Contact Law

8/8/2019 Contact Law

1/30

Contact LawContact Law


2/30

DefinitionDefinition

A contract may be defined as a legallyA contract may be defined as a legally

binding agreement or,binding agreement or, "A promise or"A promise or

set of promises which the law willset of promises which the law willenforce".enforce".


3/30

The agreement will create rights andThe agreement will create rights and

obligations that may be enforced in theobligations that may be enforced in the

courts.Th

e normal meth

od ofcourts.Th

e normal meth

od ofenforcement is an action for damagesenforcement is an action for damages

for breach of contract, though in somefor breach of contract, though in some

cases the court may order performancecases the court may order performance

by the party in default.by the party in default.


4/30

CLASSIFICATIONCLASSIFICATION

1.1. Contracts by deedContracts by deed

A deed is a formal legal document signed, witnessed and deliveredA deed is a formal legal document signed, witnessed and deliveredto effect a conveyance or transfer ofproperty or to create a legalto effect a conveyance or transfer ofproperty or to create a legal

obligation or contract.obligation or contract.

2.2. Simple contractsSimple contracts

Contracts which are not deeds are known assimple contracts. TheyContracts which are not deeds are known assimple contracts. Theyareinformal contracts and may be madein any wayareinformal contracts and may be madein any way -- in writing,in writing,orally or they may beimplied from conduct.orally or they may beimplied from conduct.


5/30

1.1. Bilateral contractsBilateral contracts

A bilateral contract is one where a promise byA bilateral contract is one where a promise by

one partyisexchanged for a promise by theone partyisexchanged for a promise by the

other. Theexchange ofpromisesisenough toother. Theexchange ofpromisesisenough to

render them both enforceable. Thusin arender them both enforceable. Thusin a

contract for thesale ofgoods, the buyercontract for thesale ofgoods, the buyer

promises to pay the price and thesellerpromises to pay the price and theseller

promises to deliver thegoods.promises to deliver thegoods.


6/30

2.2. Unilateral contractsUnilateral contracts

A unilateral contract is one where one party promises toA unilateral contract is one where one party promises todo somethingin return for an act of the other party, asdo somethingin return for an act of the other party, asopposed to a promise, eg, where X promises a reward toopposed to a promise, eg, where X promises a reward toanyone who will find his lost wallet. Theessence of theanyone who will find his lost wallet. Theessence of theunilateral contract is that only one party, X, is bound tounilateral contract is that only one party, X, is bound todo anything. No oneis bound to search for the lostdo anything. No oneis bound to search for the lost

wallet, but ifY, havingseen the offer, recovers the walletwallet, but ifY, havingseen the offer, recovers the walletand returnsit, he/sheisentitled to the reward.and returnsit, he/sheisentitled to the reward.


7/30

ELEMENTSELEMENTS

AgreementAgreement

An agreement isformed when one partyAn agreement isformed when one party

accepts the offer ofanother and involves aaccepts the offer ofanother and involves a

"meeting of the minds"."meeting of the minds".


8/30

.. ConsiderationConsiderationBoth parties must have provided consideration, ie, eachBoth parties must have provided consideration, ie, eachside must promise to give or do somethingfor the other.side must promise to give or do somethingfor the other.

Intention to create legal relationsIntention to create legal relations

The parties must haveintended their agreement to haveThe parties must haveintended their agreement to havelegal consequences. The law will not concern itselfwithlegal consequences. The law will not concern itselfwithpurely domestic orsocial agreements.purely domestic orsocial agreements.


9/30

FormForm

In some cases, certain formalities (that is, writing) must be observed.In some cases, certain formalities (that is, writing) must be observed.

CapacityCapacityThe parties must be legally capable ofenteringinto a contract.The parties must be legally capable ofenteringinto a contract.

ConsentConsent

The agreement must have been entered into freely. Consent may beThe agreement must have been entered into freely. Consent may bevitiated byvitiated byduressduress ororundueinfluenceundueinfluence..

LegalityLegality

The purpose ofthe agreement must not beillegal or contrary to publicThe purpose ofthe agreement must not beillegal or contrary to publicpolicy.policy.


10/30

ENFORCEABILITYENFORCEABILITY

Void contractsVoid contracts

A "void contract" is one where the wholeA "void contract" is one where the whole

transaction is regarded as a nullity. It means thattransaction is regarded as a nullity. It means thatat no time has there been a contract betweenat no time has there been a contract between

the parties. Anygoods or money obtained underthe parties. Anygoods or money obtained under

the agreement must be returned. Whereitemsthe agreement must be returned. Whereitems

have been resold to a third party, they may behave been resold to a third party, they may be

recovered by the original ownerrecovered by the original owner


11/30

Voidable contractsVoidable contracts

A contract which isvoidable operatesin everyA contract which isvoidable operatesin every

respect as a valid contract unless and until onerespect as a valid contract unless and until oneofthe parties takessteps to avoid it. Anythingofthe parties takessteps to avoid it. Anything

obtained under the contract must be returned,obtained under the contract must be returned,

insofar as thisis possible. Ifgoods have beeninsofar as thisis possible. Ifgoods have been

resold before the contract was avoided, theresold before the contract was avoided, theoriginal owner will not be able to reclaim themoriginal owner will not be able to reclaim them


12/30

Unenforceable contractsUnenforceable contracts

An unenforceable contract is a validAn unenforceable contract is a valid

contract but it cannot beenforced in thecontract but it cannot beenforced in the

courtsifone of the parties refuses to carrycourtsifone of the parties refuses to carry

out its terms. Items received under theout its terms. Items received under the

contract cannot generally be reclaimedcontract cannot generally be reclaimed


13/30

FORMATIONOF A CONTRACTFORMATIONOF A CONTRACT

A contract may be defined as anA contract may be defined as anagreement between two or more partiesagreement between two or more partiesthat is intended to be legally binding.that is intended to be legally binding.

The first requisite of any contract is anThe first requisite of any contract is anagreement (consisting of an offer andagreement (consisting of an offer andacceptance). At least two parties areacceptance). At least two parties are

required; one of th

em, th

e offeror,required; one of th

em, th

e offeror,makes an offer which the other, themakes an offer which the other, theofferee, accepts.offeree, accepts.


14/30

OFFEROFFER

An offer is an expression of willingnessAn offer is an expression of willingness

to contract made with the intention thatto contract made with the intention that

it shall become binding on the offerorit shall become binding on the offeror

as soon as it is accepted by the offeree.as soon as it is accepted by the offeree.


15/30

A genuine offer is different from what isA genuine offer is different from what is

known as an "invitation to treat", ieknown as an "invitation to treat", ie

where a party is merely inviting offers,where a party is merely inviting offers,

whichhe is then free to accept orwhichhe is then free to accept or

reject. The following are examples ofreject. The following are examples of

invitations to treat:invitations to treat:


16/30

AUCTIONSAUCTIONS

DISPLAY OF GOODSDISPLAY OF GOODS

ADVERTISEMENTSADVERTISEMENTS MERE STATEMENTS OF PRICEMERE STATEMENTS OF PRICE

TENDERSTENDERS


17/30

ACCEPTANCEACCEPTANCE

An acceptanceis a final and unqualifiedAn acceptanceis a final and unqualified

acceptance of the terms ofan offer. Toacceptance of the terms ofan offer. To

make a binding contract the acceptancemake a binding contract the acceptance

must exactly match the offer. The offereemust exactly match the offer. The offeree

must accept all the terms of the offer.must accept all the terms of the offer.


18/30

An acceptanceis a final and unqualifiedAn acceptanceis a final and unqualified

acceptance of the terms ofan offer. Toacceptance of the terms ofan offer. To

make a binding contract the acceptancemake a binding contract the acceptance

must exactly match the offer. The offereemust exactly match the offer. The offeree

must accept all the terms of the offermust accept all the terms of the offer


19/30

COUNTER OFFERSCOUNTER OFFERS

Ifin his reply to an offer, the offereeIfin his reply to an offer, the offeree

introduces a new term orvaries the termsintroduces a new term orvaries the terms

ofthe offer, then that reply cannot amountofthe offer, then that reply cannot amount

to an acceptance. Instead, the replyisto an acceptance. Instead, the replyis

treated as a "counter offer", which thetreated as a "counter offer", which the

original offerorisfree to accept or reject. Aoriginal offerorisfree to accept or reject. A

countercounter--offer also amounts to a rejectionoffer also amounts to a rejectionofthe original offer which cannot then beofthe original offer which cannot then be

subsequently acceptedsubsequently accepted


20/30

CONDITIONAL ACCEPTANCECONDITIONAL ACCEPTANCE

TENDERSTENDERS

COMMUNICATION OF ACCEPTANCECOMMUNICATION OF ACCEPTANCE


21/30

EXCEPTIONS TO THEEXCEPTIONS TO THE

COMMUNICATION RULECOMMUNICATION RULE a) In unilateral contracts the normal rulefor communication ofacceptance toa) In unilateral contracts the normal rulefor communication ofacceptance to

the offeror does not apply. Carrying out thestipulated task isenough tothe offeror does not apply. Carrying out thestipulated task isenough toconstitute acceptance of the offer.constitute acceptance of the offer.

b) The offeror mayexpressly orimpliedly waive the need for communicationb) The offeror mayexpressly orimpliedly waive the need for communication

ofacceptance by the offeree, eg, wheregoods are dispatched in responseofacceptance by the offeree, eg, wheregoods are dispatched in responseto an offer to buy.to an offer to buy.

c) The Postal Rulec) The Postal Rule -- Where acceptance by post has been requested orWhere acceptance by post has been requested orwhereit is an appropriate and reasonable means ofcommunicationwhereit is an appropriate and reasonable means ofcommunicationbetween the parties, then acceptanceis complete assoon as the letter ofbetween the parties, then acceptanceis complete assoon as the letter of

acceptanceis posted, even ifthe letteris delayed, destroyed or lost in theacceptanceis posted, even ifthe letteris delayed, destroyed or lost in thepost so that it never reaches the offeror. See:post so that it never reaches the offeror. See:


22/30

METHOD OF ACCEPTANCEMETHOD OF ACCEPTANCE

The offer may specify that acceptanceThe offer may specify that acceptance

must reach the offeror in which casemust reach the offeror in which case

actual communication will be required.actual communication will be required.

If a method is prescribed without itIf a method is prescribed without it

being made clear that no other methodbeing made clear that no other method

will suffice then it seems that anwill suffice then it seems that an

equally advantageous method wouldequally advantageous method wouldsufficesuffice


23/30

KNOWLEDGE OF THE OFFERKNOWLEDGE OF THE OFFER

An offeree may perform the act that constitutesAn offeree may perform the act that constitutesacceptance of an offer, with knowledge of that offer,acceptance of an offer, with knowledge of that offer,but for a motive other than accepting the offer. Thebut for a motive other than accepting the offer. Thequestion that then arises is whetherhis act amountsquestion that then arises is whetherhis act amountsto a valid acceptance. The position seems to be that:to a valid acceptance. The position seems to be that:

(a) An acceptance which is wholly motivated byfactors(a) An acceptance which is wholly motivated byfactorsother than theexistence of the offer has no effect.other than theexistence of the offer has no effect.

(b) Where, however, theexistence of the offer playssome(b) Where, however, theexistence of the offer playssome

part, howeversmall, in inducing a person to do thepart, howeversmall, in inducing a person to do therequired act, thereis a valid acceptance of the offer.required act, thereis a valid acceptance of the offer.See:See:


24/30

CROSSCROSS--OFFERSOFFERS

A writes to B offering to sell certain propertyA writes to B offering to sell certain property

at a stated price. B writes to A offering to buyat a stated price. B writes to A offering to buy

the same property at the same price. Thethe same property at the same price. The

letters cross in the post. Is there (a) an offerletters cross in the post. Is there (a) an offerand acceptance, (b) a contract? This problemand acceptance, (b) a contract? This problem

was discussed, obiter, by the Court in Tinn vwas discussed, obiter, by the Court in Tinn v

Hoffman (1873) 29 LT 271. Five judges saidHoffman (1873) 29 LT 271. Five judges said

that crossthat cross--offers do not make a bindingoffers do not make a bindingcontract. One judge said they do.contract. One judge said they do.


25/30

TERMINATION OF THE OFFERTERMINATION OF THE OFFER

1. ACCEPTANCE1. ACCEPTANCE

Once an offerhas been accepted, aOnce an offerhas been accepted, abinding contract is made and the offerbinding contract is made and the offerends.ends.

2. REJECTION2. REJECTION

If the offeree rejects the offer that is theIf the offeree rejects the offer that is theend of it.end of it.


26/30

3. REVOCATION3. REVOCATION

The offer may be revoked by the offeror atThe offer may be revoked by the offeror at

any time until it is accepted. However, theany time until it is accepted. However, the

revocation of the offer must berevocation of the offer must becommunicated to the offeree(s). Unless andcommunicated to the offeree(s). Unless and

until the revocation is so communicated, it isuntil the revocation is so communicated, it is

ineffective. See:ineffective. See:

ByrnevVan Tienhoven (1880) 5 CPD 344.ByrnevVan Tienhoven (1880) 5 CPD 344.


27/30

The revocation need not beThe revocation need not becommunicated by the offerorcommunicated by the offerorpersonally, it is sufficient if it is donepersonally, it is sufficient if it is done

through a reliable third party. See:through a reliable third party. See: Dickinson vDodds (1876) 2 ChD 463.Dickinson vDodds (1876) 2 ChD 463.

Where an offer is made to the wholeWhere an offer is made to the whole

world, it appears th

at it may be revokedworld, it appears th

at it may be revokedby taking reasonable steps. See:by taking reasonable steps. See:

Shueyv United States [1875] 92 US 73Shueyv United States [1875] 92 US 73


28/30

LAPSE OF TIMELAPSE OF TIME

Where an offerisstated to be open for aWhere an offerisstated to be open for a

specific length of time, then the offerspecific length of time, then the offer

automatically terminates when that timeautomatically terminates when that time

limit expires. Where thereis no expresslimit expires. Where thereis no express

time limit, an offeris normally open onlytime limit, an offeris normally open only

for a reasonable timefor a reasonable time


29/30

FAILUREOF A CONDITIONFAILUREOF A CONDITION

An offer may be made subject toAn offer may be made subject toconditions. Such a condition may beconditions. Such a condition may be

stated expressly by the offeror orstated expressly by the offeror orimplied by the courts from theimplied by the courts from thecircumstances. If the condition is notcircumstances. If the condition is notsatisfied the offer is not capable ofsatisfied the offer is not capable ofbeing accepted. See:being accepted. See:


30/30

7. DEATH7. DEATH

The offeree cannot accept an offer afterThe offeree cannot accept an offer after

notice of th

e offeror's death

. However,notice of th

e offeror's death

. However,if the offeree does not know of theif the offeree does not know of the

offeror's death, and there is noofferor's death, and there is no

personal element involved, then he maypersonal element involved, then he may

accept the offer.accept the offer.

Documents

Contact Law