overview of contract law

Law and Ethics

Overview of Contract Law

Definition of Contract

Bilateral Contracts

- Both parties are bound

from beginning. Eg.

housepainting

Unilateral Contract

- One party bound: offer

made to world at large

e.g. dog lost poster.

4 Essential Elements

1.?

2.?

3.?

4.?

4 Essential Elements

1.Agreement

2.Intention

3.Consideration

4.Certainty

Agreement: Offer and Acceptance

What is an offer?

Who are the offeror and offeree?

What are types of offers?

1st element: Agreement: Offer and Acceptance

What is an offer?

Who are the offeror and offeree?

What are types of offers?

Distinguishing offers from invitations to treat

What is the difference between

them?

Distinguishing offers from invitations to treat

An offer can be converted into

contract by acceptance but an

invitation to treat can be

acceptance or rejection.

How do we determine that?

1.Is the statement clear,

definitive, and unambiguous?

2.Is it complete?

Types of invitations to treat

1. Advertisements - Partridge bird case / Grainger winelist

case

2. Display of goods for sale - Boots case / Fisher knife

case / Pimm coat case

3. Quotations / Price lists - Norgren copyright case

4. Auctions - Harris and Nickerson case

Advertisement:

Carlill v Carbolic

Smoke Co.

Exception to the

rule.

Can you recall

the facts of the

case?

Rules of acceptance

1. Acceptance must be unqualified / Counter-offers create a

new term (Neale v Merrett)

2. Acceptance must be communicated - Silence not acceptance

(Russell v Baird oatmeal case) also contained in S.47 of

Sale of Goods and Supply of Services Act 1980.

3. Silent acceptance permissible in existing arrangement eg.

Netflix

Unilateral contracts - offer accepted by performance (eg.

reward for information) Billings v Arnotts case

Acceptance and Postal Rule

When does the acceptance take place?

a) Is it when the person signs the contract?

a) Is it when they post it?

a) Is it when the other party receives it in the post?

Acceptance takes

place on date,

time and posting

of the contract

- Adams v

Lindsell

Two

prerequisite

conditionsPostal Acceptance

1) Postal acceptance must

either be a reasonable

or agreed method of

comms at the time

2) The acceptance letter

must have the correct

postage and be properly

addressed

This only applies to acceptance, not

revocation.

Termination of an Offer

1) Rejection or counter-offer made by

offeree

2) Unreasonable lapse of time between

the offer being made and accepted

3) Revocation or withdrawal of the

offer by the offeror

4) Death of one party

5) Before performance in unilateral

contract

1. Rejection and Counter-Offer

Rejection may be express or implied

Implied rejection = counter offer

Hyde v Wrench - farm selling case / price drop

2. Lapse of Time

Offer may state expiry date

Ramsgate Hotel v Montefiore - Share purchase case

Also remember offer of price change if you leave shops.

3. Revocation

Bilateral contract, offeror can revoke before acceptance

Offer can be revoked by performance (e.g. for sale sign in

garden)

Routledge v Grant - house sale 6 week case

Dickinson v Dodds - house sale / sold house to other party

4. Death

Re: Whelan

Offeree dies then offer is automatically terminated

Offeror dies, offer terminated unless accepted by the offeree

before hand - except where they knew of death occurring.

5. Before performance in Unilateral Contract

Can be terminated any time before performance takes place

Pavey v Matthews builder renovations reasonable pay case

ALSO

Offers to world at large must be withdrawn from world at

large eg. Shuey case.

2nd Element: Intention to Create Legal Relations

Strong presumption by courts that businesses entering

contract intend to be legally binding.

The opposite is the case for domestic and social

arrangements.

Domestic and Social Agreements

1. Contracts between husbands and wives

Balfour v Balfour - Ceylon - health case

Merritt v Merritt - note family home legal sep / diff outcome

1. Parents and children

Jones v Padavatton

Commercial Agreements

Automatic presumption legally binding

Rose and Frank Co v JR Compton Bros - clause didn’t intend to

be legally binding

Edwards v Skyways - pilot redundancy case - ex gratia

Capacity - Who cannot sign a contract?

1. Minors

Under 18s

To protect the minor from inexperience and those who

unknowingly enter contracts

EXCEPTIONS

- Contracts for necessaries (Nash v Inman)

- Beneficial contracts for service (Chaplin case)

Contracts always considered void

Infants Relief Act 1874

- Contract for repayment of money or loan

- Contract for goods other than necessaries

- All accounts, bills / invoices stating money is owed

Contracts valid unless repudiated

- Taking a lease out on property

- Offering to buy shares

- Entering into a partnership

- Taking out an insurance policy

- Marriage settlement

2. Persons of Unsound Mind

Contracts valid unless person can demonstrate

- He was unable to understand the nature of the contract

- Other party knew of his incapacity

Where person has permanent mental incapacity, contract law

treats the the same as minors;

Permitted to create contract for necessaries and beneficial

contracts of service

3. Drunkards

Contracts valid unless person who was intoxicated can show

- They were so drunk they didn’t understand

- The other party knew of drunken incapacity

White v McCooey case - Galway Races - verbal - pub case

No evidence to suggest plaintiff was drunk

4. Convicts

Forfeiture Act 1870 - historically not possible

O’Conor v. Coleman - solicitor couldn’t recover fees

This changed in Criminal Law Act 1997 so convicts have full

contractual rights subject to normal prison rules

5. Companies

Designated activity companies and PLCs have limited

contractual capacity

Can create contracts w/ objectives of company stated in MOA

Otherwise ultra-vires

Private companies limited by shares has unlimited contractual

capacity

3rd Element: Consideration

QUID PRO QUO - something for something

Exchange of consideration - groceries customer’s

consideration is money, grocer’s is providing the goods

Executed - defined promise eg. coffee is £3

Executory - promise in return for a promise - that is perform

acts in future (eg. Tesco delivery).

Rules of Consideration

Consideration must be sufficient not adequate

- Thomas v Thomas / house rent £1 a year dead husband case

/ consideration has economic value

- Chapell v Nestle / record chocolate bar case wrappers

were consideration

Consideration must not be past

- Re McArdle / house repairs, dead husband, children not

obliged to pay

- Morgan v Rainsford

Rules of Consideration

Consideration must be more than what the party already has to

do.

- Collins v Godfroy case / solicitor providing expert

testimony

Contents of a Contract Terms - doctrine of freedom to contract

Express

- written or oral

Implied

- custom O’Connaill v Gaelic Echo journo’s hols case

- legislation / employment law

- courts (The Moorcok) - constitution (Glover employment

case)

Contents of a Contract Conditions and Warranties

Conditions: very important terms, if breached party can

terminate without notice e.g. Arcos wood length case,

Poussard v Spiers operetta case missed opening night

Warranties: less vital terms, nreach doesn’t entitle to

repudiation

Bettini v Gye opera case missed rehersals

Schuler AG v Wickman sales rep tool case

Contents of a Contract Innominate Terms

Not always easy to determine

IF breached, injured party may claim damages and depending on

nature may be able to repudiate.

Hong Kong Fir v Kawasaki - vessel hired ready to go, wasn’t

ready, took 4 months, court said damage wasn’t seriuos enough

Irish Telephone Rentals v Irish Civil Service Building Soc.

Phones case - court ruled innominate term

Exemption Clauses - Exclusion and Limitation

Clauses

Exemption clauses attempts to exempt or restrict ability

under the contract

E.g. accountant example

Use of exemption clauses subject to disapproval by the courts

b/c used by more powerful party

Rules determined by the Court to keep an eye on this

Incorporation of Exemption Clauses

Only valid where

1) Signature - L’Estrange v Graucob - cigs vending machine V

2) Valid notice - Chapelton v Barry UCD deckchairs case

3) In course of dealing - J Spurling v Bradshaw; no explicit

clauses but still valid orange juice case

Construction of Exemption Clauses

1. Contra Proferentum Rule

Where meaning is unclear, they will interpret meaning to be

least ambitious for party taking case. // Houghton v

Trafalgafr Insurance Co. car insured to carry load for that

which it was constructed

2. Main Purpose Rule

Exemption clause can’t be used for anything other than main

purpose // Sze Hai Tong case.

Construction of Exemption Clauses

3. Fundamental Breach Rule

Exemption invalid if party seeking has committed breach of

contract. Clayton Love v B&! Transport

4. Exclusionary Rule

Exemption clause that attempts to exclude consumer liability

is invalid. Ronan v Mindland Railway Company - cattle

delivery company - damage.

Legislation restricting exemption clauses

Sale of Goods and Supply of Services Act 1980 S. 12-15

Business can’t exempt liability where goods not fit for

purpose or merchantable quality

Contract two businesses can exempt provided they’re fair and

reasonable

Burden of reasonableness falls on person seeking to benefit

Legislation restricting exemption clauses

European Communities (Unfair Terms in Consumer Contracts)

Regulations 1995- 2013

EC Directive obliged Ireland to provide protection for

consumers

Regs define unfair term that causes “significant imbalance in

parties.”

If court determines the clause to be unfair, it will be void

and incapable of enforcement.

Question:

Explain the

differences, with

references to case law

between offers and

invitations to treat.

Question:

List four ways in

which an offer

can be terminated

and provide

examples.

Question:

Explain the

differences between

conditions,

warranties,

innominate terms.

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