英国合同法复习资料

Lecture 1 Offer and acceptance I

What is an offer?

Key principles: An offer is a statement which objectively indicates that the offeror is prepared to contract on specified terms.

Harvey v Facey [1893] A.C. 552 p7.

Fact: P: ―Will you sell us Bumper Hall Pen? Telegraph lowest cash price‖ D: ―Lowest price –900 pounds‖P:―We agree to buy for the sum of 900 pounds asked by you‖ D refused to sell. Held: D is not b ound. P‘s first telegram asked two questions and D answered only the second. D had made no promise, express or implied to sell. A statement of the minimum price at which a party may be willing to sell will not amount to an offer.

Gibson v Manchester City Council [1979] 1 WLR 294 p7.

Fact: Council had a policy of selling council houses to tenant. ―T he council may be prepared to sell the house to you‖ and invited Gibson to fill in a form. Gibson filled in but council refused to sell.

Held: No contract. The words ―may be prepared to sell‖ are fatal to this. The Council did not make an offer but only invited offers and the tenant made a firm offer which was rejected by the Council.The tenant‘s application was an offer rather than an acceptance.

Recognized instances of invitations to treat

Advertisements

Key principles: Advertisements are normally invitations to treat because it is clear that the advertiser does not intend to be bound.

Partridge v Crittenden [1968] 1 W.L.R. 1204

Fact: Concerns a newspaper advertisement that certain wild birds are available for sale for 25s each. No details as to quantity.

Held: The ad did not amount to an offer to sell.

Exception: if the advertisement is unilateral

Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 p35.

Fact: In a newspaper ad, D stated that it would pay ￡100 to any person who became ill with flu after using the smoke ball as directed and that to show its sincerity it had deposited ￡1000 in a bank account. P used the smoke ball, but nevertheless caught flu.

Held: the ad was an offer to the world which was accepted by P when she used the smoke ball as directed. She was entitled to the ￡100.

Shop displays

Key principles: the display of goods for sale on a supermarket shelf is an invitation to treat, and the other to buy is made by the customer presenting the goods to the cashier.

Fisher v Bell [1961] 1 QB 394

Facts: where the defendant was charged with the offence of offering for a sale a flick knife. Held :As a general rule, display of flick knife in a shop window is an invitation to treat and not an offer.

Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 p17. Facts: the D displayed medicines on their shelves which under statute must be sold under the supervision of a registered pharmacist. In this shop, the pharmacist could refuse to allow the purchase at the cash desk.

Held: Putting up goods on the shelves of a self-service shop was an invitation to treat. There was no sale until the shopkeeper accepted the customer‘s offer to buy. The main practical

consequence of this are under the law of contract, shops are not bound to sell goods at the price indicated and a customer cannot demand to buy a particular item on display.

Tenders

Key principles: a circular inviting the submission of tenders is normally an invitation to treat and the submission of the tender is the offer.

Spencer v Harding (1870) LR 5 CP 561 p9.

Facts:The defendants have a circular whereby to offer for sale some stocks by tender and to be sold at a discount in one lot. The plaintiff argued that the defendant has to sell to the highest tender.

Held: For the defendant. An offer for sale in the tender is just an invitation to treat. There is nothing to suggest that the defendant will accept the highest bid.

City Polytechnic of Hong Kong v Blue Cross (Asia Pacific) Insurance Ltd [1995] 2 HKLR 103 Facts: City Polytechnic, through an insurance broker, invited tenders from several insurance companies to cover its employees‘ medical and life insurance.

Held: It was confirmed that an invitation to tender is no more than an intention to receive bids. Situations where there is a contractual obligation to accept the most competitive bid

Key principles: an invitation to submit tenders may amount to an offer where it is clear that the seller intends to sell to the highest bidder. (The invitation to tender may amount to an offer of the unilateral type if that is that was intended)

Harvela Investments v Royal Trust of Canada [1986] AC 207 p13.

Facts: D1 invited P and D2 to make sealed competitive bids for a parcel of shares, stating ―we bind ourselves to accept (the highest) offer. P bid $2175000 and D2 bid $2100000 or $101000 ―in excess of any other offer. D1 believed that they were bound to accept the bid of D2, as being the highest bid.

Held: the invitation to tender amounted to an offer to sell to the highest bidder, however, the

―referential‖ bid of the type adopted by D2 was not permissible in a transaction of this kind and therefore D1 was bound to accept the P‘s bid. (the third party‘s bid was a referential bid and was not a valid offer.)

An obligation to consider tenders

Key principles: an invitation to submit tenders is an offer to open and consider all confirming tenders together.

Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] 1 WLR 1195 p11. Facts: D invited tenders for a concession to operate pleasure flights from the local airport. The letter stated that ‘No tender which is received after the last date and time specified‘ would be considered. P‘s tender was posted by hand in the D‘s letter box before the deadline expired, but D‘s staff did not empty the box and the P‘s tender was not considered.

Held: all tenders submitted which complied with the tendering procedure would be opened and considered together with the other conforming tenders. The invitation to tender was a unilateral offer was accepted by the submission of a tender. The court held that the defendants were contractually bound to consider the P‘s tender.

Auctions

Key principles: an ad for an auction is normally an invitation to treat, and the bid is the offer which can be accepted by the auctioneer. In an auction, the auctioneer‘s request for bids is an invitation to treat and each bid is an offer

Harris v Nickerson (1873) LR 8 QB 286 p24.

Facts: D auctioneer advertised that certain items including ?office furniture‘ were to be sold at an auction sale. The P attended the sale to buy the office furniture, but it was withdrawn from the sale. The P claimed that the ad amounted to an offer to sell the furniture which he accepted by attending the auction.

Held: the ad did not amount to a promise to sell the furniture.

Auctions without reserve

Warlow v Harrison (1859) 1 E & E 309 p21.

Facts: the D auctioneer advertised a sale without reserve. When P tendered to D the money as the price of the goods, D refused to receive the money or to deliver the goods.

Held: Where an auction is made ―without reserve‖, the au ctioneer is under a contractual obligation to sell it to the highest bidder. An ad to hold an auction ―without reserve‖ would amount to an offer to sell to the highest bidder.

Legislation: Sale of Goods Ordinance S60

?In the case of a sale by auction-

?(a) 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;

(b) 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 bid;

(c) where a sale by auction is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such 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;

(d) a sale by auction may be notified to be subject to a reserve or upset price, and a right to bid may also be reserved expressly by or on behalf of the seller.

Lecture 2: Offer and Acceptance

Unilateral Contracts: In a unilateral contract, the offeror performs his part of the obligation when he makes the offer and if the offeree wishes to enter into the contract, the offeree must perform his part. Examples of unilateral contracts: Reward cases; ―If‖ contracts

Key principles: acceptance of a standing offer occurs when an order is placed.

Great Northern Railway Co. v Witham (1873) LR 9 CP 16 p16.

Facts: P advertised for tenders for the supply of railway stores. D submitted a tender offering to provide the required articles for 12months. P placed orders, all of which were carried out except the last one. D argued that he was not legally obliged to supply the goods, and so was not in breach of contract.

Held: the agreement to supply for a year was a standing offer which was accepted each time an order was placed. A promise to supply as much as a buyer may order becomes binding upon the promisor when the buyer makes an acceptance. The court reasoned that the fact that the contract may have been unilateral in nature did not prevent it from being binding. [In terms of consideration, the redistribution of the pre-contractual risks was sufficient consideration for contract formation.

Offer in Unilateral Contracts

a. An offer can be made to an identified person or party

Great Northern Railway Co. v Witham (1873) LR 9 CP 16

b. An offer can be made to the public at large or to a particular class of persons.

Carlill v Carbolic Smokeball Co. [1893] 1 QB 256 p35.

Fact: The Carbolic Smoke Ball Company made a product called the "smoke ball". The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay ￡100 to anyone who got sick with influenza after using its product according to the instructions set out in the advertisement. And ￡1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter. Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used three times daily for nearly two months until she contracted the flu on January 17, 1892. She claimed ￡100 from the Carbolic Smoke Ball Company.

Held: Bowen J stated that a unilateral contract was not made with all the world, it is an offer made to the whole world and the contract was made with a limited portion of the public who came forward and perform the condition on the faith of the advertisement.

Acceptance in unilateral contract

In unilateral contracts, performance of the conditions of the offer amounts to acceptance; there is no requirement of actual communication.

Communication of acceptance

Key principles: in unilateral contracts, no need to communicate acceptance to the offeror.

The relevance of motive in acting on the terms of a unilateral offer

Key principles: motive of the offeree is irrelevant provided the offeree does what is required by the offer.

Williams v Carwardine KB (1833) 5 C&P 566 p41.

Facts: Plaintiff gave information not because of the reward but to ease her conscience.Walter Carwardine was murdered in Hereford. The plaintiff, Mrs Williams, gave evidence at the Hereford assizes against two suspects, but did not say all she knew. The suspects were acquitted. On April 25, 1831, the victim's brother and defendant, Mr Carwardine, published a handbill, stating there would be a ￡20 for...Whoever would give such information as would lead to the discovery of the murder of Walter Carwardine. In August, 1831, the Mrs Williams gave more information which led to the conviction of two men (including a Mr John Williams, the

plaintiff's husband). She claimed the reward. Mr Carwardine refused to pay. At the trial her motives were examined. It was found that she knew about the reward, but that she did not give information specifically to get the reward.

Held: P‘s motive is not material.The Court helds, that the plaintiff was entitled to recover the ￡20. The advertisement amounted to a general promise or contract to pay the offered reward to any person who performed the condition mentioned in it, namely, who gave the information.Two judges clearly stated that motives were irrelevant. Littledale J said, "If the person knows of the handbill and does the thing, that is quite enough." Patteson J said "We cannot go into the plaintiff's motives."

When the act was done in ignorance of the offer

Key principles: 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. Under the situation where the act was done in ignorance of the offer(completely don't know, forget and etc), there doesn't exist any acceptance, thus on contract will be concluded.

R v Clark (1927) 40 CLR 227 p41.

Facts: the offeree gave information in ignorance of the offer of the reward. The claimant wanted to compel the Crown to pay a reward it had offered for information leading to the conviction of a murderer. The claimant gave the information. But he gave it while he was under investigation himself for murder. He told the police "exclusively in order to clear himself". It was uncertain whether he was thinking about the reward at the time he coughed up the information.

Held: No contract. The acceptance must be communicated. 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…‖

Revocation of an offer in a unilateral contract

Key principles: once the offeree has begun to perform the terms of an unilateral offer, it could not be revoked by the offeror but it would cease to bind him if the offeree left it incomplete and unperformed, unless such performance is unnecessary. (Abbott v Lance (1860) Legge‘s New South Wales Report 1283)

Errington v Errington [1952] 1 KB 290 p45.

Facts: A Dad got a mortgage and bought a house for his son and daughter in law. He said if she paid the mortgage, the house would be theirs. They started to do so, and then split. The dad died. He left the house to his widow. She brought an action to eject the daughter in law.

Held: P acted on the promise. D cannot eject them in disregard of it. The father‘s unilateral offer could not be revoked after they had started to pay.He said there was no need to imply an obligation to complete the payments. The limit is where the daughter stops paying, and the father‘s estate has to pick up the bill. Then she would lose her right to stay. The couple were on a

license, short of a tenancy but a contractual, or at least equitable right to remain, which would grow into good equitable title as soon as the mortgage was paid.

When can the offeree claim the benefits promised by the offeror

Key principles: The reward or commission is only paid to the offeree once all the terms of the offer have been satisfied.

Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 p47.

Facts: P agreed with the D that if he introduced a purchaser who would buy Ds‘ two cinemas for at least ￡185000 each, then he would be paid a commission. Willing purchaser was found by the P but the D did not want to complete the transaction.

Held: P was not entitled to the commission because it is only payable on completion of sale. Lord Russel: the agent took the risk in the hope of a substantial remuneration for a comparatively small exertion.

Bilateral contract

Bilateral contracts: in bilateral contracts, there is an exchange of promises (offer and acceptance) The offer is made to an identified person or party.

Offer in bilateral contract

The offer is made to an identified person or party

Acceptance in Bilateral Contracts

Requirements of a valid acceptance

Key principles: the acceptance must be unconditional and unequivocal.(any change in the contract is not allowed generally Mirror rule)

In bilateral contracts, the acceptance of the offer must be communicated by the offeree or his agent. Actual communication is required here.

Examples of waiver of communication of acceptance

Where acceptance is made by post, the offeree doesn‘t have to have actual communication with the offeror

Silence

Key principles: silence cannot normally be prescribed as a mode of acceptance.

Felthouse v Bindley (1862) 11 CBNS 869 p50.

Facts: Uncle Paul Felthouse was a builder who lived in London. He wanted to buy the horse Sizing Europe off his nephew, John Felthouse. After a letter from the nephew about a previous discussion in buying the horse, the uncle replied saying, "If I hear no more about him, I consider the horse mine at ￡30 and 15s." The nephew did not reply. He was busy at auctions on his farm

in Tamworth. He told the man running the auctions, William Bindley, to not sell the horse. But by accident, Bindley did. Uncle Felthouse then sued Bindley in the tort of conversion - using someone else's property inconsistently with their rights. But for the Uncle to show the horse was his property, he had to show there was a valid contract. Bindley argued there was not, since the nephew had never communicated his acceptance of the uncle's offer.

Held: the nephew had not communicated his intention and had not done anything to bind himself, so there was no valid acceptance.Acceptance must be communicated clearly and cannot be

imposed due to silence of one of the parties. The uncle had no right to impose a sale through silence whereby the contract would only fail by repudiation. Though the nephew expressed interest in completing the sale there was no communication of that intention.

Exception: When silence would amount to acceptance

a.when the offeree has taken benefit under the contract

b.when the offeree agreed that his silence would constitute acceptance

see Re Selectmove Ltd. [1995] 1 WLR 474

Re Selectmove Ltd. [1995] 1 WLR 474

Facts: Selectmove Ltd owed the Inland Revenue substantial sums in outstanding tax and national insurance. The managing director, Mr ffooks, met with Mr Polland, from the Inland Revenue and said he would pay future tax as it fell due and the arrears at ￡1000 a month. Mr Polland said he would have to check and would contact the managing director if it was unacceptable. Selectmove Ltd heard nothing till a ￡25,650 notice came in and a threat of a wind-up petition. Mr ffooks subsequently claimed that the Revenue had said he could repay less. The High Court held that even if that were found to be true, Mr Polland had not bound the Revenue, and there was no consideration for the varied agreement anyway.

Judgment: Peter Gibson LJ (Stuart-Smith LJ and Balcombe LJ concurring) said that the House of Lords case, Foakes v Beer precluded any variation of the agreement to repay the debt without good consideration, despite the recent decision in Williams v Roffey Bros Ltd. Peter Gibson LJ state ‘it is clear… that a practical benefit of that nature is not good consideration in law’. He felt bound by Foakes and could not apply Roffey to leave it without any application, despite seeing the 'force of argument'. It is the offeree who waives his right.

c.when the offeree has accepted the offer by his conduct - See Brogden v Metropolitan Railway

Brogden v Metropolitan Railway

Facts: Mr Brogden, the chief of a partnership of three, had supplied the Metropolitan Railway Company with coals for a number of years. Brogden then suggested that a formal contract should be entered into between them for longer term coal supply. Each side's agents met together and negotiated. Metropolitan's agents drew up some terms of agreement and sent them to Brogden. Brogden wrote in some parts which had been left blank and inserted an arbitrator who would decide upon differences which might arise. He wrote "approved" at the end and sent back the agreement documents. Metropolitan's agent filed the documents and did nothing more. For a while, both acted according to the agreement document's terms. But then some more serious disagreements arose, and Brogden argued that there had been no formal contract actually established.

Judgment: The House of Lords (The Lord Chancellor, Lord Cairns, Lord Hatherley, Lord Selborne, Lord Blackburn, and Lord Gordon) held that a contract had arisen by conduct and Brogden had been in clear breach, so he must be liable. The word "approved" on the document with Brogden's name was binding on all the partners, since Brogden was the chief partner, even though the standard signature of ―B. & Sons‖ was not used. A mere mental assent to the agreement's terms would not have been enough, but having acted on the terms made it so. Lord Blackburn also held that the onus of showing that both parties had acted on the terms of an agreement which had not been, in due form, executed by either, lies upon person alleging such facts.

Communication of acceptance in Bilateral Contracts

Key principles: It must be by the offeree or his agent. Communication of acceptance by a third person whohas no authority to do so is not binding on the offeror

Powell v Lee [1908] 99 LT 284 p48.

Facts: The claimant applied for a job as headmaster and the school managers decided to appoint him. One of them, acting without authority, told the plaintiff he had been accepted. Later the managers decided to appoint someone else. The claimant brought an action alleging that by breach of a contract to employ him he had suffered damages in loss of salary.

Held: communication not valid. The county court judge held that there was no contract as there had been no authorized communication of intention to contract on the part of the body, that is, the managers, alleged to be a party to the contract.

Prescribed method of acceptance

Key principles: The method of acceptance prescribed by the offeror must be followed by the offeree. If he fails to do so, as a general rule, such acceptance does not give rise to an agreement. Exception

Key principles: Where no method of acceptance has been prescribed, the offeree must follow a reasonable method.

a)Where the parties are at arm‘s length, the offeree should follow the same method as used by the offeror to send his offer or more expeditious method.

b)Sometimes the method of acceptance prescribed may not be the sole method of acceptance. In that situation, an alternative method may be considered appropriate.

Manchester Diocesan Council of Education v Commercial & General Investments Ltd. [1970] 1 WLR 241 p68.

Facts: MD called for tenders relating to property. C&G submitted a tender (offer to buy). The tender stated that acceptance was to be notified to the person whose tender was accepted by letter sent ?by post addressed to the address given in his tender‘. MD decided to accept C&G tende r and sent their acceptance to the CG's solicitor, which was not the address given in the offer.

C&G knew of this acceptance.

Held: Clause 4 does not say that posting a letter addressed to the D shall be the sole permitted method of communicating an acceptance. The parties became contractually bound. The method of acceptance prescribed in the tender was not mandatory - here the offeror was made aware of the acceptance by an equally effective method and thus the acceptance was effective.

“The Postal Rule”:

Where post is the prescribed method for sending an acceptance or is reasonable to use post, the acceptance is deemed to be complete when the letter is posted.

Key principles: The offeror is bound by the acceptance even though the letter of acceptance is delayed or never reaches the offeror or is lost.

Adams v Lindsell (1818) 1 B & Ald 681

Facts: The case involved two parties in the sale of wool. On 2 September, the defendants wrote to the plaintiffs offering to sell them certain fleeces of wool and requiring an answer in the course of post. The defendants, misdirected the letter so that the plaintiffs did not receive it until 5 September. The plaintiffs posted their acceptance on the same day but it was not received until 9 September. Meanwhile, on 8 September, the defendants, not having received an answer by 7 September as they had expected, sold the wool to someone else. The defendants argued that there

could not be a binding contract until the answer was actually received, and until then they were free to sell the wool to another buyer

Held: Law J said that if that was true it would be impossible to complete any contract through the post; if the defendants were not bound by their offer until the answer was received, then the plaintiffs would not be bound until they had received word that the defendants had received their acceptance, and this could go on indefinitely.[1] Instead it must be considered that the offerors were making the offer to the plaintiffs during every moment that the letter was in the post. Then when the Offeree has placed his acceptance in the post there is a fictional meeting of minds, which concludes the offer and gives effect to the acceptance. The acceptance did not arrive in course of post strictly speaking (all parties understood in course of post to refer to 7th of September). But because the delay was the default of the defendant it was taken that the acceptance did arrive in course of post.

Household Fire v Grant (1879) 4 EXD 216 p53.

Facts: D offered to buy shares in the P‘s company. P posted a letter accepting the offer. The letter never arrived.

Held: As soon as the letter of acceptance is posted there is a binding contract, even if the letter is lost or delayed. The post office acts as the agent for both parties.

The postal rule of acceptance does not apply:

Where the letter of acceptance is wrongly addressed or insufficiently stamped;

where the offeror requires actual communication of the acceptance.

Holwell Securities Ltd. Hughes [1974] 1 WLR 155 p57.

Facts: P had an option to purchase property from D. Clause 2 of the option agreement stated:‘ the said option shall be exercisable by notice in writing to D at any time within 6 months from the date hereof‘ The letter was posted, properly addressed and stamped but was never actual ly delivered to D.

Held: The words ?notice‘ required actual communication of the acceptance, and so no contract came into force.

Lecture 3: Offer and Acceptance

Methods of acceptance

C ontracts through courier services: such as DHL, Federal Express are used for making contracts

Arguably, the postal rule of acceptance should apply to an acceptance sent by courier service, i.e. it is effective once the letter of acceptance is handed over or to the courier service

Contracts made by instantaneous methods: such as telephone, telex, fax and email.

In the case of an acceptance sent by telephone, telex or fax, it is clear that the acceptance becomes effective only after it is received by the offeror; the position is not so clear with regard to an acceptance by email.

Acceptance by telephone

Key principles: The receipt rule--- acceptance takes place when the words of acceptance are clearly heard by the offeror.

In terms of the conclusion of the contract:

Time: the moment when the offeror receives the acceptance

Place: the place where the offeror receives the acceptance

Entores v Miles Far East Corporation [1955] 2 QB 327 p63.

Facts: The plaintiff in London sent a telex to the defendant in Amsterdam offering to buy goods from the defendant. The defendant sent a telex in return accepting the offer. A contract was made when the defendant‘s acceptance was received by the plaintiff in London.

Held: the contract was only complete when the acceptance was received by P in London. The receipt rule is also applied in the situation of fax. So the time when the K is concluded is the moment when the P received the acceptance. the place where the K is concluded is London. So the jurisdiction of the contract belongs to the court in London instead of Amsterdam.

Fault-based concept

Lord Denning introduced a “fault-based” concept to determine the existence of a contract purported to have been made by telephone.

a) offeror‘s fault: where the offeror does not, due to his own fault, hears the words of acceptance; he is bo und by the contract as he will be ―estopped from saying that he did not receive the message of acceptance.‖

b) offeree‘s fault: The offeree has the duty to ensure that the words of acceptance are heard by the offeror. If the line goes dead or becomes indistinct and the offeree knows this, the offeree must repeat the message making sure that the offeror has got the correct message.

Where the words of acceptance uttered by the offeree are not heard by the offeror (neither due to his fault nor due to the offer ee‘s fault), there would be no contract.

c) nobody‘s fault: where the words of acceptance uttered by the offeree are not heard bt the offeror(neither due to offeror;s fault nor due to offeree‘s fault), there would be no K. Exception to the receipt rule----telex or fax

Key principles: Where an acceptance bt telex or fax is sent outside office hours, the receipt rule of the acceptance may occur at the start of the next working day.

Mondial Shipping and Chartering BV v Astarte Shipping Ltd

Fact: In this case a telex message was sent to a business outside “ordinary business hours Held: It was held that the communicator could not have expected the recipient to have received the message, which was sent late Friday evening at that time. Instead it was reasonable to hold that it was actually communicated on Monday morning

Supplement to the receipt rule

a)intention of the parties

b)sound business practice

c)judgment where the risk should lie

Brinkibon Ltd. v Stahag Stahl,etc. [1983] 2 AC 34 p66.

Facts: After negotiations between the parties for the sale of a quantity of steel bars the buyers, an English company, accepted by a telex sent from London to Vienna, the terms of sale offered by the sellers, an Austrian company. The contract was not performed, and the buyers issued a writ claiming damages for breach of contract. The buyers contended that they were entitled to leave

to serve the writ out of the jurisdiction under RSC, Ord.11, r.1(1)(a) on the ground that (i) the case came within para.(f) because the contract "was made within the jurisdiction" on the basis that, by analogy with the rules relating to the acceptance of an offer by post or telegram, acceptance of an offer by telex concluded a contract at the time and place the telex was sent; or (ii) the case came within para.(g) because the writ was "in respect of a breach committed within the jurisdiction.".

Held: the contract was made in Vienna since in the case of instantaneous communications that was where the acceptance was received.

Acceptance by Fax

Key principles: the receipt rule is applied in the situation of fax

Susanto Wing Sun co Ltd v Yung Chi Hardware Machinery Co. Ltd. [1988] No.A8177

Facts: Contracts were made by fax. Offers were faxed from Taiwan to the plaintiff in Hong Kong who sent his acceptance by fax to Taiwan.

Held: Following Entores and Brinkibon that the contract was concluded in Taiwan. Acceptance by emails

Key principles: common law rule: It is not clear when an email acceptance takes effect. However, the receipt rule applied to acceptances made by telephone, telex or fax seems to be preferable Statutory rule: Also note S19 of the Electronic Transactions Ordinance (Cap. 553) which states as follows:

?―Unless otherwise agreed between the originator and the addressee of an electronic record, an electronic record is sent when it is accepted by an information system outside the control of the originator or of the person who sent the electronic record on behalf of the originator.

(2) Unless otherwise agreed between the originator and the addressee of an electronic record, the time of receipt of an electronic record is determined as follows-

?(a) if the addressee has designated an information system for the purpose of receiving electronic records, receipt occurs-

?(i) at the time when the electronic record is accepted by the designated information system; or

(ii) if the electronic record is sent to an information system of the addressee that is not the designated information system, at the time when the electronic record comes to the knowledge of the addressee;

?(b) If the addressee has not designated an information system, receipt occurs when the electronic record comes to the knowledge of the addressee.‖

Termination of an offer

An offer may be terminated in the following ways:

a. Acceptance by the offeree

Once the offeree accepts the offer, a contract comes into existence, signalling the end of the offer. “Acceptance to an offer is like a match to a train gun powder‖. Where an offer is made to more than one offeree, the acceptance by one of them generally does not terminate the offers to others.

b.Rejection by the offeree

Key principles: a) direct rejection: a rejection of the offer by the offer materially which composes a counter-offer.

b) indirect rejection: An attempt to accept an offer on new terms, not contained in the offer, is a rejection of the offer accompanied by a counter-offer.

Hyde v Wrench (1840) 3 Beav 334 p75.

Facts: D offered to sell his farm to P for￡1000. P responded by offering to buy it for ￡950. D refused to sell it for that am ount. P then tried to accept D‘s original offer to sell for ￡1000. D refused it.

Held: There was no contract between A and B. When a counter-offer of ￡950 was proposed by B, it kills A‘s original offer. When B later agreed to buy the farm for ￡1000, it was already a new offer and it is up to A to accept it or to reject it.

Notice: request for information

Key principles: a counter-offer will kill the original offer while the request for information won‘t. under the situation of counter-offer, a new offer comes into being, while in the situation of request for information, no new contract emerges. A request for information in response to an offer is not a rejection and counter offer.

Stevenson v McLean (1880) 5 QBD 346 p78.

Facts: P and D were negotiating about the sale of iron. D wrote offering to sell the iron for cash. P telegraphed asking whether the iron could be delivered over a 2-month period. McLean wrote to Stevenson, Jacques & Co. in Middlesbrough asking if he could get an offer for warrants on iron ore. Stevenson said 40s per ton in cash was the lowest price, the offer open till Monday. At 9.42am, McLean telegraphed saying ?Please wire whether you would accept forty for delivery over two months, or if not, longest limit you could give.‘ Stevenson di d not answer, and sold at 1.25pm to someone else. McLean, before hearing, telegraphed saying he accepted the original offer. Stevenson refused to deliver the iron, and McLean brought an action for non-delivery. Held: P‘s telegraph was not a rejection of the D‘s offer. It was merely an inquiry and so P could subsequently accept D‘s offer.

c. Revocation by the offeror

Key principles: An offer can be revoked any time before its acceptance.

Guarantee

Key principles: In the case of a continuing guarantee it can be revoked any time with regard to future advances provided the guarantee is divisible.

Offord v Davies (1862) 142 ER 1336 p80.

Facts:By a guarantee given in consideration that P would, at the request of D, discount bills, D promised to guarantee the repayment of such discounts for twelve months. Before P had discounted any bills, D had countermanded the guarantee.

Held: This promise itself creates no obligation. D had a right to revoke.

Exception:

Key principles: where an offer is made under seal or supported by consideration of the offeree and the offer provides that the offer will be open for a certain period of time, the offer cannot be withdrawn before the lapse of that time.

Routledge v Grant (1828) 4 Bing 653 p79.

Facts: D offered to take a lease of P‘s premises and said he would keep the offer open for 6 weeks.On Apr 9, D withdrew the offer, and on Apr 29, P purported to accept it.

Held: there was no contract. Because one party cannot be bound without the other. As D repudiated the contract on Apr 9, before the expiration of the 6 weeks, he had a right to say that P should not enforce it afterwards.

https://www.360docs.net/doc/b38027921.html,pse of time

Key principles: An offer lapses at the time stipulated by the offeror. If no time is stipulated by the offeror the offer lapses after a reasonable time. The determination of reasonable time depends on the different types of contract or offer. if no time is fixed for an offer to lapse, then it lapses after the passage of a reasonable time.

Ramsgate v Montefirore [1866] LR 1 Ex 109

Facts: The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract.

Held: D was entitled to refuse to take up the shares. His offer had lapsed because an excessive amount of time had passed. The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessfu

Manchester Diocesen v Commercial and General Investments [1969] 3 All ER 1593 p85. Facts: MD called for tenders relating to property. C&G submitted a tender (offer to buy). The tender stated that acceptance was to be notified to the person whose tender was accepted by letter sent ?by post addressed to the address given in his tender‘. MD decided to accept C&G tender and sent their acceptance to the CG's solicitor, which was not the address given in the offer.

C&G knew of this acceptance.

Held: no contract was formed earlier before Jan 7 thus it was open to P to accept it on Jan 7 and P‘s letter of that date was effectual to bind the D contractually.

e. Death of the offeror

Key principles: generally, where the offeror dies before the acceptance of the offer and the offeree knows about it, the offeree cannot accept the offer unless it can be proved that the offer was intended not to be personal but was capable of acceptance by the offeror‘s personal representative.

Bradbury v Morgan (1862) 1 H & C 249 p87.

Facts: P credited H.J.Leigh in the usual way of their business. H.J.Leigh died and P without knowledge of his death, continued to supply the deceased with goods on credit. ￡100 owed by the deceased to P, and D (executor), declined to pay.

Held: P is entitled to judgment. A contract is not put an end to, by death.

f. Death of the offeree

Key principles: where the offer requires personal performance of the contract by the offeree, e.g. contracts of employment or agency, the offeree‘s death will bring the offer to an end.

g. Supervening incapacity of the offeror

Key principles: if the offeree knows that the offeror does not have the capacity to contract, the former cannot, as a general rule, accept the offer.

h. Other ways in which an offer comes to an end

key principles: change of circumstances;failure of a condition precedent

Communication of revocation

Key principles: a) an offer can be revoked by the offeror at any time before acceptance, but the revocation is only effective once it is actually communicated to the offeree. Even where the postal rule applies, the position is the same.(an exception to the postal rule, revocation takes place at the moment when the offeree received it instead of the moment the revocation is posted) Byrne v Van Tienhoven (1880) 5 CPD 344 p62.

Facts: On Oct 1, D posted a letter to P offering to sell them tin plates. On Oct 8, D revoked their offer by post. On Oct 11, P accepted the offer by telegraph, and confirmed their acceptance by a letter dated Oct 15. On Oct 20, P received D‘s letter of revocation.

Held: the revocation of the offer was not effective because it was only communicated on Oct 20, which was after the acceptance of the offer on Oct 11. There was a contract between A and B because revocation of offer could be treated as effectively communicated to the offeree when it was received.

Henthorn v Fraser [1892] 2 Ch 27

Facts: P, who lived at Birkenhead, called D, to negotiate for the purchase of houses. D signed and handed to him a note giving him the option of purchase for fourteen days. On the next day D posted to P a withdrawal of the offer. This withdrawal was posted between 12 and 1 o'clock, and did not reach Birkenhead till after 5 P.M. In the meantime P. had, at 3.50 P.M., posted to D an unconditional acceptance of the offer, which was delivered in Liverpool after D's office had closed, and was opened by D on the following morning.

Held: a binding contract was made on the posting of P's acceptance, that the revocation of the offer was too late, and that P was entitled to specific performance.

b) the revocation of offer can be communicated by the offeror or by the offeror‘s agent or by a reliable person.

Dickinson v Dodds (1876) 2 CHD 463 p83.

Facts: D delivered to P an offer to sell certain houses. However, P was informed by a Mr. Berry that D had been offering or agreeing to sell the property to another person.

Held:a sale to a third person which came to the knowledge of the person to whom the offer was made was an effectual withdrawal of the offer.

Battle of forms

Key principles: a) When parties go back and forth in the negotiation and one party prescribes one form for the contract and the other party another form and this goes on, the terms of the party which calls the last shot prevail.

This scenario also presents offer, counter-offer and offer and counter-offer situations.

Key principles: an acceptance must amount to a final and unqualified assent to the terms of the offer.

Butler Machine Tool v Ex-Cell-o Corporation Ltd. [1979] 1 W.L.R. 401 p75.

Facts: P sent a standard term contract to D which provided for a price variation clause and stated that this condition would prevail.D ignored Ps‘ standard term contract and placed an order for the machine on their own standard terms which did not include a price variation clause. D‘s standard

term contract was signed by P. P however claim that the price variation clause of the standard term contained in their offer was a term of their contract with D.

Held: D‘s terms prevailed and so the price variation clause was not a term of the contract. D‘s order was not an acceptance because it contained additional requirements. It was a rejection and counter-offer.

b) Lord Denning has however expressed a different approach. He appears to take the view that in cases where a battle of forms is confronted by the Court, it should adopt a harmonious construction and it should look at the terms and conditions of both parties together and try to reconcile them; if differences were irreconcilable, the conflicting terms should be scrapped and replaced by a reasonable implication.

Lecture 4 Certainty and Finality

A contract can be invalid because of lack of certainty or incompleteness

Uncertainty or incompleteness may arise because:

1. the parties have not agreed upon on important terms

2. the terms are vague

3. remuneration has not been agreed upon

4. the price-fixing mechanism is uncertain

5. the contract contains some meaningless clauses

Importance of certainty

General considerations

Certainty or completeness does not mean that each and every term must be certain and complete; an agreement can be enforced where the basic terms of the agreement are certain and complete or capable of being made certain and complete by a reasonable person conversant with the commercial background and circumstances in which the alleged contract was made

The test here is objective as well as quantitative: objective because the courts determine the question of certainty and finality by applying an objective test; quantitative because the courts are satisfied with a relative amount of certainty essential to make a contract commercially viable. The test of certainty:

The test here is objective as well as quantitative:

(1). Objective test: Whether the contract is certain or not does not depend on what the parties‘ point of view but a reasonable people‘s.

(2). Quantitative test: The courts will be satisfied with a relative amount of certainty essential to make a contract commercially viable

Vague and ambiguous terms

a) Vagueness and ambiguity relating to the subject matter of the contract

Where the subject matter of the contract is not clear and open to different meanings, the contract may be invalid.

Raffles v Wichelhaus (1864) 2 Hurl & C 906 (P123)

Fact: P agreed to sell cotton to D ―to arrive ex Peerless from Bombay‖. There were two ships by the same name, Peerless, one leaving Bombay in October the other leaving Bombay in December. P meant the ship sailing in October, D meant the ship sailing in December. The parties were at cross purposes.

Held: No contract came into existence. The subject matter(the time of delivery) is simply unclear. Mellish, in support of the plea: There is nothing on the face of the contract to show which Peerless was meant; so that this is a plain case of latent ambiguity.

b) Vagueness and ambiguity relating to the parties

Where the identity of the offeree is material the offer can be accepted only by the person to whom it is addressed.

Boulton v Jones (1857) 2 H&N 564 (P165)

Fact: Jones offered to buy 50 ft of leather hose of Brochlehurst from whom he could claim a set-off in the price. Brochlehurst had in the meantime sold his business to Boulton who received Jones‘ offer. Boulton accepted the offer.

Held: Since Jones wanted to deal with Brochelhurst and not with Boulton, no contract came into being. There is a mistake ,there is an uncertainty.

Martin B: where the facts prove that the D never meant to contract with A alone, B can never force a contract upon him; he has dealt with A, and a contract with no one else can be set up against him.

However, in all such cases the court looks at the transaction objectively. If it finds that a reasonable person looking at the circumstances would think that a contract has been made, it would give a binding effect to it, although one of the parties might have made a mistake

c) Vagueness and certainty relating to the price

Exceptionally, vagueness and ambiguity as to the price may render the contract invalid. On the other hand, generally, uncertainty as to the price does not prevent a contract from being formed e.g. in sale of goods contracts where the parties are silent on the price, the contract may be enforced by requiring the buyer to pay a reasonable price. Again the parties may agree that the price would be fixed by a third party.

Sale of Goods Ordinance Cap 26 Section 10:

(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

Other 5 aspects of certainty and finality

where the parties leave some terms open

key principles: vital terms left open under this situation, the contract will be invalid. Where a vital term is left open in a contract, the courts may not enforce that contract

May & Butcher v R [1934] 2 KB 17n (P89)

Fact: Agreement for the sale of tentage (tent equipment) providing that the price of the tentage, dates of payment and manner of delivery to be agreed between the parties from time to time Held: The agreement lacks certainty and finality because it left vital terms to be settled Exception bt minority judges:

Example of when an agreement which leaves the price to be further settled by the parties is enforceable.

Foley v Classique Coaches Ltd [1934] 2 KB 1 (P91 小字)

Fact: Land was sold by P to Ds. P owned an adjoining petrol station. Land was sold to Ds on the condition that Ds will buy petrol from P for the motor coach business at a price to be agreed from time to time.

Held: Despite this clause, Ds were bound by the agreement. Even though the price is silence, the court said the K is concluded. Scrutton L.J said, in the present case, there was an arbitration clause which relates to the subject- matter of the agreement as to the supply of petrol, and it seems to me that this arbitration clause applies to any failure to agree as to the price. an implied term that the petrol shall be supplied at a reasonable price was in the contract.

An agreement to agree

Key principles: a) A mere agreement to negotiate is not binding because it is too uncertain; it does not impose an obligation on the parties: (i) to negotiate or (ii) to accept proposals that would appear to be reasonable

b) ―Lock out‖agreements (agreements not to negotiate with another par ty)

Walford v Miles [1992] 2 AC 128 (P97)

Fact: Ps agreed ―subject to contract‖ to buy D‘s photographic processing business. One of the Ps and Mr. Miles had an oral lock-out agreement that if Ps provided a letter of comfort from their bank that the bank was prepared to provide to them the finance of ￡2m for the proposed deal, P‘s would have an exclusive opportunity to come to terms with Ds.

Held: Such a lock-out agreement could be validly made but the present agreement was not enforceable because it did not have an express or implied time limit stating how long the lock-out agreement would last

LORD ACKNER: while negotiation are in existence either party is entitled to withdraw from these negotiations, at any time and for any reason. There can be thus no obligation to continue to negotiate until there is a ―proper reason‖ to withdraw. Accordingly, a bare agreement to negotiate has no legal content.

Pitt v PHH Asset Management Ltd [1994] 1 WLR 327

Facts: An agreement that D would not consider any offer for the purchase of a house other than P's, provided that P exchanged contracts within two weeks of receiving a draft contract, was an enforceable lock-out agreement. D withdrew his acceptance subject to contract of P's offer to buy a property for GBP 200,000 when B made an offer of GBP 210,000. P responded by threatening an injunction (which the Court of Appeal accepted would have had nuisance value only) and made an oral agreement with D's estate agent which he confirmed in writing, to the effect that D would not consider any offers other than P's offer of GBP 200,000 on the basis that P would exchange contracts within two weeks of receipt of the draft contract. P duly offered to exchange contracts within the 14-day period, but D was only prepared to do so if P increased the purchase price to GBP 210,000; and on P's refusal to do so D sold the property to B.

Held: The judge held on a preliminary issue that the agreement between P and D was a valid enforceable contract, and gave judgment for P for damages to be assessed.

Where the lock-out agreement is to last only for a two-week period, the courts will be prepared to enforce it.

Absence of Remuneration

Key principles: Where goods have been delivered or services rendered at the request of another party but no price for the goods or remuneration for the services have been fixed, the court will allow an action to recover a reasonable price or remuneration

British Bank for Foreign Trade v Novinex [1949] 1 KB 623 (95)

Fact: D agreed to pay a commission to Ps if they introduce some clients to them. Ps did so but D refused to pay because the amount of remuneration had never been agreed upon between Ps and D

Held: Whenever there was evidence that the parties acted on the faith of a written agreement, the court would try to enforce the agreement

Cohen LJ said that, ―The principle to be deduced from the case is that if there is an essential term which has yet to be agreed and there is no express or implied provision for its solution, the result in point of law is that there is no binding contract. In seeing whether there is an implied provision for its solution, there is a difference between an arrangement which is wholly executory on both sides and one which has been executed on one side or the other. If executed, there is necessarily implied, from the conduct of the parties, a contract that, in default of agreement a reasonable sum is to be paid.‖

Rule under statute

Supply of Services (Implied Terms) Ordinance Cap 459 Section 7

(1) Where, under a contract for the supply of a service, the consideration for the service is not determined by the contract, is not left to be determined in a manner agreed by the contract or is not determined by the course of dealing between the parties, there is an implied term that the party contracting with the supplier will pay a reasonable charge.

(2) What is a reasonable charge is a question of fact.

Price-fixing mechanism

where the price-fixing mechanism set out by the parties fails to work

key principles: if the price clause fails, the K can be invalid.

a) Sometimes, the parties may include a clause in the agreement providing for a price-fixing mechanism. Where the intention of the parties is that the price-fixing mechanism must be adhered to by the parties, the agreement cannot be enforced without following that mechanism.

b)On the other hand, where the intention of the parties in providing for the price-fixing mechanism is that it is not essential that the mechanism should be strictly adhered to, the court can fix a reasonable price. (If the parties had provided for fixing a fair price but that mechanism had broken down, the court could identify a fair and reasonable price, especially where the price-fixing mechanism was considered as being non-essential)

c) Where the agreement has been executed by one of the parties, the courts are more likely than not to enforce the agreement.

Sudbrook Trading Estate Ltd v Eggleton [1983] 1 C 44

Fact: A lease gave the lessee an option to buy the reversion (land) at ―such price not being less than twelve thousand pounds as may be agreed upon by two Valuers one to be nominated by the Lessor and the other by the Lessees or in default of such agreement by an Umpire appointed by the said Valuers…‖. The lessee exercised the option to buy the land but the lessor refused to appoint a valuer, thus making the price-fixing machinery defective and requiring the courts‘ intervention. However, the lessor argued that the option was ineffective for want of certainty. Held: In this case, the parties had agreed upon the essential terms of the contract including the option agreement. The intention of the parties was that the lessee must pay a fair and reasonable price to the lessor for the land. That is why the parties wanted to appoint the valuers. Since the price-fixing mechanism was defective, the court could provide a reasonable and fair price to carry out the intentions of the parties

Gillatt v Sky Television Ltd [2000] 1 All ER (Comm) 461

Facts: G,who by virtue of his contract with STL, was entitled to 55 per cent of the market value of T, a company, appealed against the dismissal of his claim against STL on the grounds that he had failed as stipulated by the contract, to appoint an independent chartered accountant to determine the valuation. G contended that the requirement to appoint an accountant was not intended as an condition precedent and that the court was in a position to determine his entitlement.

Judgment: The court held that the need to appoint an accountant was an essential and integral part of the agreement and the court could not intervene.

where there are meaningless clauses in the contract

The effect of meaningless clauses

A meaningless clause which is simply a verbiage, not intended to add anything to an otherwise complete agreement could be struck out without prejudice or affecting the rest of the agreement Nicolene Ltd. v Simmonds (P102)

Fact: P offered to buy a large quantity of steel bars from D. D accepted the offer, adding, ―I assume that the usual conditions of acceptance apply‖. P acknowledged this letter but D failed to deliver the goods

Held: The clause, ―usual conditions of acceptance apply‖, could be simply ignored and the contract enforced. Denning L.J: there were no usual conditions of acceptance at all, so the words are meaningless. The clause was so vague and uncertain as to be incapable of any precise meaning.it is clearly severable from the rest of the contract.

The courts do their best to aid the parties intending to make a legally binding contract and therefore they excise or cut-off meaningless terms, for they do not want to ―incur the reproach of being the destroyer of bargains.‖

Sometimes, the courts resolve the apparent vagueness and ambiguity in the terms of the contract by looking at the customs and usages prevailing in such commercial dealings and by interpreting the terms objectively.

where agreements are made subject to contract

key principles: if parties have said that whatever we agree upon is subjece to a further K that means whatever we agree is not binding. In another word, only the final agreement, which is settled down is binding, while the negotiation is not binding.

Often, the owner of land agrees with the buyer or lessee that the sale of land deal or lease will be subject to contract or subject to formal contract or subject to contract to be prepared by solicitors or the like. In these cases, these clauses prevent there being a binding contract until the formal contract has been made

Winn v Bull [1877] (P104)

Fact: The defendant agreed in writing to take lease of a house for a certain term at a certain rent but ―subject to the preparation and approval of a formal contract.‖

Held: the court observed that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. It held that there was no contract as the formal contract had not been prepared and approved.

JESSEL M.R.: the P said in effect,‘I agree to grant you a lease on certain terms, but subject to something else being approved.‘ But ?something else is required‘ which is not expressed. So the agreement is uncertain in its terms and consequently cannot be sustained.

These situations are different from those where the parties intend to be bound from the outset. This could happen where they enter into a provisional agreement until a fully legalized agreement is signed.