1. LG538 Law - General Principles of Contract Law
Offer and acceptance; invitation to treat; intention to create legal relations

2. Learning Objectives
To define an offer and be capable of distinguishing it from an invitation to treat.
To understand the effect of a counter-offer.
To understand the difference between a counter-offer and a request for information.
To be able to define and describe acceptance.
To understand the rules on communication of acceptance and in particular the postal rule.
To be aware of how an offer can be terminated.
To understand the need for an intention to create legal relations to form a binding contract.
To appreciate that social arrangements may lack the necessary legal intention.
To understand the key elements of commercial arrangements that do indicate the intention to create legal relations.

3. General Principles of Contract Law
A contract is an agreement between two or more parties which is enforceable by law.
All contracts are agreements but not all agreements are contracts.
Is there a contract?
Is the agreement one which the law should recognise and enforce?
When do the obligations of the parties come to an end and what are the remedies for breach of contract?

4. Basic Principles Freedom of contract. Some restrictions:
- standard form contracts; implied terms; prohibition on clauses introduced by statute; judicial intervention to sanction impropriety by a party to a contract.
Sanctity of contract.

5. Definitions Simple/specialty (e.g. conveyance of land).
Bilateral contract - both parties make a promise and are bound by it.
Unilateral contract - one person makes a promise and the other person is free to perform or not.
Void - an agreement without legal effect - there has been a common mistake.
Voidable - a contract in which the law allows one of the parties to withdraw from it if he wishes, thus making it void.
Unenforceable - valid contract but not enforceable by the courts because of a lack of evidence.

6. Form of Contract
General rule is that contracts may be in any form whatsoever. Most contracts are valid whether they are made orally, in writing or even by conduct.
Statute requires that (a) for certain agreements, e.g. land, some parts must be written down; (b) for certain agreements, e.g. consumer credit, all parts must be written down.
Legislation brought in to prevent fraud & to protect vulnerable persons.

7. Contract as a combination of Written & Spoken Elements
Contract = written document + what was said during negotiations.
Condition precedent - something that was to be done before the contract comes into force.
Condition subsequent - something is to be done but can be done later - merely an incident of a binding agreement.

8. Offer & Acceptance Agreement = offer + acceptance
Contract = offer + acceptance + consideration (with intention)

9. Offer & Acceptance - An Offer
Definition: an offer is a definite & unequivocal statement of willingness to be bound by contract.
Form of offer: (1) expressly; (2) impliedly, e.g. by conduct.
Offer can be made to a particular person, a class of persons or to the whole world.
The offer must be reach the person to whom it was made to be capable of acceptance, the offeree must know about it.

10. An Offer
Richards, P. (2004) p.14: “An offer is an expression of a willingness to contract on certain terms made with the intention that a binding agreement will exist once the offer is accepted.”
Carlill v. Carbolic Smoke Ball Co. [1892] 2 QB 484
Must be a willingness to be bound by the offer – Harvey v. Facey [1893] AC 522

11. An Invitation to Treat
This is not an offer in itself but is an invitation to others to make an offer.
Goods in a shop window – Fisher v. Bell [1961] 1 QB 384
Goods in a self-service shop – Pharmaceutical Society of Great Britain v. Boots Cash Chemists [1951] 2 QB 795
Advertisements – Partridge v. Crittenden [1968] 2 All ER 421; Leonard v. Pepsico, Inc. US District Court
Auctions – Payne v. Cave (1789)

12. Situations where there is no offer
Invitation to treat: this is an invitation to others to make an offer.
Carlill v. Carbolic Smoke Ball Co. [1893] - unilateral contract.
Quotations, brochures & catalogues - statement of price, merely supplying information.
Boyers & Co Ltd v D & R Duke Ltd [1905]; Tansey v College of Occupational Therapists Ltd [1995].
Display of goods - Minister for Industry and Commerce v Pim Bros Ltd [1996].
Auctions - s.58(2) Sale of Goods Act Tully v Irish Land Commission [1961]

13. Counter- offer
A counter-offer is an offer made in response to an offer. e.g. where the offeree offers a lower price, or in any other way barters with the offeror.
A counter-offer imposes conditions on the acceptance; acceptance must be unconditional.
Counter- offer terminates original offer.
Hyde v Wrench [1840]
Butler Machine Tool Co Ltd v Ex-Cell-O Corp Ltd [1979]
Tansey v College of Occupational Therapists Ltd [1995]

14. Counter-Offers & Requests for Information
Where a request for information is made, the offeree already intends to accept the original offer and merely requires some extra information about the deal.
Stevenson v. McLean (1880) 5 QBD 346

15. Battle of the Forms
Many parties have their own standard terms & conditions printed on their forms.
One party may enter into a contract on its own usual terms and the other party might accept on their own particular terms.
Butler Machine Tool Co. v. Ex-Cell-O Corporation [1979] 1 All ER 965

16. Acceptance
Definition: this is the unconditional assent to all the terms of the offer.
Form of acceptance:
- acceptance can be written, oral or inferred from conduct of parties;
- offeror may stipulate a mode or method of acceptance;
- communication of acceptance usually required in bilateral contract;
- silence will not amount to acceptance - Russell & Baird Ltd v Hoban & Co Ltd.
- acceptance is only effective when the offeror learns of it.

17. Communication of Acceptance
General rule is that an external manifestation of acceptance must be communicated to the offeror.
Parkgate Investments v. Shandon Park Mills (unrep. High Court, 1991)
An acceptance can be retracted at any time until it is received by the offeror.
The acceptance must be received by the offeror.
A contract is governed by the laws of the jurisdiction in which it has been concluded, that is where the acceptance has been received.
Entores v. Miles Far East Corporation [1955] 2 QB 327

18. Manner of Acceptance Prescribed by Offeror
The offeror may stipulate a mode or method of acceptance.
It is unclear whether the exact following of the offeror’s request is required.
If the offeree replies in a different manner than that prescribed by the offeror, this may be seen as a counter-offer.
Quenerduaine v. Cole (1883) 32 WR 185

19. Silence Silence will not amount to acceptance of an offer.
Felthouse v. Bindley (1862) 11 CBNS 869
Exceptions to this rule:
both parties agree silence will constitute acceptance;
course of dealings;
unilateral offers.

20. The Postal Rule
Communication of acceptance will be complete and effective when the letter is posted/ placed in the hands of the relevant postal authorities.
This rule will only apply when acceptance by post is either the chosen, obvious or reasonable method of acceptance.
Adams v. Lindsell (1818) 1 B&Ald 681
Household Fire Insurance Ltd v Grant [1879]
Holwell Securities Ltd v Hughes [1974]
Brinkribon Ltd v Stahag Stahl GmbH [1983]
Kelly v Cruise Catering Ltd and Kloster Cruise Ltd [1994]
E- commerce

21. Electronic Contracts Brinkribon Ltd v Stahag Stahl GmbH [1983] 2 AC 34
s.19 & s.22, Electronic Commerce Act 2000 deal with the legal enforceability of electronic contracts
s.20 & s.21, Electronic Commerce Act 2000 – acknowledgement of receipt of an electronic communication; time & place of receipt of electronic communications
Article 14, European Communities (Directive 2000/31 EC) Regulations 2003 replaced ss.20 & 21 of Electronic Commerce Act 2000

22. Electronic Contracts
Article 14, European Communities (Directive 2000/31 EC) Regulations 2003, provides that notwithstanding the Electronic Commerce Act 2000, the relevant service provider is to acknowledge receipt of an order without undue delay & by electronic means where the recipient of the services places his or her order through electronic means.
Applies to electronic transactions such as web-based contracts (Clark, 2008, p.26)
European Communities (Protection of Consumers in respect of Contracts made by means of Distance Communication) Regulations, 2001 – this Irish statutory instrument implements the Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts

23. Ignorance of the Offer Gibbons v. Proctor (1891) 64 LT 594
Fitch v. Snedaker (1868) 38 NY 248 – “How can there be consent or assent to that of which the party has never heard?”
R. v. Clarke (1927) CLR 227
Williams v. Cawardine (1833) 5 C&P 566

24. Termination of Offer
The offer must be ‘open’ when the offeree accepts it.
Revocation of offer - Dickinson v Dodds [1876] - note that revocation will not take effect until the revocation has been received & clearly understood by the offeree. (Revocation must reach offeree - Byrne & Co v Van Tienhoven & Co [1880]).
Rejection of an offer.
Lapse of time - Walker v Glass [1979].
Occurrence of a condition.
Revocation by death.
Supervening incapacity.

25. Intention to Create Legal Relations
Some agreements are not intended to be legally enforceable.
Objective test - would the reasonable man viewing the words & conduct of the parties objectively conclude that there was an intention to create legal relations?
A contract will only be valid if the intention to create legal relations exists.

26. Social & Domestic Arrangements
Presumption that such arrangements are not intended to be legally binding.
Binding in honour only.
Balfour v. Balfour [1919] - domestic arrangement - presumption that there was no intention to be legally bound.
Jones v. Padavatton [1969] – no intention to create legal relations.
Simpkins v. Pays [1955] - weekly competition - legally binding.

27. Social & Domestic Arrangements – 2
The presumption that there is no intention to create legal relations in social & domestic arrangements is rebuttable.
It can be rebutted by evidence to the contrary, e.g. formal/detailed financial arrangements; spouses no longer living happily together.
Parker v. Clark [1960]
Merritt v. Merritt [1970]
Lens v. Devonshire Club (1914) The Times, Dec.4
Heslop v. Burns [1974] 1 WLR 1241

28. Business & Commercial Agreements
Strong presumption that parties intended it to be binding.
This presumption can be rebutted if a contrary intention is clearly expressed in the agreement itself.
Jones v. Vernon’s Pools Ltd [1938]
Appelson v. Littlewood Ltd. [1969]
Snelling v. John G Snelling Ltd [1973]
AWG Development Fund Ltd v. Woodroe Ltd (Trading As Century Homes), High Court, 25/1/01.
Rose and Frank Co v. Crompton & Bros Ltd [1923]

29. Collective Labour Agreements
Presumption that collective agreements between trade unions and employers are not legally enforceable.
Again this presumption may be rebutted.
O’Rourke v. Talbot (Irl) Ltd [1984].
High Court decision - Barrington J. held that there was an intention to create legal relations.

30. Factors to be examined in deciding whether parties intended to affect their legal relations
Vagueness – Lambert v. Lewis [1982] AC 225
Letters of Comfort – Kleinwort Benson Ltd. v. Malaysian Mining Corp. [1989] 1 WLR 379
Mere representations – Heilbut, Symons & Co. v. Buckleton [1913] AC 30
Where the agreement gives wide discretion to one party – Taylor v. Brewer (1913) 1 M&S 290
Where the promise was made in jest or anger - Licenses Insurances Corporation v. Lawson (1896) 12 TLR 501; Weeks v. Tybald (1605) Noy 11