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Chapter 3: Formation of contract Part B: The law of obligation Chapter 3: Formation of contract 2
CHAPTER GUIDE Nature of a simple contract Offer and invitation to treat The termination of an offer acceptance The need for consideration The doctrine of privity The presumptions relating to intention to create legal relations 3
Formation of a contract offer Acceptance Consideration Capacity intention 4
3.1 definition A contract can be described as a legally binding agreement-enforceable in law A standard form contract is set out in pre-printed form by one party, usually a large organisation which has sufficient economic muscle to be able to impose its own terms on the other party. There will be no scope for negotiation of the terms and therefore at least that part of contract will automatically be in writing. 5
3.1 Formation of contract 1 Analyse the nature of a simple contract Simple contracts require no formality such as the need to be written or formally completed. In order to form a contract the five essential features must be present. a) Offer b) Acceptance c) Consideration d) Intention to create legal relation e) Capacity 6
3.2 The meaning of an offer and distinguish it from an invitation to treat Define an offer -A definite promises to be bound by specific terms -Cannot be vague -Can be in any form -Can be made to a particular person, a class of persons or the whole world at large -Carlill v Carbolic Smoke Ball Co 7
3.2 Define Invitation to treat This is merely something that acts as an inducement to encourage another person to make an offer 1) Most public advertisements(patridge v Crittenden 1968) 2) Shop windows displays (Fisher v Bell 1960) 3) Goods on shop shelves (Phar society of GB v Boots Cash Chemists 1953) 4) Catalogues, prospectus and tender, auction advertisement 8
3.2 Distinguish the meaning of an offer and an invitation to treat In this case the pleas of the defence, amongst which were that their newspaper advert was merely an ITT, were undermined by the following facts: a) The wording was too precise to be deemed an ITT b) The advert was addressed to the world at large, not Mrs Carlill, hence worldwide offers are possible. c) Money on the table signaled intention d) Unilateral acceptance was possible by Mrs Carlill. Waiving the need for her to communicate her acceptance of the offer 9
Tan writes to Yun stating that he will sell his car to him for 10,000.At the same time, Yun writes to Tan stating that he will buy his car for 10,000 Which of the following statements applies this situation? A There is a binding agreement due to the postal rule B There is a collateral contract C There is neither an agreement nor a contract 10
3.2 Termination of an offer Termination Rejection Counter offer Lapse of time Revocation Death Condition 11
3.2 Termination of an offer a)express rejection-saying no b)counter offer-hyde v Wrench Through this should not be confused with a mere request for information per Stevenson v Mclean c)lapse of time either: express Implied-Ramsgate Hotel v Montefiore 12
d) Revocation subject to the following: It is open to the offer or to revoke his offer at any time before acceptance. He may do this, even if he has already stated a period for which the offer will remain remain open.-routledge v Grant It must be actually received by the offeree- Byrne v Van Tienhoven It communication may be via a reliable third party- Dickinson v Dodds 13
e)death The death of the offeror will bring an end to the offer. However, if the offer is accepted in ignorance of the offeror s death, there will be a binding contract, provided the obligations are not personal to the offeror Bradbury v Morgan 1862.Death of the offeree terminates the offer. f) Conditions An offer may be conditional. If the condition is not satisfied, the offer is not capable of acceptance. 14
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