8/20/20

AB1301 Business Law

Seminar 2
Formation of Contract I
Corinne Tan
Aug 2020

Overview

◉ Intention to create legal relations

◉ Nature and types of contracts
◉ Elements of a legally enforceable contract
◉ Valid offer
◉ Effective acceptance
◉ Electronic contracts

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Intention to create legal

relations (1)

◉ Objective test of intention, determined by facts

○ Would a reasonable person present at the time
conclude that the arrangement was contractual?
○ Exception applies if a party’s actual/subjective
intention differs from his apparent/objective
intention, and this is actually known to the
counterparty [Norwest Holdings Ptd Ltd (in liq) v
Newport Mining Ltd (2010)]

Intention to create legal

relations (2)
◉ Presumption of intention
○ For social or domestic agreements, courts begin with
the presumption that the parties did not intend to
contract [Balfour v Balfour (1919)]
■ But see Merritt v Merritt (1970)
○ For commercial agreements, courts begin with the
presumption that parties intended their agreement to
be legally enforceable
■ But see Rose & Frank Co v JR Crompton & Bros Ltd (1923)
○ Presumption is rebuttable if evidence indicates a
contrary intention
■ Two significant factors (ie, certainty of the terms of the 4
agreement AND actual reliance on the agreement)
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What is a contract?

◉ A contract is an agreement between two or more

parties that courts will enforce
◉ May be made in writing, orally or by conduct
◉ Gives rise to obligations which are enforceable at law

Elements of a contract

◉ Offer Demonstrates the meeting of minds

◉ Acceptance
◉ Consideration
◉ Intention to create legal relations Contracts

Agreements
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Types of contracts

◉ Bilateral contracts
○ Offeror makes an offer to a known offeree
○ Parties know each other’s identity
○ Exchange of promises
○ Bilateral contract is formed upon communication of acceptance
◉ Unilateral contracts
○ Offeror makes an offer to the whole world
○ Offeror may not know the offeree’s identity
○ Only offeror makes a conditional promise
○ Unilateral contract is formed through performance of an act
which demonstrates acceptance
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What is an offer?

◉ Offeror’s expression of willingness to contract on certain

terms, with the intention that, upon acceptance by the
offeree, a binding agreement is formed
◉ Must be communicated to:
○ A particular offeree
○ A group of people; or
○ The whole world

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What is NOT an offer

◉ Mere puff
◉ Supply of information
○ Harvey v Facey (1893)
◉ Invitation to treat (Preliminary stage in which one party
invites the other to make an offer)

Invitation to treat

◉ Advertisements
○ Section 14 of the Electronic Transactions Act
○ Partridge v Crittenden (1968)
◉ Display of goods
○ Pharmaceutical Society of GB v Boots Cash Chemists (1952) [This
position is affirmed by the decision of Chwee Kin Keong v
Digilandmall (2004) in Singapore]
◉ Auctions and tenders
○ UOL Development (Novena) Pte Ltd v Commissioner of Stamp
Duties (2008) [But see Harvela Investments Ltd v Royal Trust Co
of Canada (1986)]

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Advertisements

◉ Can either be an offer or an invitation to treat

◉ Is there an definite intention to be bound?
○ If so, the advertisement is an offer
◉ Advertisements for unilateral contracts are treated as
offers
○ See Carlill v Carbolic Smoke Ball Co (1892)

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Advertisements - Carlill v OFFER ACCEPTANCE

(Promise of a Reward (By Perfomance
Carbolic Smoke Ball Co (1892) – “Executory” – “Executed”)

◉ Advertisement published in the Gazette read:

○ “£100 reward will be paid by the Carbolic Smoke Ball Co to any person who
contracts the increasing epidemic influenza colds, or any disease caused by
taking cold, after having used the ball three times a day for two weeks AGREEMENT
according to the printed directions supplied with each ball. £1000 is
deposited with the Alliance Bank, Regent Street, showing our sincerity in the
matter.”
◉ Plaintiff used the balls as directed but still fell ill and sued for £100
◉ Held that the advertisement was a unilateral offer made to the
whole world though the contract is formed only with the person
who comes forward and perform the stated condition (note
plaintiff succeeded in her claim)
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When an offer terminates (1)

◉ Revocation or withdrawal
○ Offer can be revoked by offeror anytime before acceptance by
offeree
○ Withdrawal must be communicated to offeree (Byrne & Co v
Van Tien Hoven (1880)]
○ Promise to hold offer open for certain time only binding if
consideration is given in return [Routledge v Grant (1828)]
○ For unilateral contracts:
■ Reasonable steps to bring withdrawal to the attention of relevant people
■ Can only withdraw if performance is not commenced
■ Offeror obliged not to revoke the main offer once the offeree has
commenced performance within a reasonable time [Daulia Ltd v Four
Millbank Nominees Ltd (1978), see obiter in Dickson Trading (S) Pte Ltd v
Transmarco Ltd (1989)] 13

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When an offer terminates (2)

◉ Rejection and counter-offer

○ Offeree rejects the offer expressly or impliedly (where the
offeree accepts the offer with conditions attached or makes a
counter-offer)
○ Counter-offer: Original offer lapses and new counter-offer is
capable of being accepted [Hyde v Wrench (1840)]
◉ Lapse of time
○ Offer open for specified period will lapse upon expiration of that
period
○ Where no period specified, offer will lapse after a reasonable
period of time has passed

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When an offer terminates (3)

◉ Failure of condition
○ Offer subject to a condition automatically terminates if the
condition is not met
○ Condition can be express or implied [Financings Ltd v Stimson
(1962)]
◉ Death
○ Of offeror – in some cases, only if the offeree has notice of it
[Bradbury v Morgan (1862)]
○ Of offeree – if the offer was personal to the offeree [Chia Kim
Huay v Saw Shu Mawa Min Min (2012)]

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What is an acceptance?

◉ Final and unconditional assent to terms of offer

◉ Can be express (in writing or verbally) or implied (by conduct)
◉ Must be communicated to offeror
◉ Silence does not amount to acceptance unless both parties
agree
◉ The following are NOT acceptances:
○ Counter-offers
○ Conditional acceptances (e.g. “subject to contract”) [Stuttgart Auto Pte
Ltd v Ng Shwu Yong (2005)]
◉ Acceptance cannot be withdrawn once communicated to
offeror
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Communication of acceptance
(1)
◉ General rule that acceptance must be communicated
○ Applies to all modes of instantaneous communications (Entores v
Miles Far East Corporation (1955)]
◉ Exceptions to the communication rule
○ Express waiver
■ Both parties agree that offeree’s silence will be construed as
acceptance
○ Implied waiver
■ Facts show that offeror has waived need for communication
[for eg, in unilateral contracts the requirement of
communicating acceptance is waived (acceptance is by
conduct), see Carlill v Carbolic Smoke Ball Co (1892)]
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Communication of acceptance
(2)
◉ Exceptions to the communication rule (continued)
○ Postal rule (by snail mail)
■ Postal acceptance takes effect when posted, not when
received [Adams v Lindsell (1818)]
■ Prerequisites to applying the postal rule
● Where it is reasonable to use post and has not been prohibited
by the terms of offer (where postal communication is
contemplated)
● Letter of acceptance must be properly stamped and addressed

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Electronic communications (1)

◉ Electronic Transactions Act

○ Sections 13 and 14
■ Section 13 (time of receipt of electronic communications)

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Electronic communications
(2)
■ (continued) Section 14 (invitation to treat – the default rule
for transactions/“offers” of goods and services via the
Internet will only be considered as an invitation to treat,
unless the offeror makes it clear that he intends to be bound
by such transactions/”offers”)

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Electronic communications
(3)
◉ Chwee Kin Keong v Digilandmall (2004)
○ In obiter remarks, the High Court judge appears to
endorse the application of the receipt rule to electronic
records:
■ “The Vienna Sales Convention (“the Convention”) applies in
Singapore…. It appears that in Convention transactions, the
receipt rule applies unless there is a contrary intention. Offer
and acceptances have to “reach” an intended recipient to be
effective. It can be persuasively argued that e-emails
involving transactions embraced by the Convention are only
effective on reaching the recipient. If this rule applies to
international sales, is it sensible to have a different rule for
domestic sales?”

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Links

◉ Presentation for today

◉ Shared Document
◉ Slido

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Discussion Questions -
Pointers
◉ 1a (Short response):
○ Issue (the question itself)
○ Law (any relevant case and/or statute)
○ Application to the facts
○ Conclusion (link back to the question)
◉ 1b (Short response):
○ When does offer and acceptance take place?
○ Hint: There can be two views here. Use ILAC to think through before
writing/noting. Which do you think is the better view?
◉ 1c (Short response):
○ When does offer and acceptance take place?
○ Consider the intentions of the parties from the circumstances: Is there an
intention to be bound on the part of the vendor? 23

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Discussion Questions -
Pointers

◉ 2a (Short response):
○ Is a contract formed? (Is there an invitation to treat? When does offer
and/or acceptance take place?)
○ Relevant case?
○ Application and conclusion?
◉ 2b(i):
○ Create a timeline
○ I: Was the offer accepted before or after the withdrawal of the offer?
○ L: What are the relevant legal principles? Relevant case?
○ Application and conclusion? (Can consider alternative views but
decide on the better view)
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Discussion Questions -
Pointers

◉ 2b(ii):
○ Create a timeline
○ I: Was the offer accepted before or after the withdrawal of the offer?
○ L: What are the relevant legal principles?
■ Case?
■ Statute?
○ Application and conclusion?

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Thanks!
Any questions ?
Stay back for a chat or email me at
◉ corinne.tan@ntu.edu.sg

Special thanks to all the people who made and released these awesome resources for free:
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Presentation template by SlidesCarnival

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