a promise is enforceable only if the other party has purchased it or has given the
offeror something in return for the commitment.
• E.g. if Aitha did’t poide paet fo Takig, the Jaso a eak his od ad
revoke his offer without any legal recourse.
• One way to revoke offers prior to deadlines is for parties to form an option agreement, whereby the
offeree pays the offeror to keep the offer open for the specified time.
• Option agreement is a separate contract that may or may not lead to the acceptance of the
offer
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find more resources at oneclass.com
Document Summary
The contract: several of the basic elements of a contract, an agreement (i. e. , composed of offer and acceptance, complete (i. e. , certain, deliberate (i. e. , intention to create legal relations is present, supported by mutual consideration. An agreement: agreement comes before contract, and agreement takes the form of offer and acceptance. Definition of offer: an offer is a promise to enter into a contract, on specified terms, as soon as the offer is accepted. Jason from tracker offered to supply steel tracking to amritha. He listed price, terms of payments, delivery data, and other essential matters. Amritha is entitled to accept this offer which forms a contract. Certainty of offer: a(cid:374) offe(cid:396) does(cid:374)"t ha(cid:448)e to (cid:373)eet the sta(cid:374)da(cid:396)d of pe(cid:396)fe(cid:272)t (cid:272)la(cid:396)ity and precision in how it is expressed. If the parties intend to have a contract, the courts will endeavour to interpret the alleged offer in as reasonable a fashion as possible and thereby resolve ambiguities.
