INTENTION TO CREATE LEGAL RELATIONS To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly Atkin LJ in Rose & Frank Co v JR Crompton & Bros Ltd  2 KB 261 at 293
Rebuttable presumptions In social and domestic agreements there is a presumption against legal obligations Balfour v Balfour  2 KB 571 Cohen v Cohen (1929) 42 CLR 91 Jones v Padavatton  1 WLR 328 The presumption is rebuttable Merritt v Merritt  1 WLR 1211 Wakeling v Ripley (1951) 51 SR (NSW) 183
Balfour v Balfour There are agreements between parties which do not result in contracts within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together, or where there is an offer and acceptance of hospitality. Nobody would suggest in ordinary circumstances that those agreements result in what we know as a contract, and one of the most usual forms of agreement which does not constitute a contract appear to me to be the arrangements which are made between husband and wife…they are not contracts because the parties did not intend that they should be attended by legal consequences. Atkin LJ at 578
Rebuttable presumptions In business or commercial agreements, there is a rebuttable presumption that the parties did intend to create legal obligations Carlill v Carbolic Smoke Ball  1 QB 256 Rose & Frank Co v Crompton & Bros Ltd  AC 445 Honour clause
Offer the indication by one person to another of his or her willingness to enter into a contract with that person on certain terms Carter and Harland, Contract Law in Australia 4 th edn p28
Essential features of an offer: The offeror must intend to be bound by the offer Distinguish from request for information or invitation to treat The offer must be communicated to the offeree The offer may be made to one person, a class of persons, or the whole world The offer must contain enough information (certainty) to allow a binding contract to come into existence
Intention to be bound An offer is not: A request for the supply of information Harvey v Facey  AC 552 An invitation to treat Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd  1QB 401. Gibson v Manchester City Council  1AllER 972
Harvey v Facey the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at the lowest price. Lord Morris at 556
Examples of Invitations to Treat advertisements/circulars price lists displays of goods in shops calls for bids at auctions, and calls for tenders.
Carlill v Carbolic Smoke Ball  1 QB 256 Distinguish offer from invitation to treat by looking at intention of offeror Offer can be made to world at large Unilateral contract – communication of acceptance not required Consideration can equal detriment/effort Text of ad:
All an offer needs is a yes to make a contract
ACCEPTANCE A FINAL and UNQUALIFIED assent to the terms of an offer made in the manner specified or indicated by the offeror The yes which ends negotiations
Acceptance Must respond to the offer Must be communicated Subject to exceptions - Postal Acceptance Rule Must not be condition al
Acceptance must respond to the offer So, only those persons: to whom the offer was made; and who have the offer in mind at the point of acceptance may accept R v Clarke (1927) 40 CLR 227
R v Clarke it is not an absolute proposition of law that one who, having the offer before him, acts as one would naturally be induced to act, is deemed to have acted on the faith of or in reliance upon that offer. It is an inference of fact and may be excluded by contrary evidence. Starke J at 244
Acceptance must be communicated Silence is not sufficient Felthouse v Bindley (1862) 11 CB(NS) 869 Conduct may communicate acceptance Brogden v Metropolitan Railways (1877) 2 App Cas 666 Empirnall Holdings v Machon Paul (1988) 14 NSWLR 523
Consideration... The price paid for the promise
Bargain A promise asked for, or relied upon, as an aspect of a bargain between the parties to the contract Dunlop Pneumatic Tyre Company v Selfridge & Company  AC 847
An act or forbearance of one party, or promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable Sir Frederick Pollock, adopted by the House of Lords in Dunlop Pneumatic Tyre Company Ltd v Selfridge & Company Ltd at 855
Past consideration is not good consideration If what is done is not done as a reaction to the promise, it cannot be good consideration Roscorla v Thomas (1842) 3QB 234 Eastwood v Kenyon (1840) 113 ER 482
PRIVITY OF CONTRACT Only parties to a contract may enforce, or be bound by, a contract
Wedding cake As well, Mavis is being threatened with legal action by Chrissie Saranrap. Chrissie was married a month ago and was expecting Mavis to provide her specialty – the nouveau doveau - a tiered tower of cupcakes, iced in white and arranged to resemble the wings of doves – as the centrepiece cake for her wedding reception. Mavis loves doing cakes for weddings – in fact she now makes more money from doing wedding cakes than she does from her regular cooking classes.
Chrissie saw information about Mavis cake services after an article in the local paper, and called round to see Mavis, and look at the different cakes she could make. They discussed possibilities and pricing and Chrissie left with a price list. Apparently, Chrissie called and left Mavis a message on the answering machine ordering the nouveau doveau for her wedding, to be delivered on 2nd May at the wedding reception, for $2,000 COD. In her message, Chrissie had said: If I dont hear to the contrary, Ill assume everything is OK. Call me if there is a problem – otherwise I will see you on the 2nd. Looking forward to your lovely creation.
Unfortunately, because of all the work being done to the kitchen and problems with electrical work and electrical supply, Mavis had experienced a number of black outs which had interrupted her answering machine. Mavis – never received the message from Chrissie, and so of course, had not provided the cake. Chrissie is very angry and claims her wedding was ruined without the cake. She has threatened to sue Mavis.