ACCA F4 Chapter 2 Flashcards

1 Essential elements of a valid contract 1) Agreement, i.e. offer and acceptance 2) Consideration 3) Intention to create legal relations 4) Capacity and Legality

1 Essential elements of a valid contract 1) A contract can be in any form - simple contract. It may be written, or oral, or inferred from the conduct of the parties. Most contracts are simple contracts. 2) Some contracts must be made in a particular form such as writing. Contracts for the sale of land must be in writing. 3) Conveyances of land and leases for three years or more must be by deed – these are known as specialty contracts. Such contracts must be in writing, signed, witnessed and delivered (i.e. intended to take effect). 4) Made by deed is 12 years. For all other contracts, the limitation period is six years.

2 Offer 1) An offer is a definite and unequivocal statement of willingness to be bound on specified terms without further negotiations. 2) An offer can be in any form – oral, written or by conduct. However, it is not effective until it has been communicated to the offeree. For example, if a reward is offered for the return of a lost item, it cannot be claimed by someone who did not know of the reward before they returned the item. 3) An offer can be made to a particular person, to a class of persons or even to the whole world - Carlill v Carbolic Smoke Ball Co (1893).

2 Offer 1) An invitation to treat 2) A mere statement of selling price in response to a request for information 3) A mere statement of intention to sell

2 Offer 1) An invitation to treat means an invitation to the other party to make an offer; e.g. ‘we may be prepared to sell’ – Gibson v Manchester City Council (1979). 2) - Most advertisements (except if no further negotiations were intended or expected) - Shop window displays - Goods on shop shelves

2 Offer 1) Partridge v Crittenden (1968) Facts: The defendant put the following advertisement in a magazine: ‘Bramblefinch cocks and hens, 25s each’ Held: This was an invitation to treat and not an offer. The advertisement stated that the birds were for sale, not that the seller would sell to all comers 2) Carlill v Carbolic Smoke Ball Co (1893) Facts: The manufacturers of a medicinal ‘smoke ball’ advertised in a newspaper that anyone who bought and used the ball properly and nevertheless contracted influenza would be paid a £100 reward. Mrs Carlill used the ball as directed and did catch influenza. The defendant claimed that there was no enforceable contract because Mrs Carlill had never notified the company that she accepted its offer Held: The court rejected the defendants argument on the basis that the wording of the advert was such that Mrs Carlill needed only to comply with the terms of the offer and there was no further negotiations intended. Once Mrs Carlill had satisfied the conditions she was entitled to enforcement of the contract. Furthermore, weight was placed on the £1000 bank deposit that claimed to 'show their sincerity in the matter' in showing that the advertisement was not just a mere 'puff'.

2 Offer Fisher v Bell (1961) Facts: The Restriction of Offensive Weapons Act 1959 creates a criminal offence of ‘offering for sale’ certain offensive weapons. A shopkeeper was prosecuted under this statute for displaying a flick knife in his shop window, and thus 'offering it for sale'. Held: A window display was not an offer of sale, but only an invitation to treat. So the display did not infringe the law.

2 Offer Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) Facts: Statute requires that the sale of certain pharmaceuticals must be carried out under the supervision of a qualified pharmacist. Boots operated a store where the drugs were displayed on a self-service basis and the customers paid at a cash desk for the goods they had selected. A pharmacist was present at the cash desk but not at the shelves where the goods were displayed with a price tag. The Pharmaceutical Society claimed that the statute was being contravened. Held: The display of goods in a shop was not an offer, but an invitation to treat. It was the customer who made the offer and Boots could either accept or reject this offer at the cash desk (in the presence of the qualified pharmacist). The act constituting the acceptance is the ringing up of the price on the till by the cashier and at that moment a binding contract of sale is made

2 Offer Harvey v Facey (1893) Facts: The defendant (F) was in negotiations with the regarding the sale of his store. The claimant (H) sent the defendant a telegram stating: “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid.” On the same day, F sent H a reply by telegram stating: “Lowest price for Bumper Hall Pen £900.” H sent F another telegram agreeing to purchase the property at the asking price. F refused to sell and H sued for specific performance and an injunction to prevent the new buyer from taking the property. Held: The court held that by replying to H's question regarding the lowest price of the property, F did not make an affirmative answer to the first question regarding his willingness to sell. The defendant’s response to the query was simply a statement of information. It was not an offer capable of being accepted by the claimant.

2 Offer Harris v Nickerson (1873) Facts: The defendant placed an advertisement in London papers that certain items, including some office furniture would be placed up for auction over three days. The claimant obtained a commission to buy the office furniture and expended time and expense to travel to bid for the office furniture. On the third day, the lots for the office furniture were withdrawn. The claimant sued for loss of time and expense. Held: An advertisement that goods will be put up for auction does not constitute an offer to any person that the goods will actually be put up, and that the advertiser is therefore free to withdraw the goods from the auction at any time prior to the auction.

2 Offer - revocation - rejection - lapse

2 Offer 1) Revocation by the offeror can be made at any time before acceptance, even if the offeror has agreed to keep the offer open. 2) Routledge v Grant (1828) Facts: G offered to buy R’s horse and stated that the offer would remain open for six weeks. However, before the six-week period had elapsed, G withdrew the offer. Held: G was entitled to withdraw the offer at any time before acceptance.

2 Offer 1) The revocation must be communicated to the offeree, i.e. it must be brought to his actual notice. Byrne v Leon Van Tienhoven (1880) Facts: An offer was posted on 1 October. It reached the claimant on 11 October. The claimant immediately cabled his acceptance. In the meantime, the defendant had changed his mind and posted a letter of revocation on 8 October. The revocation was received by the claimant after he had cabled his acceptance Held: The revocation did not take effect as it was not communicated to the claimant prior to his acceptance. The contract was therefore binding. 2) The revocation can be communicated by the offeror or a reliable third party. Dickinson v Dodds (1876) Facts: The defendant agreed to keep an offer open for two days. However, in the meantime the defendant sold the property to a third party. The offeree was told of the sale by a third party, but then attempted to accept the original offer. Held: This was a reasonable way of communicating revocation. The offer was therefore properly revoked and could not be accepted.

2 Offer 1) If the offeree pays the offeror to keep the offer open, any revocation will amount to a breach of that collateral contract. The offeree could claim damages for the loss of the opportunity to accept the offer, although he could not accept the offer itself. 2) In the case of a unilateral/option contract, the offeror cannot revoke his offer once the offeree has begun to perform the acts which would amount to acceptance. Errington v Errington (1952) Facts: A father offered to transfer his house to his son if the son paid the mortgage. The son began to pay the mortgage but, when the father died, his personal representatives wanted to withdraw the offer. Held: The offer could not be withdrawn because the son, by paying some of the instalments, had started acceptance.

2 Offer 1) Rejection by the offeree may be outright or by means of a counter-offer. A counter-offer is an offer made in response to an offer. 2) Hyde v Wrench (1840) Facts: Wrench offered to sell Hyde a farm for £1,000. Hyde made a counter-offer, by offering £950. Wrench rejected this. Later Hyde came back and said that he now accepted the original offer of £1,000. Wrench rejected it. Held: Hyde could no longer accept the original offer. It had been terminated by the counter-offer and was no longer capable of acceptance. His ‘acceptance’ was merely a fresh offer which Wrench was free to turn down.