LAW2101 CONTRACT A - CASE SUMMARIES AND KEY POINTS

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Allyson Watkins
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1 TOPIC 1: OFFER Offer is an indication by one person to another of his or her willingness to enter into a contract with that other person on certain terms TYPES OF CONTRACT Unilateral Contract Bilateral Contract Multilateral Contract 2 parties to the contract (i.e. A and B) Only 1 promise is made (e.g. A promises to pay $100 to B if B finds A s lost puppy) B accepts A s offer when B performs the stipulated task (i.e. contract is formed when B completes performance) B is not obliged to perform, but A is obliged to pay when B has performed (i.e. only one party has an obligation) *Note: Revocation possible whilst B is completing the agreement 2 parties to the contract (i.e. A and B) Both parties exchange a promise/promises for each to do something in the future (e.g. sale of second hand book under the agreement) Both A and B s promises are executory (i.e. to be performed at some point after the contract is formed) Contract between more than two parties. Most features of bilateral contracts apply, though there could be other special features as well Gibson v Manchester Council Manchester CC wrote to Gibson: o The corporation may be prepared to sell the house to you for 2725 (less 20%) o This letter should not be regarded as a firm offer of a mortgage o if you would like to make formal application please complete the enclosed application form Gibson completed the application form and returned the form to the Council Change of government election (i.e. new local council stopped all proposed sales) Gibson sought to enforce the sale (by specific performance) Carlill v Carbolic Smoke Ball 100 reward will be paid by the Carbolic Smoke Ball Co to any person who contracts influenza, colds after having used the ball three times daily for two weeks according to the printed directions supplied! Approach (Denning) (Court of Appeal - 2:1 for Gibson): look at the correspondence as a whole and at the conduct of the parties and see therefrom whether the parties have come to agreement on everything that was material Departed from conventional approach of offer and acceptance! Approach (Lord Diplock) (House of Lords Unanimous for Council): No reason here to depart from conventional approach of construing the documents to identify a clear offer and acceptance, but acknowledges the possibility of departing in exceptional types of contracts that do not fit easily into the normal analysis of offer and acceptance " may be prepared to sell and request for formal application : Fatal and make it impossible to construe letter as a firm contractual offer *Note: Look at all the facts In Storer agreement existed due to it going further Would a reasonable person in the offeree s position view that an offer was intended and would be binding upon agreement?! Offer existed: " Advert was not a promise/offer (i.e. Was a mere puff they did not intend to be 1

2 During the last epidemic of influenza many smoke balls were sold and in no case was the disease contracted by those using the balls 1000 is deposited with the Alliance Bank, Regent St, showing our sincerity in the matter Carlill used the smoke ball as directed and contracted the flu Carlil Claimed for the 100, but Carbolic Smokeball Co refused to pay and argued that there was no contract o Offer: Refer to findings o Intention: No intention to be legally bound o Acceptance: Refer to findings o Consideration: Refer to findings o Certainty: Offer terms (i.e. the advert) too vague and open ended MacRobertson Miller Airline Services v Commissioner of State Tax (WA) MM s practice was to first quote the fare and availability of seats and then to issue a ticket in return for the fare Ticket contained conditions giving MM the right to cancel a flight or a booking without incurring any liability bound): Clearly an offer and not a puff due to the deposit to Alliance Bank " Too vague: Advert was not too vague " No time limit: Time limit would be by reference to a reasonable time or during use " No means of checking or monitoring use " No offer can be made to the world at large: Possible to make offer to the public at large! Acceptance existed: Carlill did not communicate acceptance: Accepted by performance! Consideration existed: No consideration moved from Carlill: Use of smoke ball constituted benefit to D and detriment to P! HCA Finding (Unanimous): Ticket did not record the terms of an agreement, but rather the terms of an offer which was subsequently accepted by conduct! Approach (Barwick CJ): " Sweeping exemption left no room for obligation to carry the passenger " Passenger makes the offer by presenting at the airport, and airline accepts by carrying (i.e. ticket is an invitation to treat)! Approach (Stephen J): Ticket constitutes an offer by the airline capable of acceptance or rejection by the passenger when he/she has had reasonable opportunity to read the condition (i.e. ticket only records terms of an offer)! Approach (Jacobs J) Obiter: When the person who purchases the ticket is not the customer, there will be 2 contracts " Executory agreement between purchaser of ticket and airline " Issue of ticket will constitute offer made to passenger which passenger can accept by presenting themself for travel OFFERS DISTINGUISHED FROM INVITATIONS TO TREAT Shop sales Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd Boots operated a self service shop Items on shelve that required the supervision of Pharmacists before sale Pharmacist at cash register! Goods on shelves cannot be considered an offer: Customers are entitled to return/exchange product they have selected back onto shelf Customer makes offer to purchase at register 2

3 Electronic Transactions (Victoria) Act 2000, s 14B (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 (2) Subsection (1) extends to proposals that make use of interactive applications for the placement of orders through information systems! Has to be explicitly addressed to the other party! Contract formed between a natural person and an automated system or between 2 automated systems cannot be valid! Where a natural person makes an input error in the course of the transaction and system provides no way to rectify the error, the error maker is able to withdraw that part of communication provided that it is done as soon as possible if they have not received any benefits from the other party " Not the right to rescind the contract Auctions Bid is the offer and anything preceding that amounts to Invitation to Treat and the fall of the gravel is acceptance AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 Auction was not advertised as being without reserve Auctioneer announced that the property is on the market which has the same effect as stating that there is no reserve! Announcement that auction was held without reserve does not alter the general rule: Holding an auction without reserve did not constitute an offer and did not bind the vendor to sell to the highest bidder Tenders Tenders are offers and anything preceding them amounts to Invitations to Treat Exceptions: Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 Harvela and Outerbridge were invited to submit tenders for the purchase of shares Successful tenderer would gain control over the company Letter stipulated: we bind ourselves to accept the highest offer complying with the conditions of the tender Harvela tendered to purchase shares for $2.175m and Outerbridge tendered to purchase shares for $2.1m or $101,000 in excess of any other offer which you may receive Vendor accepted Outerbridge s offer, but Harvela claimed that it could purchase shares for $2.175m Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 Invitation for companies to run simulation situation CAA and tenderers signed two documents! Approach (Peter Gibson J) (Trial Judge): Invitations to submit tenders amounted to an offer capable of acceptance by submission of the highest bid " Tenders were described as offers " Vendor promised to accept highest bid : Constitutes an offer an vendor has to accept the highest bid (i.e. implied term not to accept referential bid)! Approach (House of Lords): Invitation of referential bids were dependent on the presumed intention of the vendor " Terms were inconsistent in the current case! Approach (Finn J): Civil Aviation Authority governed by two process contracts : Signature of letter for participation in tender & Contract for request of tender " CAA was obliged to conduct tender process 3

4 o Signature of letter for participation in tender o Contract for request of tender CAA did not meet terms of letter for participation, which Hughes claimed constituted a breach in accordance to contracts " CAA did not meet it own terms for the invitation to participate in tenders (i.e. invitation can be a contract) CISG: Offer Article 14 A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal TERMINATION OF AN OFFER Withdrawal or revocation Can occur at anytime before acceptance and is effective when it is communicated to the offeree *Note: Promise to keep an offer open for specified period is not binding and can be revoked at any time prior to the expiration of the period, unless the promise is supported by consideration (i.e. option) Goldsbrough Mort v Quinn (1910) Grantor gave option holder an option to purchase land within a week in exchange for 5 shillings Grantor purported to repudiate offer before the week was up Mobil Oil v Wellcome Intl Pty Ltd Announcement by Mobil to franchisees that if scored >90% in Circle of Excellence program for 6 years would be entitled to free extra years on franchise Ps (franchisees) proceeded to get such scores Mobil revoked the offer and terminated the program after 4 years Ps commenced action against Mobil Oil! High Court : Offeree paid for option to have one week to consider offer, so offeror could not withdraw before expiration of the promised period! Approach (Griffith CJ &O Connor J): Option was a contract of sale conditional upon it being contract exercised in specified period! Approach (Isaac J): Option was a preliminary contract to hold open an offer to sell the property (i.e. contract to sell is a separate contract)! Mobil entitled to revoke unilateral offer although performance had commenced: Revocation can only be prevented if there is implied ancillary unilateral contract in which the offeror promises not to revoke once the offeree commences performance *Note: Possible for P to seek injunction preventing revocation of offer or damages for breach of contract of process CISG: Revocation of Offer Article 16 (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. (2) However, an offer cannot be revoked (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is! Opposes the Common Law 4

5 irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. Rejection & Counter-Offer Stevenson, Jaques & Co v McLean (1880) LR 5 QBD! Approach (Lush J): Mere enquiry (i.e. Agree to 346 buy, but an enquiry is possible) By telegram (dated Saturday 27 September) D " Telegram at 9.42am was not a rejection of offered to sell iron to P for 40s., nett cash, open the offer but a mere inquiry about whether till Monday the terms could be modified On Monday morning P sent telegram to D asking " Although McLean was at liberty to revoke whether D would accept forty for delivery over the offer before Monday finished, that was two months, or if not, longest limit you would not effective until it reached the plaintiffs. allow D did not respond to the telegram and later that day sold all warrants to another party D sent a telegram to P at 1.25pm on the Monday advising all warrants had been sold Prior to receiving that communication, P sent a telegram to D at 1.34pm advising acceptance of offer (P s acceptance of offer) CISG, Article 19 (1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer. (2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance. (3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.! When you add things to the initial offer, it is a counter offer LAPSE AND DEATH OF OFFEROR Offer will be available for stipulated period and will lapse within reasonable time if there is no said period *Note: Death of an option holder does not prevent option from being exercised and will be exercised by option holder s representatives unless it is a personal service 5

6 Fong v Cilli (1968) 11 FLR 495 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 Deathbed granting of an option by Mr Laybutt for $10 on $42,000 property to sell his property to oil company, Amoco Option specified to be exercised by giving notice of exercise to grantor or his agent but did not specify an agent and that payment of the deposit was to be made to me, that is, Mr Laybutt Amoco sought to exercise the option after Laybutt s death by giving notice to his widow, the executrix, prior to probate being granted Sent a cheque for $4,200 to the solicitors acting for the deceased estate! Approach (Blackburn J): Offeree cannot accept offeror s offer after offeror s death if they knew of the death before the purported acceptance! Option was not validly exercised: " Agreement required the notice to be given to me, that is the deceased Mr Laybutt " As the notice was not given to the Public Trustee (Laybutt s successor), it was not correctly served and was therefore not effectively executed " Agreement required payment to the grantor, his successors and assigns (i.e. payment to the solicitors did not meet requirement) FAILURE OF CONDITION AND CHANGED CIRCUMSTANCES Neilsen v Dysart Timbers Ltd [2009] NZSC 43; [2009] 3 NZLR 160 Dystart obtained judgment against Nielsen for $315,000 under guarantee given by Nielsen for their company Nielsens disputed liability under guarantee and applied for leave to appeal Nielsens offered to pay $250,000 for full satisfaction of their debt and Dystart s solicitors were uged to obtain urgent instructions from their client 3 hours after leave for appeal was granted, observing the possible risks of the leave, Dystart accepted offer Neilsens claimed that offer was no longer available for acceptance! NZ Supreme Court 3-2 : Offer was still available for acceptance (i.e. Fundamental/important change of circumstances required to terminate offer) *Note: Doctrine of frustration If item was destroyed, so contract was frustrated " If there is an implied condition to the offer and the condition does not occur, then the offer will be terminated " Was the right to appeal a change of circumstances?: Did not terminate the offer, so may it does not meet the threshold *Note: Threshold to terminate an offer is very high (i.e. need to be tampered goods) 6

INTRODUCTION TO CONTRACT LAW

Contract A INTRODUCTION TO CONTRACT LAW What is a contract? A contract may be defined as: An agreement or set of promises that the law will enforce. A contract is a legally binding agreement, and thus