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Principles of Contract Law Essay

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Published: 4th Nov 2020

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Principles of Contract Law

Contractual relationship is a widespread and varied phenomenon which is pervasive in all world’s languages. Contractual relationship is known as a legal relationship between two parties or more and demonstrate by an offer and valid consideration. All contracts are agreement, however, not all agreements are contracts which means there are several elements that demonstrate whether if there is an agreement or not. Offer and Acceptance are the most important elements to evidence the agreement. Contract law could be bilateral or unilateral. Also, the contract may be between people who are not related to each other like Great Northern Railway Co v Witham [1873].[1] Indeed, offer, acceptance and consideration are the most important points to show the existence of a contract, therefore, worth discussing first for the traditional requirements (offer, acceptance, and consideration) and then move to the contemporary requirements that needs to show the evidenced of agreement, and finally the conclusion that comes after the discussion about the traditional and contemporary requirements.

The reasonable approach examines for the exterior evidence of an agreement. Traditionally, agreements must be advanced by an offer that provided by the offeror, and the other party who is offeree has to complete acceptance to that offer. The traditional approach is thorough and organized to support certain, however, this approach is not flexible and obviously artificial.[2] In New Zealand Shipping Co. Ltd v A M Satterthwaite Co. Ltd, The Eurymedon [1975], Lord Wilberforce noticed that the formation that related to the offer and acceptance usually did not fit with the contemporary transaction and the judges have to search for external evidence.[3] Any agreements must have offer, acceptance, and consideration.

An offer knows as a willingness to contract under specific conditions is provided to make the offeree obliged to apply what is stated in the contract.[4] The offer must be clear and provide terms which are that the terms set as a legally binding agreement if the offeree has accepted. In addition, an offer can be directed to a single person, group of people, or even to the whole world as Carlill v The Carbolic Smoke Ball Company [1893].[5]Offer usually different from an invitation to treat, which means that invitation to treat is not an offer, but it is an inviting for consumer to bargain.[6] There are several cases relevant to an invitation to treat, the first case that is relevant to advertisement when the defendant posted an advertisement for sale a bramble finch and hens. S. 6 of the protection of Birds Act 1954 consider it an offence and the defendant has been charged with unlawfully offering. However, the defendant was not guilty because an invitation to treat not an offer[7]. Moreover, invitation to treat with goods in shops such as Fisher v Bell [1961] [8] the defendant was not guilty, the display of the knife in the window was not an offer it was an invitation to treat. Moreover, Tenders is usually an invitation to treat where tenders have made the offer and has freedom to define which will accept.[9] The common case for that is Spencer v Harding [1870][10] there is no offer that was an invitation to treat because the tender is an invitation to treat and Harding did not plan to sell for the highest bidder.[11] In addition, Harvela Investment v Royal Trust of Canada [1986][12] an example of the unilateral contract that based on express guarantees to accept the highest bid. In the case, the invitation to treat was accepted by individuals who bid, then the tender who has the highest bidder followed by a bilateral contract.   

Acceptance defines as unconditional assents to the terms of that offer which is made by accepting and intention.[13] Acceptance must be fully completed and unconditional which means that the offeree must accept the term exactly as the offeror proposed it unconditionally. In addition, acceptance must be communicated between parties which means the offeror must be clear that offeree has accepted his offer.[14] In Entores Ltd v Miles Far East Corporation [1955][15] the defendants were in Holland when the claimants were in England sent to the defendants a telex offer and the defendants have replied with telex communication, so the contract has taken place because there was to communicate between them. Moreover, there is deference between counter offer and mere request for information, in Stevenson v McLean [1880] [16]McLean was asking for more information about the process to pay the iron but not to binding a contract, so there is no counter offer. Silence does not consider as an acceptance as in Felthouse v Bindly [1862] [17]the horse was sold by mistake at auction and the uncle sued auctioneer, but there is a no contract and the silence does not an acceptance.[18] The postal rule has been developed since the nineteen century to solve the problems that related to the formation of contracts via post. The rule state that the offeree acceptance occurs at the same moment of posting by using the Royal Mail. However, the postal rule does not apply for acceptance by e-mail, faxes, or hand delivery.[19] There are several incidents of the postal rule, the first one is posting before discovering attempted revocation which means since the acceptance posted then the offeror cannot be able to revoke the offer.[20] In Byrne v Van Tienhoven [1880] [21]the offer has made and accepted by letter that send through the post. The second incident is lost postal acceptance, which is proving that a posting is enough, even if the letter does not reach to the offeror and the letter must have a stamped properly as evidenced in Household Fire Insurance Co v Grant [1879].[22] The last incident is appropriate of postal acceptance, when the offeree can invoke if the offeror restricts that acceptance should be by post, or if the posting was reasonable. In Henthorn v Fraser [1892] [23] the offer was cancelled before the postal acceptance has received, but the offer has been already posted.

Agreements must promote by consideration and if there is no consideration, then there is no contract. Consideration is the most important and difficult requirements in traditional approach and knows in Dunlop v Selfridge Co [1915] the price that bought for the promise and that promise which given for the amount of money is enforceable.[24] In Bilateral contract both parties must provide consideration, however, in unilateral contract the promise only from one party and there is no other party. In addition, consideration need not be adequate, but must be sufficient, in Chappell & Co. Ltd v Nestle’ Co. Ltd [1960] the value of wrappers was not found and the sale was not covered by s.8.[25] In Twiddle v Atkinson [1861][26] the groom was not a party to the contract, so there is no agreement because the consideration must provide from the promise. Moreover, past consideration created for the promises that provide after the contract have been agreed, an example of that is Re McArdle [1951][27]. However, in Lampleigh v Braithwait [1615] [28]the consideration had taken because the promise to create after the performance had been done. In consideration, there is a pre-existing obligation, a common case for that is Williams v Roffey Bros, & Nicholls (Contractors) Ltd. [1990][29] The appellants offer Williams bonus payment to finish the work at a specific time, when Williams finished and asked them for the bonus the appellants refused to pay for him. Williams sued them and the Court of Appeal held that the promise for a bonus was enforceable.[30]Unless there is no consideration, then there is no agreement.

Contemporary approach is usually focused on the conduct of parties because some agreements have not had a clear offer and acceptance, so the conduct of the parties is the main evidence of the agreement.[31] Brogden v Metropolitan Railway [1877] shows that difficult of classifies the time of the formation in the agreement that based on conduct, however the court found the contract to exist. In addition, in RTS Flexible System Ltd v Molkerei Alois Muller GmbH & Co. KG [2010][32] the performance was not usually modify to find a contract between parties, there was an agreement to the all terms, however the performance was important to show whether the contract binding existed. There are able methods to illustrate whether if there is an agreement or not without traditional approach of offer and acceptance.[33]Moreover, there is a previous situation in case law that offer and acceptance did not work, which is included the third party in negotiating process such as Clarke v Dunraven [1897],[34] or when the court using the contract to force an obligation Upton-on-Seven RDC v Powell [1942].[35] Supplementary to contemporary approach, acceptance can be by sign or even by email, in L’Estrange v Graucob [1934] [36]the defendant signed to pay cigarette vending machine, the machine did not work and when he sued, the claim was not successful because of the sign. The same for Immingham Storage Company Limited v Clear Plc [2011] [37]since Clear accepted the offer by signing the quotation, because of that the terms have consistent with the intention and there is a valid contract.  

Traditional approach and contemporary are important to show the existence of contractual agreement. Even the House of Lords still used the traditional analysis of an offer and acceptance, there are some situations that did not solve with an offer and acceptance. Some cases have to analysis the conduct of each party to evidence whether if there a valid contract.

Books:

1-       Andrews N, Contract Law (Cambridge University 2011)

2-      Burrows A, A Casebook on Contract (6th edn, Hart Pub 2018)

3-      Elliott CF Quinn, Contract Law (9th edn, Harlow: Pearson Education 2013)

4-      MacIntyre E, Business Law (9th edn, Pearson 2018)

5-      Merkin R, S SaintierJ Poole, Poole's Textbook on Contract Law (14th edn, Oxford, United Kingdom: Oxford University Press 2019)

6-      Poole J, Textbook on Contract Law (12th edn, Oxford University 2014)

7-      Robert Merkin, Séverine Saintier and Jill Poole, Poole's Textbook on Contract Law (14th edn, Oxford, United Kingdom: Oxford University Press 2019)

Article:

1-     Che Hashim R, 'Postal Rule In Acceptance Via Email' (2018) 44 Commonwealth Law Bulletin accessed 4 November 2019

Cases:

1-      Carlill v The Carbolic Smoker Ball Company [1893] 1 QB 525 (Court of Appeal)

2-      Chappell & Co. Ltd v Nestle’ Co. Ltd [1960] AC 87

3-      Clarke v Dunraven [1897] AC 59

4-      Entores Ltd v Miles Far East Corporation [1955] 2 Q.B 327; [1955] 3 W.L.R. 48 CA

5-      Great Northern Railway v Witham [1873] LR9 CP 16

6-      Harvela Investment v Royal Trust of Canada [1985] CH 103, [1986] AC 207 (HL)

7-      Henthorn v Fraser [1892] 2 CH 27, CA

8-      Household Fire Insurance Co v Grant [1879] 4 Ex D 217, CA

9-      Immingham Storage Company Limited v Clear Plc [2011] EWCA Civ 89

10-  In Byrne v Van Tienhoven [1880] 5 CPD 344

11-  Lampleigh v Braithwait [1615] Hob 105

12-  L’Estrange v Graucob [1934] 2 KB 394

13-  Partidge v Crittenden [1968] 1 WLR 1204

14-  Re McArdle [1951] Ch 699, 1 All ER 905

15-  RTS Flexible System Ltd v Molkerei Alois Muller GmbH & Co. KG [2010] UKSC 14, [2010] 1 WLR 753, [2010] Bus LR 776

16-  Spencer v Harding [1870] LR 5 CP 561 (CP)

17-  Stevenson v McLean [1880] 5 Q.B.D. 346 QBD

18-  Twiddle v Atkinson [1861] 1 B & S 393

19-  Upton-on-Seven RDC v Powell [1942] 1 ALL ER 220

20-  Williams v Roffey Bros, & Nicholls (Contractors) Ltd. [1990] 1 QB 1


[1] Great Northern Railway v Witham [1873] LR9 CP 16

[2] Jill Poole, Textbook On Contract Law (12th edn, Oxford University 2014) 29-33

[3] New Zealand Shipping Co. Ltd v A M Satterthwaite Co. Ltd, The Eurymedon [1975] AC 154

[4] Burrows A, A Casebook On Contract (5th edn, Hart Pub 2018) 4

[5] Carlill v The Carbolic Smoker Ball Company [1893] 1 QB 525 (Court of Appeal)

[6] Ewan MacIntyre, Business Law (9th edn, Pearson 2018) 67-68

[7] Partidge v Crittenden [1968] 1 WLR 1204

[8] Fisher v Bell [1961] 1 QB 394

[9]  Robert Merkin, Séverine Saintier and Jill Poole, Poole's Textbook on Contract Law (14th edn, Oxford, United Kingdom: Oxford University Press 2019) 47[2.3.2.4.1].

[10] Spencer v Harding [1870] LR 5 CP 561 (CP)

[11] Robert Merkin, Séverine Saintier and Jill Poole, Poole's Textbook On Contract Law (14th edn, Oxford, United Kingdom: Oxford University Press 2019) 47[2.3.2.4.2].

[12] Harvela Investment v Royal Trust of Canada [1985] CH 103, [1986] AC 207 (HL)

[13] Catherine Elliott and Frances Quinn, Contract Law (9th edn, Harlow: Pearson Education 2013) 30-31.

[14] Ibid 35-37.

[15] Entores Ltd v Miles Far East Corporation [1955] 2 Q.B 327; [1955] 3 W.L.R. 48 CA

[16] Stevenson v McLean [1880] 5 Q.B.D. 346 QBD

[17] Felthouse v Bindly [1862] 11 CBNS 869

[18] Neil Andrews, Contract Law (Cambridge University 2011) 48.

[19] Rosmawani Che Hashim, 'Postal Rule In Acceptance Via Email' (2018) 44 Commonwealth Law Bulletin accessed 4 November 2019.

[20] Neil Andrews, Contract Law (Cambridge University 2011) 52.

[21] In Byrne v Van Tienhoven [1880] 5 CPD 344

[22] Household Fire Insurance Co v Grant [1879] 4 Ex D 217, CA

[23] Henthorn v Fraser [1892] 2 CH 27, CA

[24] Robert M. Merkin and Séverine Saintier, Poole's Textbook On Contract Law (14th edn, Oxford University 2019) 126-128.

[25] Chappell & Co. Ltd v Nestle’ Co. Ltd [1960] AC 87

[26] Twiddle v Atkinson [1861] 1 B & S 393

[27] Re McArdle [1951] Ch 699, 1 All ER 905

[28] Lampleigh v Braithwait [1615] Hob 105

[29] Williams v Roffey Bros, & Nicholls (Contractors) Ltd. [1990] 1 QB 1

[30] Jill Poole, Textbook On Contract Law (12th edn, Oxford University 2014) 127-128.

[31] Robert M. Merkin and Séverine Saintier, Poole's Textbook On Contract Law (14th edn, Oxford University 2019) 36-37.

[32]  RTS Flexible System Ltd v Molkerei Alois Muller GmbH & Co. KG [2010] UKSC 14, [2010] 1 WLR 753, [2010] Bus LR 776

[33] Robert M. Merkin and Séverine Saintier, Poole's Textbook On Contract Law (14th edn, Oxford University 2019) 37.

[34] Clarke v Dunraven [1897] AC 59

[35] Upton-on-Seven RDC v Powell [1942] 1 ALL ER 220

[36] L’Estrange v Graucob [1934] 2 KB 394

[37] Immingham Storage Company Limited v Clear Plc [2011] EWCA Civ 89

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