Comparison of Contracts in English Law

There are two different categories of contacts in English Law; unilateral contracts and bilateral contracts. The distinction between bilateral and unilateral contracts has long been considered vital.[1] It has been regarded as an axiomatic truth revealing the basic order of the contractual system[2] which ‘is logical in theory, simple in application and just in result.’[3] This essay will analyse both types of contracts and set out the differences using the relevant case law.

What are bilateral contracts?

The classic illustration of bilateral contract is where A promises to sell goods to B in return for B promising to pay the price. This is a bilateral contract because as soon as these promises have been exchanged, there is a valid contract to which both parties are legally bound. Therefore, bilateral is the offer of a promise for a promise. The same applies to services. If A offers to clean B’s garden upon a rate, both parties have defined obligations; A needs to clean the garden and B has to pay the agreed rate.

Examples of unilateral contracts

On the other hand, if A says to B, ‘If you decide to clean my garden tomorrow, I will pay you £x once it is cleaned and B does not committ but says that if he is able to do it, he  shall be happy to take £x, then this does not constitute a bilateral agreement. A has offered to pay an amount in certain circumstances but B has made no commitment to perform. B is totally free to decide whether he will undertake the work  and if B decides that he does not wish to do it, then A cannot raise a claim against him.[4] This is an example of a one-sided agreement known as unilateral contract. However, if he decides to undertake the work, this would mean that he accepted A’s offer of £x and the bilateral contract will be formed.

Establishing one side obligation was challenging in the past as there was a difficulty to define the distinction between unilateral and bilateral contracts resulting in misunderstandings of the mutual obligations by the parties.[5] The developments shaping the modern law acknowledges that the issue now is not whether the offeree has made a return promise but if there has been initially an original promise made  by the offeror.[6]

The key case concerning unilateral contracts is Carlill v Carbolic Smoke Ball Company Ltd.[7] The defendants advertised in a newspaper that they would pay £100 to anyone who ‘contracts the increasing epidemic influenza, colds, or any disease taking cold, after having used the ball three times daily for two weeks according printed directions supplied with each ball’.[8] The claimant caught flu after using the product and claimed the sum of £100. The defendants argued that the advertisement was a ‘mere puff’ and that, there was no offer made to anyone as it was not possible to contract with the world at large.

Lindley LJ found that there was a clear promise expressed in language.[9] Firstly, it seems that the promise is not made with anybody in particular. However, this is a usual situation when it comes to advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and those who does perform the condition accepts the offer. In this case, the advertisement offers £100 to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer.[10]

The meaning of The Smoke Ball Case

The approach taken in Carlill is relevant to rewards for e.g the return of lost property, or information leading to the conviction of an offender. These ‘unilateral’ contracts, which depend on someone choosing to do something in order to receive the reward are different from advertisements promoting goods, or listing the terms on which they are available for purchase, which are likely to be treated as ‘mere puffs’, or as ‘invitations to treat’.[11]

The Carlill case shows that the courts use the contract law as an instrument for discouraging misleading claims in advertising and for deterring the marketing of unproven, or even dangerous, pharmaceuticals.[12] The court protects the consumers by interpreting the events in the form of a contractual relationship giving rise to legal obligations.[13] However, by doing so, it ignores ‘alternative interpretations of the events, such as the idea that the misleading advertisement might constitute a civil wrong in itself, or that consumers who are ignorant of the properties of goods put on the market should be protected from any harmful consequences.’[14]

Another case that concerns how a contract comes about through the offer of a reward and the necessity of reliance on an offer in the formation of a contract is Williams v. Carwardine.[15] Walter Carwardine was murdered and Mrs Williams didn’t give all the information she knew about the suspects. Later, the victim’s brother and defendant published a handbill saying that he would give a reward of £20 to whoever would give sufficient information that would lead to the conviction of his brother’s murderer. Then, Williams gave more information which led to the conviction of two persons and claimed the reward. The court examined her motives and found that although she knew about the reward she did not give information to receive the reward but because she was severely beaten by the defendant. Therefore, her motive was not material.

Acceptance in unilateral and bilateral contracts

The distinction between unilateral and bilateral contracts is also important when it comes to ‘acceptance’. In unilateral contracts, the acceptance will always be by conduct –eg. cleaning the garden- although there are some issues as to what conduct establishes acceptance. After, the Carlill case, in unilateral contracts the performance of the act specified in the offer constitutes acceptance, and need not be communicated to the offeror.[16]

This can also be the case in bilateral contracts. An acceptance can be made by conduct when there may be no exchange of words between the customer and cashier in a shop. The customer may go to the cashier with the goods that wishes to buy for payment, constituting an offer to buy, which will be accepted by the cashier taking the money and giving the receipt of the transaction. This was discussed in the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists[17] where it was argued whether the sale was completed once the customer took an article from the shelves and put it into the basket. The court held that it is unacceptable and impossible to say that the contract is completed once the goods are put into the basket because the customer may change his mind and finally decide not to buy the goods.

However, there are cases that concern more complicated transactions. In Brogden v Metropolitan Railway,[18] the plaintiffs sent a draft agreement to the defendants for providing a specific quantity of coal for  £1 per ton. The defendants signed the agreement and returned it to the other party, making an offer but the plaintiff’s manager placed the agreement into a drawer. There was no external manifestation of acceptance by the plaintiffs and when the order was delivered the defendants argued that there was no contract because the plaintiffs had never accepted their offer. The House of Lords agreed that it was not sufficient that the plaintiffs should have decided to accept but there had to be an external manifestation of their acceptance which had to make it known to the defendants.[19] This decision shows that a bilateral contract may be accepted by conduct without the need for a verbal or written communication of acceptance. However, evidence must be present that would lead a reasonable person to believe that the intention was to accept.[20]

In bilateral contracts, silence cannot establish acceptance. This was also discussed in the case of Felthouse v Bindley[21] where an uncle who wanted to buy a horse from his nephew wrote a letter offering a particular sum and stated that, ‘If I hear no more about him, I consider the horse mine.’ The nephew didn’t respond to the letter and sold the horse to a third party. The question here was whether the uncle had entered into a binding contract for the purchase of the horse. It was held that there wasn’t a contract because the nephew had never communicated his intention to accept his offer and although he had made moves to remove the horse from the auction which could constitute an intention to accept his offer, the uncle didn’t know about this at the time and therefore, it was not sufficient to establish the contract.[22] The only circumstance under which we can consider silence as acceptance is when the offeror has stated or given the offeree the reasonable impression to believe that silence means acceptance of the offer.[23]

The doctrine of Consideration in the English Law of  Contract

Consideration is an important doctrine of English Law. The definition arises from the case of Currie v Misa[24] where Lush J said that consideration ‘may consist either of some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other.’[25] The basic rules that govern consideration are that; it must move from the promisee; must not be past and must be sufficient but does not have to be adequate.[26]

The doctrine raises questions as to the reasons why the law should refuse to sanction a transaction for want of consideration where there is evidence that both parties intended to enter into a contract and conclude to an agreement.[27] If the court decides not to enforce such transaction because the parties failed to provide some sort of consideration, that can be argued that goes against the good faith and the reasonable expectations of the parties.[28]

In bilateral contracts, the parties are bound from the moment they exchanged promises as each promise itself is enough to establish sufficient consideration.[29] However, unilateral contracts do not bind the promisee but only the promisor, unless the promisee agrees by performing the act mentioned in the offer.[30]

Moreover, a promise is an act and those who define ‘consideration as any act of forbearance given in exchange for a promise-as Pollock said in Principles of Contract[31]- will necessarily find a consideration in every case of mutual promises.’[32] However, the enforcement of a bilateral contract may not be allowed for public policy reasons as it often excludes recovery upon unilateral contracts.[33] For example, a promise, in consideration of a counter-promise to commit a crime, will not give rise to an action in court.[34] ‘The same is true of a promise of abstention from the commission of a crime or tort or grossly immoral conduct or from the breach of an official or statutory duty. It is against the public  interest to allow an action in these circumstances, although there is a formal contract completed by the promise and the doctrine of consideration is satisfied.’[35]

The courts have not been consistent in their approach to consideration as there are situations where odd and worthless items have been regarded to be good consideration such as in the case of Ward v Byham[36] where a mother promised to keep her illegitimate child looked after and happy in order to receive money and because there was no legal obligation to keep the child happy, the court held that there was sufficient consideration.

However, in the case of White v Bluett[37] the court held that a promise made by the son not to complain about his father’s will in return for his debt to be written off, was seen to be insufficiently tangible to establish good consideration.

Revocation of Unilateral & Bilateral Contracts

In bilateral contracts, an offer is valid until is revoked and the revocation must be communicated to the offeree although it is not necessary to be communicated by the offeror themselves.[38] Revocation may be communicated by a third party providing that the third party is a reliable source of information and is one on whom both parties can rely.[39] Moreover, If the offeror has set down a deadline for acceptance, the expiry of this will end the offer; if there is no deadline, it will lapse after ‘a reasonable time’ as it was held in Ramsgate Victoria Hotel Co v Montefior[40] where it was stated that five months are too long for the acceptance of an offer to sell shares.

In Byrne & Co v Van Tienhoven & Co[41] the defendants wrote to the plaintiff on 1 October to sale him the goods. The plaintiffs received the offer on 11 October and accepted it by telegram on the same day, and also sent a letter on 15 October.  On 8 October the defendants wrote to the plaintiffs a letter to notify them the withdrawal of their offer. However, the plaintiffs read the letter  on 20 October and sued the defendants for breach of contract. The defendants argued that their offer had been withdrawn by the time the plaintiffs agreed to accept.[42] Lindley J concluded that ‘the withdrawal by the defendants on the 8th of October of their offer of the 1st was inoperative; and a complete contract binding on both parties was entered into on the 11th of October, when the plaintiffs accepted the offer of the 1st, which they had no reason to suppose had been withdrawn.’[43]

However, in unilateral contracts since the offer is a promise in return for an act and may be accepted by anyone who wishes to perform the act, the revocation to the world at large shall be made by the offeror by taking reasonable steps to notify the persons who might be likely to accept, as it was held in the American case of Shuey v United States[44]that carries a persuasive authority in England.[45]

Moreover, in unilateral contracts if the offeree has started the performance specified in the contract then it may not be revoked even though if the act has not been completed.[46]In the case of Errington v Errington & Woods[47] a father  paid a lump sum to buy a house for his son and daughter-in-law leaving a balance payable by mortgage to a building society. He promised that he would transfer the title of property to them after the last instalment had been paid. However, the father died and his representatives claimed possession. It was held that the couple were entitled to occupy the house as long as they paid the mortgage instalments. The court held that it was a unilateral contract, since it involved an act (payment of the mortgage) in return for a promise (to transfer the house once all the payments had been made). The performance had already commenced by making the mortgage repayments and therefore the promise could not be revoked.[48]

This principle was also followed in the case of Daulia v Four Millbank Nominees.[49] The parties were negotiating regarding the sale of properties and the seller promised that if the buyer sent the signed contract and a banker’s draft by 10 am the next morning, he would go ahead with the contract. The dispute arose when the buyer fulfilled this requirement but the seller refused to go ahead. Goff LJ concluded that once the offeree has commenced to undertake the act, it is too late to revoke the offer. The courts  have adopted a narrow approach on the offeror’s right to revoke their offers as  the commencing of performance is adequate to prohibit revocation.[50]

Conclusion

The English contractual system is sufficiently able to protect the reasonable expectations of parties by its own pragmatic methods and it does not come as a surprise that the English model of forming contracts are commonly used in international transactions.[51] Many academics acknowledge that the English law of contract is designed to deal with the difficulties of a modern and fast-paced business world and that’s because its rules protect the reasonable expectations of the contracting parties.[52] The distinction between unilateral and bilateral contracts establishes certainty and predictability in the resolution of contractual disputes as well as add clarity as to when the parties are bound by legal obligations and in what circumstances. 

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[1] Samuel J. Stoljar, 'The False Distinction Between Bilateral And Unilateral Contracts' [1955], Vol 64:515, The Yale Law Journal, p. 515.

[2] Ibid.

[3] Wormser, The True Conception of Unilateral Contracts, 26 YALE L.J. 136, 142 (1916).

[4] Stone, R., & Devenney, J., The modern law of contract (2019), p 47.

[5] What's the Difference Between Bilateral and Unilateral Contracts’ (Rocket Law) < https://www.rocketlawyer.com/article/whats-the-difference-between-bilateral-and-unilateral-contracts.rl> accessed on  8/03/2020.

[6] Ibid.

[7] [1893] 1 QB 256.

[8] Finch Emily, Fafinski Stefan, Contract Law (2018), 6th Edition, p 8.

[9] Ibid.

[10] Ibid.

[11] Stone R & Devenney J, Text, cases and materials on contract law, (2017), p 40.

[12] Collins, H, The Law of Contract , 2003, 4th edn, London: Lexis-Nexis, p 4.

[13] Ibid.

[14] Ibid.

[15] (1833) 4 B. & Ad. 621; 110 E.R.590.

[16] Simpson, AWB, ‘Quackery and Contract Law: the case of the Carbolic Smoke Ball’ (1985) 14 J Leg St 345, pp 375–379.

[17] [1953] 1 QB 401.

[18] (1877) 2 App Cas 666.

[19] See n.9, p 60.

[20] Ibid.

[21] [1862] EWHC CP J35.

[22] See n.17.

[23] Miller  CJ,‘ Felthouse v Bindley  Re-visited’ (1972) 35 MLR, p 489.

[24] LR 10 Ex 153.

[25] Ibid.

[26] See n.6, p 37.

[27] Steyn, J, Contract law: fulfilling the reasonable expectations of honest men, Law Quarterly Review, (1997), 113:433, p 437.

[28] Ibid.

[29] See n.26.

[30] Ibid.

[31] Dunlop v Selfridge [1915] AC 847.

[32] James Barr Ames, Two Theories of Consideration. II. Bilateral Contracts, Harvard Law Review, Vol. 13, No.1 (1899), p 29.

[33] Ibid, supra n.1.

[34] Ibid.

[35] Ibid.

[36] [1956] 1 WlR 496.

[37] (1853) lJ Ex 36.

[38] See n.6, p 13.

[39] Dickinson v Dodds (1876) 2 ch d 463.

[40] (1866) LR 1 Ex 109.

[41] (1880) 5 CPD 344 (CP).

[42] See n.10, p 71.

[43] Ibid.

[44] (1875) 92 US 73.

[45] See n.21.

[46] Ibid, p 13.

[47] [1952] 1 KB 290.

[48] See n.25.

[49] [1978] Ch 231.

[50] Mark Pettit JR, Modern Unilateral Contracts, Boston University Law Review (1983), Vol 63, p.595.

[51] See n.24, p 442.

[52] Ibid.