Contract Law Lecture Notes
Contract Law Lecture Notes
General Introduction
1. "General law of contracts" --- sets out the framework from which special contracts are derived/are
exceptions to
○ Rules looking at are default rules -- rules that apply if the parties themselves haven't
included alternative terms -- essence of English law of contract; parties are free to
contract as they wish/depart from default rules
■ Default rules provide the grounding for special contracts (i.e. employment,
insurance, consumer etc.)
● External influences -- focusing on English law of contract but there are a number of external
influences onto domestic law
○ Impact of globalization on the development of contract law -- a lot of influence on
domestic law form external sources
○ Most important influence is the EU/EU law (impact of Brexit on the relationship with
domestic contract law is to be determined)
○ English contract law is also influential due to historical relationship with other countries;
contracts are also looking more at English contract law
● Definition of contract -- "a contract is an agreement giving rise to obligations which are enforced
or recognized by law"
○ Definition doesn’t tell us why the law should be used to enforce such agreements; also
doesn't tell us why it was agreed
○ Definition doesn’t tell us what was determined what the precise meaning of the words
used are
○ Also doesn’t tell us what contracts that the law is going to enforce
■ i.e. the law won't enforce contracts that contradict with other types of law (like
the morality of an agreement to sell body parts for money)
○ Consider why the law does/does not enforce different types of agreements -- are there
justifications? Are they reasonable? Do you agree? ----- be critical
Offer
● A manifestation by the offeror (person making the offer) of a willingness to be bound by the
terms proposed by the offeree as soon as there is acceptance by the offeree
● Need to look at the language used by the offeror -- also need to look at the context that the
statement is being made
● Need clear rules in order to ensure certainty -- but if the rules are too strict it can be problematic
because in the normal course of dealings, they need room under which they can maneuver (so as
not to be locked into a contract before negotiations)
○ In this -- context allows the law to have some flexibility
● Distinguishing between something that is an offer and something that is not;
○ Generally -- there is no offer if when the party proposes the term there is no commitment
to be bound
■ i.e. Harvey v Facey [1893] A.C. 552 -- court found that the exchange was a
inquiry/response based upon the context not an offer/acceptance
■ Makes distinction between an offer and supply of information
○ Also distinguish between "invitation to treat" -- they are statements that are willing to
enter into negotiation but not offering anything to them
■ i.e. Gibson v Manchester City Council [1979] 1 All E.R. 972 -- Supreme Court
found no contract had been made bc the council had stated "may be prepared" in
letter but had made an invitation to enter into negotiation; they did intend to
sell/expect Gibson offer but had not completed the contract
■ Importance: context, language
■ i.e. Storer v Manchester City Council [1974] 1 W.L.R. 1403 -- council enclosed
an agreement of sale that was meant to be legally binding but before sale made
council changed hands; court found that contract had been found; sale could not
be halted by council otherwise they would be in breech of contract
■ Intention of the parties to be bound clearer in Storer case
■ Impact of policy -- policy reasons may explain strict approach of house of
lords/supreme court
■ Gibson case a test case --- implication it may have had on the 300/400
cases waiting to be processed; look behind the front of the court and see
the inner workings that may influence decisions
● General rules;
○ Displays and advertisements --
■ General rule: these are not offers but invitations to treat (ITT); invite the other
party to enter into negotiations
■ Key case: **Pharmaceutical Society of GB v Boots Cash Chemists
[1953] 1 Q.B. 401
■ Statutory regulation that meant that pharmaceutical product sales
must take place under supervision of registered pharmacist
■ Move to self service business model -- charged with breeching
statutory law
■ Question -- when does the sale take place?
■ Court found that they were not in breech as putting goods on
display is not an offer but an ITT -- customer makes the offer
when the product is taken to the cash desk; offer is accepted at
the moment at the cash desk and the pharmacist could stop the
sale
■ Court said that common sense dictates that if customer doesn't
make the choice they are bound by their decision once it reaches
their basket
■ Partridge v Crittenden [1968] 1 W.L.R. 1204 (sale of wild birds)
■ Able to advertise the sale of wild birds without contravening the
law on the prohibition of the sale of wild birds
■ Carlill v Carbolic Smoke Ball Co. [1893] 1 Q.B. 256
■ Offering £100 if people contract influenza
■ CSM insisted that it was ITT -- house of lords found that it was an offer
that was accepted by Carlil when she began to use the product so they
need to pay what was offered in the advertisement
■ Presented as an exception to the rule above
■ Court looked at the language used -- company used clear language to
show sincerity; found clear intention that constituted an offer was being
made
■ Need to look at each fact and look beyond the general rules to see if there
can be seen to be a departure form the rule
■ Unilateral contract seen in this case -- company bound by statement;
consumer not bound until they started to use product
■ There are general rules but you still need to look beyond the rules to see if there
is an intention to be bound
Lecture 2
1. Offer
● An offer is:
○ Manifestation by the offeror
○ of a willingness to be bound by the terms proposed to the offeree
○ as soon as there is acceptance by offeree
● General Rule: The offeror must demonstrate a commitment to be bound
○ Harvey v Facey [1893] A.C. 552, PC (Jam) (not an offer but the supply of information)
● Distinguishing between an Offer or an Invitation to Treat
○ Parties’ words or conduct may not amount to an offer because it is an ITT - an expression
of willingness to negotiate with the other party to see whether agreement can be reached
at some point
■ Gibson v Manchester City Council [1979] 1 All E.R. 972 [“the council may be
prepared to sell the house”]
■ What distinguishes Gibson from the following case: Storer v Manchester City
Council [1974] 1 W.L.R. 1403 ?
● Displays and Advertisements
○ General Rule: Goods displayed in stores or advertised in newspapers or catalogues (etc)
are ITTs
○ **Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 Q.B. 401
○ Partridge v Crittenden [1968] 1 W.L.R. 1204 (sale of wild birds)
○ Fisher v Bell [1961] 1 Q.B. 394 (flick knives)
○ Do you think that Partridge and Fisher were satisfactorily decided?
○ In the following two cases an OFFER was found by the court: can you explain why?
■ Chapelton v Barry UDC (1940) 1 KB 532 (display of deck chairs for hire).
■ Carlill v Carbolic Smoke Ball Co. [1893] 1 Q.B. 256
■ [see also Lefkowitz v Great Minneapolis Surplus Store (1957) 86 NW 2d 689 –
(US decision)]
○ The court will also look at policy reasons as to why things are ITT vs Offers ---> always
look at the context
● Timetables and Automatic Vending Machines:
○ General rule: these are offers.
■ Timetables themselves set out an offer that can accepted
■ Complication -- contract formed when customer buys the ticket but the train/bus
services aren't reliable
■ Is a late train a breach of contract? -- yes unless the timetable clearly sets
out disclaimers; also legislation that protects contractually liability from
timetables
○ Denton v Great Northern Railway Co [1856] 5 E. & B. 860 (train timetable – passenger
accepts offer when buying ticket)
○ Wilkie v London Passenger Transport Board [1947] 1 All E.R. 258 (acceptance occurs
on boarding bus)
○ Thornton v Shoe Lane Parking [1971] 2 QB 163 (automatic ticket machine outside car
park – acceptance occurs when entering car park)
■ Question as to when the contract was formed crucial -- Thornton had injury,
wanted to sue to get compensation and response of company was referencing to
exclusion clauses within the car park removing liability
■ If contract was formed prior to notices (i.e. at the moment of entering the
car park then the notices were not contained within the contract)
■ Automated machines are offers not ITT's --- acceptance is made upon
entrance to car park; moment when contract formed
● Auctions:
○ An auction involves a number of steps:
■ Advertising the auction (ITT) -- giving details of the auction
■ Putting up goods for sale (ITT) -- if it was an offer; wouldn't be able to negotiate
the price
■ Bid (offer)
■ The fall of the hammer (Acceptance)
○ Codification in Section 57(2) Sale of Goods Act 1979
○ The legal framework is different when an auction is ‘without reserve’ (without minimum
price). Why is this?
■ Auctions with a reserved price -- prices are set; the minimum that the good can
be sold at
■ Auctions without reserve price present a problem -- gives expectation that you
will get the good if you are the only one bidding
■ Creates different expectations
○ Warlow v Harrison [1859] 1 E & E 309
○ Barry v Davies [2000] 1 W.L.R. 1962
■ Goods put up for sale -- worth 14,000 pounds; only one bidder who bid 200
pounds
■ Auctioneer refused to sell; Barry said there was an expectation to sell so sued the
auction house for breach of contract
■ Auctions without reserve price give different process -- instead of bid being an
offer, court said that the offer is made by the auction house (not clear at which
point however)
■ Acceptation occurs when the highest bid is made
■ Barry was successful in lawsuit
○ English law tries to put general rules in place but there are complex factual scenarios --
law needs to be flexible to take in the complexities of the situation
■ Hard and fast rules may create injustice
● Tenders:
○ Tender -- formal offers to carry out work at a stated fixed price;
■ Make proposals can take a long time -- a lot of investment into making tenders
○ Legal framework--
■ General rule: an invitation to tender is an ITT -- invitation to enter into
negotiations
■ Offer is made by persons submitting the tender
■ Acceptance is made when the person inviting the tenders accepts one of them
○ **Harvela Investments Ltd v Royal trust Co of Canada (CI) Ltd [1986] A.C. 207
■ Example of a departure from the general rule
■ Wanted to sell shares -- invited two companies to submit a sealed offer and stated
that they will accept the highest compiling offer
■ Harvela -- made a fix bid of 2,175,000 pounds)
■ Other party -- made a referential bid; first offered 2,100,000 or they said they
would offered d101,000 more than the other party (referential bid -- means they
will always win)
■ Royal Trust accepted offer from other party -- Harvela sued bc they felt they
were entitled
■ House of Lords held that the referential bid was invalid; Royal Trust was
contractually bound to sell to Harvela
■ Reasoning of House of Lords;
■ Royal Trust in this case made an offer not an ITT even though it is
usually an ITT -- HoL said they made an offer of a unilateral contract;
one party has the obligation (RT) who promised to sell the shares, other
parties have no obligations (i.e. to bid for shares)
■ Offer that RT was made was a fixed bid not a referential bid -- other
parties offer therefore did not qualify
■ Harvela showed a commitment to be bound upon acceptance
■ Lord Templemen -- the invitation to tender by RT could only be
interpreted by a fixed bidding sale; but also this ITT bound the sellers
(Royal) to accept the highest price
■ Incorrect -- can never be bound to accept an offer
■ Takeaway --
■ Courts depart from general rule; focuses on the language RT uses to
distinguish between fixed bid and referential bid
■ Law doesn’t fit neatly into factual matters -- has to depart from the rules;
can be swayed to outcomes due to policy reasons and shoehorn the law
around the facts of the case to facilitate the policy outcome
■ Relevant policy in this decisions --
■ wanted to encourage fair play in tender process; important
commercial policy reason
■ Wanted to protect the tenderers reasonable expectations --
reasonable for these business parties to expect referential bids
not to be allowed
■ Sometimes these bids take a lot of resoures (energy, time,
finance) -- want to encourage tenderers confidence in fair
outcomes
○ Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 W.L.R. 1195
■ Also reflects policy concerns/aims
■ Council said not to bind themselves to accept all or any part of the tender they are
offered; also said that no tender received after the last date/time specified shall be
admitted for consideration
■ Aero Club submitted their tender but it arrived after the time but they still had
expectations that their tender would be expected
■ Council did not consider it because it was late and so offered it to another party;
Aero Club sued
■ In this case -- court decided that the particular ITT amounted to an offer
■ Not an offer to accept the tender but an offer to consider the tender and
so were in breach for not considering the tender
■ Departure from the general rule
■ Context -- policy reasons
■ Status of the defendant -- it was a public authority; implications is that
higher expectations are exacted on them; public law duties need to be
fulfilled
■ Blackpool and Flyde were existing concession holders -- expectations to
continue
■ ITT was made to a small number of parties and so was consistent with
the assumptions of commercial parties that their tenders would be
considered
2. Acceptance
● An acceptance is an unequivocal expression of consent to proposal contained in the offer. It
binds both parties immediately.
○ Day Morris Associates v Voyce [2003] EWCA Civ 189
○ ‘A contractual acceptance has to be a final and unqualified expression of assent to the
terms of the offer.’ (as per Black J.)
● Elements to consider when talking about acceptance --
○ Acceptance must be correspond with the offer
○ Acceptance has to be in response to the offer
○ Must be made by the appropriate methods (i.e. Harvela case -- fixed vs referential bid)
○ Has to be communicated to the offeror
● Acceptance must correspond with offer (mirror image rule)
○ Acceptance must mirror the offer. A conditional ‘acceptance’ is not one that corresponds
to the offer and a contract is unlikely to be formed.
○ If it is not a mirror image -- it might be because it is a conditional acceptance; in this
situation it is unlikely a contract will be formed as if it is you are bound to an uncertain
contract
■ Acceptance is not a valid form of acceptance
● Counter-offer
○ An offer which deviates from offer will usually be regarded as a counter-offer. The
counter-offer KLLS the original offer
■ Looking at negotiations -- proposing something that is not a mirror image; not
accepting the initial offer but making your own; for the original offeror to accept
the counter-offer
■ Once the counter-offer is made the original offer is made void
■ Hyde v Wrench [1840] 3 Beav. 334 --
■ Wrench offered to sell farm to Hyde for 1,000 pounds; Hyde
wanted to buy for 950; Wrench rejected
■ Hyde tried to accept the original offer but Wrench rejected it
■ Question for the court -- could he do it? Or was a contract
formed when he accepted the original offer after his counter
offer was rejected
■ No. No contract formed once originally offer is rejected.
○ Stevenson Jacques & Co v McLean [1879-1880] L.R. 5 Q.B.D. 346 (a request for
information does not kill off the original offer)
■ Offeree makes a request for information/clarification about the terms of the offer
○ Division between counter offer and request for information is fine -- smart offeree tries to
keep the original offer open through the language that is used
● ‘Battle of the Forms’
○ A ‘Battle of the Forms’ is said to exist where the parties conclude their contract through
exchanging forms but these forms contain incompatible terms.
○ General answer -- the contract is under the terms and conditions of whoever last tried to
impose their terms and conditions on the other party and there was no objection by the
other party; "whoever fired the last shot"
○ Brogden v Metropolitan Railway Co [1876-77] L.R. 2 App. Cas. 666
○ **Butler Machine Tool v EX-Cell-O Corp (England) [1979] 1 W.L.R. 401 -->
paradigmatic case in this respect
■ Butler were the suppliers who offered to sell tools to EX-Cell on their standard
terms and conditions
■ Within this -- there was price variation clause ; Butler was trying to do
business using this clause
■ Also said that these T and C's prevail -- assert authority
■ Ex-Cell agree to the order but with the order sent their own T and C's which
didn’t have price variation clause; also a slip that Butler was meant to sign to
acknowledge the order
■ Butler sent a letter that said the contract was under their T and C's
■ Before delivery they increased the price (allowed under their T and C's) -- EX-
Cell refused delivery and refused to pay extra; Butler filed lawsuit against EX-
Cell
■ Interesting aspect -- there is a majority and minority decision by the courts
■ Need to find a point in the transaction where the offer and acceptance mirror each
other
■ Found that EX-Cell's offer/response could be seen as a counter-offer --
so not an acceptance but a reject of the original offer and inclusion of a
counter offer
■ Butler's counter offer was an acceptance of EX-Cell's counter offer when
they removed the slip
■ The additional letter was not an attempt to introduce new T and Cs but a
method of identifying the order for machine tools
■ Contract was formed under the T and Cs that EX-Cell was proposing
■ The whole od the contract was formed under one set of T and Cs -- all or nothing
approach
■ This case exposes some of the problems with the traditional mirror image rule.
How did Lord Denning approach this case (minority decision)? Are you
convinced by his approach?
■ Dennings suggested a two step way but it has problems
■ He said the first stage -- you have to ask have the parties reached
agreement on all material points?; in this situation it seems that they have
(agreed on product not price)
■ If they have -- then a contract has been formed
■ First stage -- contract formation; if all material points have been
agreed
■ Second Stage -- what's the terms under which the contract will be
governed;
■ Often it will be "who fires the last shot"; other times it is the
party who "fires the first shot"
■ Third aspect -- sometimes the differences between the T and Cs
of the parties are irreconcilable (completely different); might not
be able to find a harmonious result so need to get rid of them all
together; the court would have to replace the parties T and Cs by
what the court deems to be reasonable T and Cs
■ Says that traditional mirror image rule is out of date -- suggesting a more
flexible framework
■ Problem -- goes against freedom of contract; also doesn't provide
commercial certainty
■ His approach has not been accepted -- sticking to the traditional approach
■ ** A very good discussion of Butler Machine Tool can be found in R. Rawlings,
‘The Battle of the Forms’ (1979) 42 MLR 715.
○ Tekdata Interconnections Ltd v Amphenol Ltd [2010] 1 Lloyd’s Rep 357
■ Dyson LJ: [para 23] ‘this [last shot] doctrine has been criticised as depending on
chance and being potentially arbitrary, as well as on the ground that, unless and
until the counter-offer is accepted, there is no contract, even though both buyer
and seller may firmly believe that a contract…
[para 25] ‘[However], the rules which govern the formation of contracts have
been long established and they are grounded in the concepts of offer and
acceptance. So long as that continues to be the case, it seems to me that the
general rule should be that the traditional offer and acceptance analysis is to be
applied in battle of the forms cases. That has the great merit of providing a
degree of certainty which is both desirable and necessary in order to promote
commercial relationships…’