Copyright Guy Harley 2004 Law of Contract. Copyright Guy Harley 2004 Contract An agreement between two or more persons that will be enforced by law

Copyright Guy Harley 2004

Law of Contract


Contract An agreement between two or more persons that will be

enforced by law May be

In writing Oral Partly in writing and partly oral

Contracts need not be in writing (some exceptions)


Analysing a Contract

Is there a contract?

What are the terms?

Is it valid & enforceable?

Has it been discharged?

Has there been a breach?


Six Elements1. Offer

2. Acceptance

3. Intention to create a contract

4. Consideration

5. Contractual Capacity

6. Certainty

The elements are not always clear


Law of Contract

Offer


Offer Specific legal meaning An offer exists only where a reasonable person would

conclude on the facts that the person was willing to be bound in a court of law

Distinguish Indication of future conduct Invitation to treat Negotiations


Indication of Future Conduct A mere statement of a present intention to do something

in the future is not an offer Harvey v Facey (S&O p 70) Australian Woollen Mills v Commonwealth (S&O p70) Harris v Nickerson (S&O p71) Kelly v Caledonian Coal Co (S&O p71)


Invitation to Treat An invitation to

Negotiate Make an offer

is not an offer but an “Invitation to Treat” The distinction lies in the objective intention of the

person making the offer or invitation to treat.


Invitation to Treat Retail Displays Catalogues Advertisements Auctions Tenders


Retail Displays Fisher v Bell (S&O p72) Pharmaceutical Society v Boots (S&O p73) In most circumstances the retailer does not make an

offer by displaying goods for sale, even where the goods are marked with a price


Catalogues Grainger v Gough (S&O p73) If the catalogue publisher was making an offer then it

would be bound by every acceptance even if their stock was exhausted.


Advertisements Depends on circumstances Carlill v Carbolic Smoke Ball Co (S&O p74) But note legislative restrictions e.g. Trade Practices Act


Negotiations An offer will not arise merely because parties have

reached agreement on one aspect of the deal Implied (or express) understanding that parties not

bound until formal contract executed Heads of Agreement


Fate of An Offer Withdrawn by offeror Accepted by offeree Rejected by offeree Lapse due to passing of time Lapse due to death of offeror or offeree Lapse due to failure of condition precedent


Withdrawing an Offer Cannot be withdrawn after accepted A contract is made when the offer is accepted The withdrawal of the offer must be communicated to the

offeree Special cases:

Unilateral offers Options cannot be withdrawn


Withdrawing an Offer Before Acceptance Generally, an offeror may withdraw an offer at any time

before acceptance Routledge v Grant (S&OR p78) But, options cannot be withdrawn

an option is a separate enforcable obligation and cannot be withdrawn

Exists where the offeree has given consideration to keep an offer open

Goldborough Mort v Quinn (S&OR p 80)


Withdrawal Must be Communicated Offeror must let the offeree know that the offer is

withdrawn Byrne & Co v Tienhoven & Co S&OR p79) Offeror does not have to communicate withdrawal

personally Would a reasonable person in the position of the offeree

conclude that the offer had been withdrawn?


Withdrawing a Unilateral Offer Involves a unilateral promise e.g. Carllil v Carbolic

Smoke Ball Co (S&O p74) If offeree has acted on the promise then offeror cannot

withdraw until offeree has had a reasonable opportunity to complete


Rejecting an Offer Once rejected, an offer cannot be accepted May be rejected expressly or by implication Implied

Offeree’s actions are inconsistent with an intention to accept


Rejecting An Offer (Cont.) A counter offer is a rejection

Hyde v Wrench (S&O p81) Any material alteration is a counter offer

Restating the offer when accepting is not a counter offer

Turner Kempson v Camm (S&O p81)


Rejecting An Offer (Cont.) A counter offer is a rejection (cont.)

Asking for clarification is not a counter offer

Reasonable person test examine all circumstances


Lapse of Offer Due to death of either party unless

An option; and Does not involve personal skill or service by the

deceased Due to failure of condition precedent Due to time

Express time limit Otherwise, offer remains open for a reasonable time


Lapse of Offer (Cont.) Due to time (Cont.)

What is reasonable time depends on: Method by which offer made Nature of the transaction Terms of Proposed Contract Actions of parties between offer &

purported acceptance Intimations as to time by offeror


Law of Contract

Acceptance


Accepting the Offer Only person to whom the offer was made may accept Acceptance must be final & unqualified Must be communicated to the person who made the

offer (some exceptions)


Accepting the Offer (Cont.) Acceptance must be final & unqualified

“Subject to Formal Contract” – 3 possibilities

1. There is a contract & one of terms is that documentation be prepared

2. There is a contract but nothing can happen until contract prepared


Accepting the Offer (Cont.) Acceptance must be final & unqualified (cont.)

“Subject to Formal Contract” (cont.)

3. There is no contract

Masters v Cameron (S&OR p82) Plastyne Products v Gall

Engineering (S&OR p83) Communications after acceptance are irrelevant


Acceptance Must be Communicated Silence does not amount to acceptance Acceptance by large companies

Who must receive acceptance? Depends on intention of parties Acceptance usually occurs when the communication

is received in the ordinary course of business or would have been received if ordinary course of business were followed


Acceptance Must be Communicated Internet

Electronic Transactions Act

Receipt occurs when it enters the addressee’s designated information system

Otherwise, when it comes to attention of addressee


Acceptance Must be Communicated Express Communication of Acceptance is not necessary

where Implied from past dealings between parties Industry custom Acceptance indicated by conduct Unilateral contracts Postal rule applies


Acceptance Must be Communicated The Postal Rule

Applies where offeror has expressly or impliedly accepted post as the means of communication of acceptance

Acceptance occurs at time of posting not receipt Applies to all situations where non-instantaneous

communications are used Often determines jurisdiction Berinkibon v Stahag Stahl (S&OR p 86)


Acceptance Must be Communicated Mode & timing of acceptance must conform to offeror’s

requirements BUT, nominating a mode of acceptance may not set the

only mode of service Spectra v Pindari

Agent of the person to whom the offer was made may accept on their behalf Powell v Lee (S&OR p87)


Has an offer been made? No Contract

Did the offeror intend to revoke

the offer?

Did the offeror communicate revocation?

Has the offer lapsed?

Has acceptance been received by

the offeror?

Was acceptance made under the

postal rule?

Contract

No

No

No

No

No

Yes

Yes

Yes

No

Yes

Yes

Yes


Exercises


Exercise 3.25

Marlena offered to sell her car to John for $78,000.

John said that he would “need some time to think about it” and would “get back” to her.

After 3 days John called and said that he accepted Marlena’s offer.

Marlena informed John that, since she hadn’t heard from him, she had sold the car to Kirsten.

Advise John as to whether he is entitled to the car


Exercise 3.27

Baral Ltd is a building materials wholesaler. On Monday, the company received by post an order from a regular customer requesting 3 tonnes of cement gravel to be delivered according to the terms on the order form on Monday week. The company immediately signed the order form and posted back its confirmation that it would deliver on the order as requested. It was usual for these companies to deal by post.


Exercise 3.27 (cont.)

The confirmation of order form would usually have taken only a few days to reach the customer but unfortunately, due to a postal strike, the customer did not receive acceptance of the order until Friday night, by which time it had already ordered the same materials from an alternative wholesaler (assuming that Baral Ltd was unwilling or unable to deliver) and faxed Baral Ltd cancelling the order (the fax arrived on Friday night but was not read by anyone from Baral until Monday morning). The customer is refusing to accept the gravel or pay for it. Advise Baral Ltd.


Exercise 3.30

Same facts as before Would your answer change if:

The order had been received by email and the return email confirming the order had been slow to reach the customer due to a network failure; only reaching the server on Monday night: by which time the customer had faxed a cancellation of the order

The order had been received by fax and the return fax had not been read by the customer until after the customer had revoked the order by fax

Documents

Copyright Guy Harley 2004 Law of Contract. Copyright Guy Harley 2004 Contract An agreement between two or more persons that will be enforced by law