!!!!!! LAW204!!CONTRACT!LAW!NOTES!!!

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1 !!!!!! LAW204!!CONTRACT!LAW!NOTES!!!

2 A IN-DEPTH NOTES FOR CONTRACT FORMATION SIDE NOTE LOOK AT ESTOPPLE WHEN THERE IS NO CONISDERATION!! Offer + acceptance = agreement Offer and acceptance = objective test! OFFER 1. CONTRACT FORMATION 1.1 AGREEMENT CASE FACTS/NOTES PRINCIPLE Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd [2010] EWCA Civ 1331 n/a To determine if an offer is made = ask whether [the offeree] (having the knowledge of the relevant circumstances which [the offeree] had), acting reasonably, would have understand that [the offeror] was making a proposal to which he intended to be bound in the event of an unequivocal acceptance (objective test) Banks v Williams (1912) 12 SR (NSW) 382 Gibson v Manchester City Council [1979] 1 All ER Council sent a letter to Gibson saying it may be prepared to sell to Gibson the property he was leasing - Letter included the price, terms and conditions upon which a sale would take place - The letter invited Gibson to make a formal application to buy by completing an enclosed application form - Council then cancelled the scheme to sell - Court held the letter was an invitation to treat - Hence the application by Gibson was just an offer, not acceptance (i.e. look for promissory intent, willingness to be bound) (wouldn t be willing to be bound to an unclear statement, eg I offer to sell my car needs to be more clear, include price, model of car etc) If the offeree learns the offer from an unauthorised person, there is no offer to accept may be prepared to sell = invitation to treat Harvey v Facey [1893] AC Harvey said will you sell us bumper hall pen? - Facey said lowest price for bumper hall pen, 900pounds the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at the lowest price

3 - Harvey replied saying he agreed to buy - Facey refused - Court held it was not an offer, the reply was merely the supplying of information Stating lowest price is not an offer? (p.s. invitation to treat = invitation to negotiate/ invitation to make an offer they lack promissory intent!) Circulars, catalogues and advertisements Partridge v Crittenden [1968] 2 All ER 421 Spencer v Harding (1870) LR 5 CP 561 Lefkowitz v Great Minneapolis Surplus Store 86 NW 2d 689 (1957) (American case) Carlil v Carbolic Smoke Ball Co [1893] 1 QB 256 (unilateral contract accepted by performance) Display of Goods Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB Advertisement = 1 black lapin stole $1.00 first come, first served - Lefkowitz was the first - Store refused, said ad could only be taken up by women - Court found the ad was an offer and he had accepted it (the store could not impose new conditions on the offer) - Placed ad offering 100pounds reward to anyone who used the medication for 2 weeks, and still contracted influenza - The ad stated that the company deposited 1000pounds in a bank account as evidence of its security - Mrs Carlill used it for 8 weeks, and got influenza - Carbolic argued that the ad was not an offer - Court found it was an offer - The necessary will or intention to make the advertisement an offer rather than a mere puff was to be found in the fact the company set up a bank account to meet possible claims as a sign of its sincerity - Legislation said certain drugs could only be sold if sale was effected by, or under the supervision of a registered pharmacist GENERAL RULE = circulars, catalogues and advertisements setting out price lists or promoting the sale of products are seen as invitations to treat. (Rationale for this p37 para 4.17) The use of the word offer in an advertisement, does not mean that there is an offer at law Where the offer is clear, definite, and leaves nothing open for negotiation, it constitutes an offer Ad, catalogue etc = an offer, if there is clear promissory intent (clear will or intention) (ad can amount to an offer if they are clearly intending to be bound) Goods on display = invitation to treat! (General rule)

4 - Boots was a self serve pharmacy - Customers selected drug then went to check out where the registered pharmacist handled the transaction - Pharmaceutical society said this method of selling breached the legislation - Court found that the display was an invitation to treat - Therefor the sale contract was entered into under the supervision of the registered pharmacist (taking it to counter = offer, then pharmacist accepted the offer) Rationale! if it was an offer, then after customer makes a selection a contract would arise and they wouldn t be able to change their mind (criticism pg if it was an offer, acceptance actual would be when they presented it at the checkout ) Auctions Payne v Cave (1789) 100 ER 502 Sale of Goods Act 1923 (NSW) s 60 Action Sales In the case of a sale by auction: (1) where goods are put up for sale by auction in lots, each lot is prima facie deemed to be the subject of a separate contract of sale, (2) a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner: until such announcement is made any bidder may retract his or her bid, (3) where a sale by auction is not notified in the conditions of sale to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid or to employ any person to bid at the sale, or for the auctioneer knowingly to take any bid from the seller or any such person: any sale contravening this rule may be treated as fraudulent by the buyer, (4) a sale by auction may be notified in the conditions of sale to be subject to a reserved price, and a right to bid may also be reserved expressly by or on behalf of the seller, (5) where a right to bid is expressly reserved, but not otherwise, Acceptance of an offer made by a bidder is by the fall of the hammer (request for bids = invitation to treat; bids = offer) Same as Payne case (above) - (2) a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner: until such announcement is made any bidder may retract his or her bid, Bidder can withdraw an offer anytime before its accepted,

5 AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 Harris v Nickerson (1873) LR 8 QB 286 the seller, or any one person on the seller s behalf, may bid at the auction. (it follow from the payne v cave that ) Auctioneer doesn t have to accept any particular bid and furthermore, is not bound to accept the highest bid (unless read barry v davis) Calling/advertising an auction = invitation to treat Harvela Investments Ltd v Royal Trust Co of Canada (CI) [1986] 1 AC 207 Barry v Davies [2001] 1 All ER 944 (if its an auction with no reserve price is the auctioneer obliged to accept the highest bid?) Issues with this case pg 41 (is there consideration?) Text says: IF THERE IS A RESERVE PRICE! once the reserve price had been reached, the position of bidders becomes the same as at a without a reserve price auction and the auctioneer is liable, pursuant to Barry v Davis if he doesn t accept the highest bid (p ) (say: once reserve price has been reached it is likely that Barry v Davis will apply because ) - Advertising an auction was not an offer to hold an auction - THEREFORE cancellation of the advertised auction creates no contractual liability upon the auctioneer If the auction is conducted on the basis that the auctioneer has stated that the highest bid will be accepted, then the highest bidder will get the contract When there is NO RESERVE PRICE! the holding of the auction constitutes an offer by the auctioneer to sell to the highest bidder and that the acceptance of the offer is made by the highest bidder. (diff from harris v nickerson because in this case the offer was made when the property was put up for sale without a reserve price, rather than when the auction was advertised) Tenders (call for tenders that, in special circumstances are an offer, give rise to a unilateral contract) (which is usually a contract to consider all properly submitted tenders (aka process contract)) Meudell v Mayor of Bendigo (1900) 26 VLR 158 Harvela Investments Ltd v Royal Trust Co of Canada (CI) [1986] 1 AC 207 The invitor (person calling for tenders) can accept or reject any tender. (This implies that the tender is an offer?) If the invitor states that he/she will accept the best tender, then he/she must do so, and a contract arises with

6 Blackpool & Fylde Aero Club v Blackpool Borough Council [1990] 3 All ER 25 Transit New Zealand v Pratt Contractors Ltd [2002] 2 NZLR 313 J & A Developments v Edina Manufacturer Ltd [2006] NIQB 85 - The invitation to tender was detailed and specific in the procedure for, and form of, the submission of tenders. - One clause in the call for tenders stated that no tender which is receive after the last date and time specified shall be admitted for consideration - Blackpool & Fylde submitted their tender correctly and on time - Due to administrative error, their tender was not considered - They lost the chance of being a successful tenderer - Court said that the call for tenders was an offer to consider all duly submitted tenders - Blackpool v Fylde had accepted by submitting their tender correctly - Contractual right to be considered along with all other conforming tenders - Get damages for loss of opportunity (i.e. damages for amount spent on tender?) the best tenderer. Where facts are similar to this case eg. Rigorous and formal procedure for submission of tenders (which requires consdierable time and resources) the call for tenders constitutes an offer to consider all duly submitted tenders. (Which is accepted by correctly submitting ur tender) - Process contract arises (contract to consider proper tenders in a particular way) Relevant Factors to the decision: - Number of parties invited to tender was small (6) - Club had held concession for 8 years, had interest and relationship with council - Council had laid out specific standing process rules for the tender process - Specified the deadline, that late tenders not be accepted led to a commercial assumption that the process would be abided by (McGrath J) Where the request makes no express commitment concerning the manner in which tenders received will be addressed, that may indicate the invitation was no more than an offer to receive them. Principles in blackpool case are not confined to government or other public authorities calling for tenders. Also include private sector entities. Roback v University of British Columbia (2007) 277 DLR (4th) 601 Dockpile Pty Ltd v Subiaco Redevelopment Authority [2005] WASC 211 Standing offers (info on p 43 para 4.39) In this case, court found, on the facts, that there was a process contract, with an implied term that the invitor would not accept a tender that didn t respond to certain guidelines Didn t extend to advertisement regarding a teaching position at a university (calling for resumes) Whether or not a PROCESS CONTRACT exists and, if it does, the nature of its terms, depends on the intention of the parties Standing offer arises when one person states his/her willingness to provide certain goods or services to another over a specified time period (eg. Stationer may provide a business all its stationary needs for 12 months) Stationer makes an offer Acceptance occurs each time an order for stationary is made, creating individual contracts each time an order is made

7 Colonial Ammunition Co v Reid (1900) 21 LR (NSW) no obligation on the business to make any orders at all, and it is free to purchase stationary from other suppliers. Range of offerees 1. A single person 2. Specified persons 3. A class of persons defined by some description 4. The world at large (carlil is authority) T W Hedley (Investments) Pty Ltd v Richardson Plant Hire Pty Ltd [2005] QSC 99 Only offerees are entitled to accept the offer Even though offer in Carlil v Carbolic Smoke Ball Co were open to the world contracts only arose with those who actually performed the conditions of the offer. TERMINATION OF OFFERS Lapse of time (of specified time, or reasonable time) Late acceptance can be seen as counter offer (i.e. time has passed, cant accept, so you make an offer to buy) Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd (1988) 14 NSWLR 523 Ballas v Theophilus (No 2) (1957) 98 CLR 193 Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1969] 3 All ER 1593 Pg (imp) - take the view that the offer is deemed to be refused (rather than being withdrawn) after reasonable time lapses. If no set time for acceptance is stipulated in the offer, it lapses after the expiration of a reasonable time In this case the terms of the offer were considered relevant in determining what was a reasonable time (Given that its deemed to be refused!) subsequent conduct of the parties is relevant to the question how long the offer should be treated as remaining open Rejection (Once an offer is rejected, it s terminated, it cannot be subsequently accepted) Hyde v Wrench (1840) 49 ER Wrench offered to sell land for 1000 pounds - Hyde responded by offering to buy for Wrench refused - Hyde then purported to accept Wrench s original offer to sell for Court held that no contract arose because the original offer came to an end one the counter offer was made - There was no offer left to accept Counter offer = Rejection of offer (NOTE - don t confuse a counter offer with a request for further info) (can use this as authority that once an offer is rejected, it cant be subsequently accepted) Stevenson Jacques & Co v McLean (1880) 5 QBD McLean offered to sell goods at a set price Request for further information is not rejection! (it doesn t terminate the

8 Powierza v Daley [1985] NZLR 588 (NZ case) Revocation Offeror withdraws their offer - Stevenson responded by seeking credit terms - McLean treated this as a rejection and sold to someone else - Stevenson subsequently accepted before the offer was formally withdrawn and claims there is a contract - Court held there was a contract because it was a mere inquiry offer) (its not a counter offer) (Cooke J) The line between rejecting an offer and merely inquiring as to a possible variation is a fine one, but the basic test is the effect on a reasonable person standing in the shoes of the offeror (i.e. objective test) look at the words objectively Promise to keep the offer open for a certain time is unenforceable if no consideration is given (gratuitous promise) if consideration is given (options fee) then an option contract arises (contract to keep the offer open till certain time). - Notes for option contract (2 views) below the table of revocation cases - May be able to get relief based on equitable estopple (even if no consid was given to keep offer open) RULES OF REVOCATION 1 - can only revoke before acceptance - Byrne v Van Tienhoven (read below) 2 - revocation must be communicated - financings ltd v stimson case - NOTE - postal acceptance rule does not apply to revocation! (Byrne v Van Tienhoven) (below) - with 2 way instantaneous communication eg face-to-face/over phone communication occurs when offeror speaks to offeree Dickinson v Dodds (1876) 2 Ch D 463 Financings Ltd v Stimson [1962] 3 All ER 386 Byrne v Van Tienhoven (1880) - Offeree posted acceptance after offeror posted letter withdrawing offer (but b4 the withdrawal letter was received) - The offeree, assuming they had a contract, re-sold the goods to a third party - Offeror said there was no contract offeree sued for damages for non delivery of goods - Court held there was a contract - The withdrawal was ineffective because the withdrawal letter If an option has not been granted, a statement or promise to keep the offer open is unenforceable because the offeree has not given consideration for it. (gratuitous promise) (For situations not involving options or equitable estopple) for revocation of an offer to be effective, it must be communicated to the offeree Postal rule (like postal acceptance rule) does not apply to communication of revocation (therefore, revocation is only communicated when its received, not when its posted) (Lindley J) both legal principles and practical convenience require that a person who as accepted an offer not known to him to have been revoked, shall be in a position safely to act upon the footing that the offer and acceptance constitute a contract

9 Dickinson v Dodds (1876) 2 Ch D 463 Patterson v Dolman [1908] Entores v Miles Far East Corporation [1955] Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbh [1983] 2 AC 34 was not received before the acceptance was posted (acceptance was valid as soon as posted cause of postal acceptance rule but withdrawal is only communicated when its actually received) - Dodds made offer to sell land to Dickenson, b4 Dickenson accepted he sold to Allan - Dickenson was made aware of the sale to Allan, by Barry (Dickenson s agent) - Dickenson tried to accept dodds offer - Court said he couldn t accept because he knew the offer had been revoked, because he knew of the sale to Allen (it was revoked b4 Dickenson accepted it) - also authority for: Withdrawal must be communicated BEFORE valid acceptance Revocation doesn t have to be communicated by the offeror, does not matter who communicates it, so long as the information given to the offeree is reliable - if offeree knows (from reliable source) the offeror sold to someone else the offer has been revoked If offeree doesn t know that the offeror sold to someone else (or bought from someone else?), then there is no revocation and acceptance would be valid. (therefore the offeror is liable for breach of contract) (Textbook says) UNLESS offeror makes clear that its open for acceptance only by the first person to notify of acceptance (authority for this?) If the offerors words are drowned out by aircraft noise or spoken into a telephone after a line has gone dead or become so indistinct that the offeree does not hear them, there is no communication If a talax message is received by an offeree (which is a commercial organisation) communication occurs when the Talax was received irrespective of whether it was read or not, since it s the responsibility of such an offeree to promptly handle messages received by his office Is this authority for communication occurs when, in all the circumstances of the case, a reasonable offeree would have accessed the message received Schelde Delta Shipping BV v Astarte Shipping Ltd (The Pamela) [1995] 2 Lloyd s Rep 249 A telexed or faxed message received during non business hours will be deemed to have been received by the offeree at the start of the next

10 Electronic Transactions Act 2000 (NSW) (p 48 footnotes - for diff states) business day for communication via s 13(3) - if the offeree has designated that he/she has an address, communication occurs when the offerors enters the offerees information system s 13(4) - if offeree has not designated that he/she has an address, communication occurs when the actually comes to his/her attention Revocation of unilateral offers: Problem! what if they already started to perform (below) Shuey v United States 92 US 73 (1875) Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR It was alleged that Mobil oil made an offer of benefits to its franchisee, if they reached certain levels of sales over a certain period of time - B4 that time period elapsed, the alleged offer was withdrawn - Although the court found that there was actually not such offer it sill dealt with the issue of withdrawal in such circumstances - Such a withdrawal was found valid, because the increased level of sales (achieved by the franchisee in performing the terms of the offer) was of benefit to the franchisee - Therefore it wasn t unjust for Mobil oil to revoke If the publication of the revocation notice is just as broad and given the same notoriety as the offer, the offer will be regarded as validly withdrawn. (Communicate revocation same way as initial offer was communicated) This is so, even if a person who was aware of the offer did not actually know of the notice withdrawing the offer (it doesn t matter if they don t know its been revoked) In some cases the offeror could withdraw an offer even though the offeree has started, but not completed, performance in particular where what the offeree has done is of benefit to the offeree itself. - Could still revoke even if there was an implied condition in the offer not to (but then offeree could have action for breach of implied contract) - could revoke even if principles of equitable estoppel were present (but then offeree could seek relief upon the estoppel). Mobil oil also says in the circumstances of a particular case, it may be appropriate to find that the offeror had entered into an implied ancillary contract not to revoke, or that the offeror is estopped from falsifying an assumption that the offeree will not be deprived of the chance of completing the acceptance (In England cant revoke the offer

11 once the offeree has started performance pg 49 (4.62) Soulsbury case) Prior to this case vievers v cordingley could not revoke once the offeree started performance, and that the offeree would be given reasonable time to complete performance, and thereby accept (the mobil case is an exception?) 2 views of an option contract - conditional contract (when the option is exercised the main contract becomes unconditional) - Irrevocable offer (the main contract comes into existence on the date of the date of the exercise of the option) pg 46 (para ) Whether the option is a conditional contract or an irrevocable offer depends on the relevant facts and circumstances. - Hughes v St Barbara Ltd [2011] WASCA 234: (Pullin JA) it must always depend upon the proper construction of the option agreement under consideration in each case. Failure of condition An offer may be made subject to an express or implied condition that a certain state of affairs remains unchanged until acceptance. If it changes, the offer lapses. Example - Express condition buy land subject to development approval - Implied condition purchase car only if it remains in the same condition Financings Ltd v Stimson [1962] 3 All ER 386 Nielsen v Dysart Timbers Ltd [2009] 2 NZLR 160 Bartolo v Hancock [2010] SASC 305 Offer to purchase car lapsed after the car was significantly damaged and its value substantially depreciated (there is a Q as to the level of importance the change in the state of affairs must be b4 a lapsing condition can be IMPLIED) An offer to settle a dispute before the hearing of it commenced, lapsed once the hearing commenced and could not be accepted by the offeree after five days of the hearing had taken place If the state of affairs changes the offer lapses Pg 50 (4.65) Condition that an offer lapse upon the occurrence of a particular change of circumstances should be implied into the offer only if it is objectively apparent that the willingness of the offeror to be bound by the offer has been fundamentally undermined by the change of circumstances condition implied is that the offer will lapse upon the occurrence of a fundamental change of circumstances. (the basis upon which the offer was made has fundamentally changed) pg 50 - para Court should give less weight to the occurrence of an event which the offeror must have had in contemplation when making the offer, about which he chose to be silent (silence when the offer was made, or when it could have been revoked, may indicated that the offeror did not regard such matter as fundamental to the continuance of the offer.) In cases in which there is no express statement of such relevant circumstances, it may be that the objective meaning of the offer leads to the conclusion that the offer is only open for a very limited period of time and lapses if not accepted

12 The circumstances were such that the reasonable meaning of the offer when made was that it was to be accepted before the hearing commenced or else it would lapse. within that period In order to avoid doubt in situations of possible changes in circumstances after the offer has been made, an offeror should give careful consideration to the circumstances that would lead to a lapse on the offer and clearly stipulate that the offer will lapse if such circumstances subsequently arise. This would avoid the issue of whether there is an implication that an offer will lapse if circumstances change and the further issue of whether the changed circumstances were sufficiently fundamental to lead to the conclusion that the offer had lapsed as a result. Death of offeror or offeree Dickinson v Dodds (1876) 2 Ch D 463 If the offeror dies before acceptance and the offeree knows of the death, the offeree cannot accept the offer Death would terminate the offer if it were an offer for performances of personal services. But if the offer can be performed by the offerors legal representative, then the offer could be accepted eg. offer to sell land. ACCEPTANCE Acceptance brings about consensus ad idem (meeting of the minds) (more on consensus as idem pg 51) Acceptance must be in reliance upon the offer (i.e must be responding to the offer) - cant do act, then see offer and then point back to earlier act and say that it was an acceptance R v Clarke (1927) 40 CLR Crown offered a reward for info leading to the arrest and conviction of 2 murderers - Clarke, who knew of the offer, came forward with information that lead to arrest & conviction, thereby satisfying the conditions of the reward - But Clarke gave the info solely for the purpose of clearing himself (as he was arrested and charged as one of the murderers) - HC said it is not an absolute proposition of law that one who, having the offer before him, acts as one would be naturally inclined to act, is deemed to have acted in reliance upon that offer. It is an inference of fact and may be excluded by contrary evidence - Prima facia presumption was rebutted, there was no valid acceptance (p52) For an offer to be accepted, the offeree s acceptance must be in reliance upon the offer - i.e. the offeree must have had knowledge of the offer This case also stands for! Prima facie, knowledge of the offer and performance of what the required to accept the offer is valid acceptance - but this can be REBUTTED by evidence to the contrary (as was done in this case) (this is a rebuttable presumption) Acceptance must correspond with the offer

13 - must be on the same terms as the offer - i.e cant be conditional - cant add terms or alter terms (Otherwise its not an acceptance it s a counter offer the offeror may accept it, or treat it as rejection) Turner Kempson & Co Pty Ltd v Camm [1922] VLR Camm sent a letter accepting an offer from turner to sell him raspberry s - Adding that he wanted them delivered in three lots of 5 tons each, approx. 10 days between each delivery - Court held this was a counter offer not acceptance Dunlop v Higgins (1848) 9 ER Accepted the offer, with a request they be delivered a certain date - This was a valid acceptance, because it was clear that the acceptance was not conditional upon the offeror agreeing to deliver the goods on that date Boreland v Docker [2007] NSWCA 94 Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 Carter v Hyde (1923) 33 CLR Carter offered to sell a hotel, including furniture this being the furniture that was in the hotel at the date of the offer - Hydes acceptance expressly referred to furniture in the hotel at the date of acceptance - Carter said this was a counter offer - HC said there was valid acceptance since statement of the date of acceptance in relation to furniture was simply an error which could not preclude a reasonable person coming to the conclusion that the acceptance was anything other than a full and unconditional acceptance of the terms of the offer Acceptance must correspond with the offer (same terms as the offer) It is not a counter offer, and is still acceptance, if it was clear that the acceptance was not conditional upon the offeror agreeing to the additional term There may be valid acceptance if the deviation from the terms of the offer is solely in favour of the offeror A response to an offer that does not introduce any new terms, but only such terms as would reasonably follow consequentially on the agreement is not a rejection i.e. if the term merely makes express what would otherwise be implied: Lark v Outhwaite [1991] An acceptance that does not coincide with the terms of the offer due to some error or misdescription by the offeree when the acceptance is made, does not necessarily mean that there has not ben a valid acceptance - the diff term was simply an error which could not preclude a reasonable person coming to the conclusion that the acceptance was anything other than a full and unconditional acceptance of the terms of the offer Acceptance can be express of implied silence/no response is not acceptance (and offeror cannot say it will be) But acceptance can be through conduct (act in a way consistent with agreement eg deliver the goods) Felthouse v Bindley (1862) 142 ER - Felthouse offered to buy horse An offeror cannot stipulate that no