Contract Law

Introduction A contract is formed when one of the parties has to accept an offer made by the other. Here, David places an advertisement in the local newspaper of a reward, ? 1000 for the safe return of each of his six cats. This shows he is making an offer to all the readers of the Daily Bungle. An offer is defined as follows: “An offer is a statement of the terms upon which the offeror is prepared to BE BOUND IF ACCEPTANCE IS COMMUNICATED WHILE THE OFFER REMAINS ALIVE1. ” The critical aspect of the definition of an offer is the will or intent of the offeror to be bound in contract by the terms of the offer.

A statement that lacks such will is not an offer, but an invitation to treat. In Gibson v Manchester City Council, the statement “the corporation may be prepared to sell the house to you…” was found to be a mere invitation to treat whereas the statement “we are willing to sell” in Storer v Manchester City Council was said to be an offer. The general rule for advertisements is that they are considered as an invitation to treat, as mentioned in the case of Partridge v Crittenden [1968] 2 AII ER 421, HC QBD. The case is that “the appellant placed an advertisement in a magazine: “Bramblefinch cocks and hens, 25s. [25 shillings = ? 1. 25] each”.

He was charged with offering for sale of a wild bird, contrary to statute, but the High Court said he must be acquitted. The advertisement was an invitation to treat, not an offer to sell; with limited stick the advertiser could not reasonably intend to be bound to sell to all those who might accept. (If the advertiser indicated 1 Nelsen v Dysart Timbers Limited [2009] NZSC 43 at [25] 2 that was willing to sell only to the first person accepting, then there should BE NO PROBLEM. )”2 THE READERS OF THE DAILY BUNGLE HAVE A CHOICE WHETHER or not to be bound by the terms of the contract, which is the search for his cats.

That being said, the advertisement placed by David is an invitation to treat. For an agreement to form into a contract, acceptance has to be communicated. Acceptance is an unconditional positive response towards AN OFFER3. IN OTHER WORDS, ACCEPTANCE MUST BE AN UNQUALIFIED AND UNEQUIVOCAL ASSENT TO ALL THE TERMS OF THE OFFER4. IN PETER’S CASE HOWEVER, there was no form of acceptance because although he found Nimmie, he wrote a letter to David negotiating the terms of the offer, i. e. “would you pay ? 1,500? ” The act of writing a letter to David falls under the postal rule, which stands for the proposition that an offer is accepted upon mailing of the offer.

This rule began with the case of Adams v Lindsell [1818] 106 ER 250. It states: “The defendants mailed their offer to sell on THE 2ND OF SEPTEMBER, 1817. THE DEFENDANTS’ LETTER WAS MISDIRECTED AND DID NOT REACH THE PLAINTIFFS UNTIL 7PM, FRIDAY THE 5TH. THAT NIGHT, PLAINTIFFS accepted the defendants’ offer and mailed it directly back in a timely MANNER. IT WAS RECEIVED BY THE DEFENDANTS ON THE 9TH BUT THEY EXPECTED TO 2 Taken from http://www. lawteacher. net/contract-law/essays/advertisement-was-an-invit ation-to-treat-not-an-offer-to-sell-contract-law-essay. php.

3 UNLOCKING CONTRACT LAW 3RD EDITION BY CHRIS TURNER, PAGE 29 4 Taken from http://www. insitelawmagazine. com/ch4acceptance. htm , part 4. 1. 3 in bold 3 RECEIVE IT ON THE 7TH AND IN THE MEANWHILE, HAD OFFERED TO SELL THEIR WOOL TO another person. Plaintiffs brought suit for the losses they sustained by not RECEIVING THE FLEECE. ”5 HOWEVER, THERE WAS NO INDICATION AS TO WHETHER THE letter sent by Peter was ever received by David. Furthermore, the content of the letter indicated changes to the original terms of the offer, which would constitute a new offer. This is known as a counter-offer and thus the original offer is terminated.

The next person to have found a cat is Hannah, a pet shop owner. She finds Timmie, takes care of it and feeds it, but while running an urgent errand, she mistakenly returns Simmie, another cat, to David but she incurs ? 20. This event is similar to the Eurymedon case, where “a contract for the carriage of a machine by ship to New Zealand provided that the owners of the goods could not sue the carriers or stevedores unless any claim was brought within one year of the action giving rise to the cause of action. The stevedores were independent contractors who were engaged to load and unload the ship by the ship owner. A stevedore damaged the

machine whilst unloading it. The owner of the machine brought an action against the stevedore after the limitation period specified in the contract. The stevedore sought to rely upon the clause in order to escape liability. The owner of the machine argued that the stevedores could not rely on the clause as they were not privy to the contract and had not provided 5 Taken from http://www. casebriefs. com/blog/law/contracts/contracts-keyed-to-murphy/t he-bargain-relationship/adams-v-lindsell/ 4 them with any consideration. It was held that the stevedores had provided consideration in the form of services of unloading the machine.

Relying on the case of Scotson v Pegg, there is nothing to prevent consideration owed to a 3rd party being valid consideration for a new promise to another party. Therefore the stevedores had protection from the limitation CLAUSE. THE CLAIMANT’S ACTION WAS UNSUCCESSFUL. ”6 HOWEVER, THERE WAS NO consideration given in Hannah’s case nor was there damage to David’s property (his cat), there was only an exchange in property. Next, Jonathan encounters Minnie who is sleeping under his car. The fact that he does not read the Daily Bungle makes him unaware or ignorant of the offer, the ? 1000 reward.

The case of acceptance in ignorance of offer can be seen in the case of R v Clarke [1927] which took place in Australia. It stated that “the Government offered a reward for information leading to the arrest of certain murderers and a pardon to an accomplice who gave the information. Clarke saw the proclamation. He gave information which led to the conviction of the murderers. He admitted that his only object in doing so was to clear himself of a charge of murder and that he had no intention of claiming the reward at that time. He sued the Crown for the reward. The High Court of Australia dismissed his claim.

Higgins J stated that: “Clarke had seen the offer, indeed; but it was not present to his mind – he had forgotten it, and gave no consideration to it, in his intense 6 Taken from http://www. e-lawresources. co. uk/New-Zealand-Shipping-v-Satterthwaite. ph p 5 excitement as to his own danger. There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing WHETHER IT IS DUE TO NEVER HEARING OF IT OR FORGETTING IT AFTER HEARING. “”7 Despite that, Jonathan returns the cat to David on the same day.

There is consideration seen here. Consideration is where each party must give something in return for anything that is gained from the other party. As stated by Lush J in Currie v Misa [1875], ‘A valuable consideration, in the sense of law, may consist either in some right, interest, profit, or benefit accruing to the one party or some forbearance, detriment, loss, or RESPONSIBILITY, GIVEN, SUFFERED, OR UNDERTAKEN BY THE OTHER’8. THE ACT OF Jonathan giving Minnie to David brings benefit to the promisor, but Jonathan’s ignorance of the reward brings loss upon him. Unfortunately because of Jonathan’s ignorance, he cannot accept the offer. He was unaware of the ?

1000 reward because in order for him to accept the invitation to treat, there would have to be ‘consensus ad idem’ (meeting of the minds). A street sweeper named Richard has also found one of David’s cats, Bimmie. He finds the cat with severe burns and is injured and so takes it to the vet and returns Bimmie to David later that day and incurs ? 60. This is also similar to the Eurymedon case due to the damaged property (injured cat). Richard has provided good consideration by returning 7 Taken from http://www. lawteacher. net/contract-law/cases/agreement-cases. php 8 Taken from Learning The Law: Contract Law Study Manual LL. B by Meera Mahendranathan and Murali Kandasamy, page 15 6.

Bimmie to David but suffered the loss of ? 60 to treat the injured cat. He has also accepted the offer by returning the cat; this shows that Richard has chosen to be bound by the terms of the advertisement and the invitation to treat has now become a contract. Reference to Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 can be made here as performance can amount to the acceptance of an offer. In that case, the act of the buyers of the smoke ball using it according to the instructions supplied is already a form of acceptance that is only valid for a unilateral contract.

However, the advertisement of the smoke ball is considered to be an offer to the world at large because a contract could be made with anyone who came forward and performed the act of acceptance. The judgment given by Lord Justice Lindley for this case goes as follows: ‘It is said that [the offer] is not made to anyone in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anyone who performs the conditions named in the advertisements, and anybody who DOES PERFORM THE CONDITIONS ACCEPTS THE OFFER.

’9 After that, David makes a revocation of the advertisement by placing a notice at the community hall. Subsequently, his wife, Sheeba, found and returned Dimmie but David refuses to pay her. This showcases the freedom of contract and also that it is possible to withdraw an offer at any time before it is accepted. A good example would be the case of 9 UNLOCKING CONTRACT LAW, 3RD EDITION BY CHRIS TURNER, PAGE 23 7 Routledge v Grant [1828] 4 Bing 653. It is stated that “Grant had offered his house for sale on the understanding that the offer would remain open for six weeks only. Grant in fact took the house off the market before the six-week period ended.

The court held that his actions were legitimate BECAUSE AT THE TIME OF HIS REVOCATION THERE HAD BEEN NO ACCEPTANCE. ”10 Another case that dictates the acceptance of an offer through performance is Brogden v Metropolitan Railway [1877] 2 App. Cas. 666 – “The claimants were the suppliers of coal to the defendant railway company. They had been dealing for some years on an informal basis with no written contract. The parties agreed that it would be wise to have a formal contract written. The defendant drew up a draft contract and sent it to the claimant. The claimant made some minor amendments and filled in some blanks and sent it back to the defendant.

The defendant then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose and it was questioned whether in fact the written agreement was valid. The courts held that the written contract was valid despite no communication of the acceptance. The acceptance took place by performing the contract without any objection as to the TERMS. ”11 SO, DAVID DOES HAVE A RIGHT TO REFUSE THE REWARD. 10 UNLOCKING CONTRACT LAW, 3RD EDITION BY CHRIS TURNER, PAGE 25 11 Taken from http://www. e-lawresources. co.

uk/Brogden-v-Metropolitan-Railway. php 8 The final person to find one of David’s cats is Danny. He finds Eimmie in his garden and is on his way to return it when he bumps into Joshua who tells him that David is “no longer gathering the cats for the competition”. In other words, Joshua is a third party that communicates the withdrawal of the reward to Danny.

A similar situation can be derived from the case of Dickinson v Dodds [1876] 2 ChD 463, where “Dodds has offered to sell HOUSES TO DICKINSON AND THE OFFER WAS TO REMAIN OPEN UNTIL 9AM ON 12TH JUNE, HAVING BEEN MADE ON 10TH JUNE. DICKINSON DID IN FACT INTEND TO accept the offer but did not do so immediately.

When Berry, an apparently reliable mutual acquaintance of both parties, notified Dickinson that Dodds had withdrawn the offer, Dickinson had then sent an acceptance, but by the time this was received the house was already sold. Dickinson claimed an unlawful breach revocation and breach of contract.

The court held that the revocation was acceptable and valid. Berry was shown to be A MUTUAL ACQUAINTANCE THAT BOTH COULD RELY. ”12 DANNY, THOUGH HAVING Eimmie, does not yet show acceptance of an offer because there is no statement as to whether or not Danny returns the cat to David.

Joshua, however, seems to be a reliable acquaintance of both David and Danny. Therefore, the withdrawal of the advertisement is legitimate. Conclusion Conclusively, only Richard is liable for ? 60 due to his care for David’s cat. The cat, though injured, is still safe and alive. The others are not liable for 12 UNLOCKING CONTRACT LAW 3RD EDITION, BY CHRIS TURNER, PAGE 26 9 the full ? 1000 reward due to lack of communication of acceptance as well as compliance to all the terms of the offer.

Therefore, for there to be a contract, four elements have to be taken into account – existence of an offer, communication of an acceptance which will then lead to an agreement, form of consideration and lastly the intention to create legal relations between the offeror and the offeree. Another element that is commonly undermined is the state of mind of both the offeror and the offeree.

“The objective approach must, however, take account of all the evidence. Even if A has acted in a way which would reasonably cause B to assume a particular state of mind as regards an agreement, if B’s behaviour, objectively viewed, indicates that such an assumption has not BEEN MADE BY B, THE COURTS WILL TAKE ACCOUNT OF THIS.

”13 13 The Modern Law of Contract by Cavendish Publishing, page 24 part 2. 3. 2 10 BIBLIOGRAPHY 1. Nelsen v Dysart Timbers Limited [2009] NZSC 43 at [25] 2. Taken from http://www. lawteacher. net/contract-law/essays/advertisement-was-a n-invitation-to-treat-not-an-offer-to-sell-contract-law-essay. php 3. UNLOCKING CONTRACT LAW 3RD EDITION BY CHRIS TURNER, PAGE 29 4. Taken from http://www. insitelawmagazine. com/ch4acceptance. htm , part 4. 1. 3 in bold 5.

Taken from http://www. casebriefs. com/blog/law/contracts/contracts-keyed-to-mu rphy/the-bargain-relationship/adams-v-lindsell/ 6. Taken from http://www.e-lawresources. co. uk/New-Zealand-Shipping-v-Satterthw aite. php 7. Taken from http://www. lawteacher. net/contract-law/cases/agreement-cases. php 8.

Taken from Learning The Law: Contract Law Study Manual LL. B by Meera Mahendranathan and Murali Kandasamy, page 15 11 9. UNLOCKING CONTRACT LAW, 3RD EDITION BY CHRIS TURNER, PAGE 23 10. UNLOCKING CONTRACT LAW, 3RD EDITION BY CHRIS TURNER, PAGE 25 11. Taken from http://www. e-lawresources. co. uk/Brogden-v-Metropolitan-Railway. ph p 12. UNLOCKING CONTRACT LAW 3RD EDITION, BY CHRIS TURNER, PAGE 26 13. The Modern Law of Contract by Cavendish Publishing, page 24 part 2. 3. 2.

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