LECTURE 4 - CONTRACT LAW, FORMATION OF CONTRACTS - 15/10/2019 Requirements for a 'contract' - The courts look for external (objective) signs of an agreement. - The courts look for a number of specific elements as follows: o Offer o Acceptance o Consideration - Together with an intention to create legal relations. Bilateral Contracts - Most contracts are bilateral in nature - Formed by an exchange of promises. - Offeror makes an offer. - Offeree accepts the offer. - Contracts are about bargains. - Usually, one party proposes the terms. - The other party has to agree to the terms. - So, starting point = Offer + Acceptance. Meaning of 'Offer' - A promise or indication by a party that he/she is prepared to enter into contract with another party, on certain terms. - The courts look for some behaviour which indicates a willingness to enter into a contractual agreement. - This indication could be by words or conduct. - The indication needs to communicate to the potential 'acceptor' of the offer, the basis upon which the 'offeror' is prepared to contract. - The terms of the offer need to be clear. - The offer could refer to terms which were discussed in earlier communication. - An offer can be contained in spoken words, a document, a letter, email communication or an advertisement. - A simple 'yes' to an offer will lead to a binding contract. - Note: The use of the word 'offer' does not necessarily mean a contractual offer has been made - Spencer v Harding [1870] LR 5 CP 561 o Circular issued by the defendants read 'we are instructed to offer to the wholesale trade by tender the stock in trade ... ' o Claimants made the highest tender, but defendants refused to grant them the goods. o Held: the request for tenders was not an offer. - Clarity is vital Distinguish 'offer' from 'invitation to treat'
- Once a statement or action is categorised as an 'offer', a simple yes or assent to it will lead to a binding contract. - Therefore, it must be clear that the statement or action indicates an intention to be bound in contract, without anything more. - An intention to open negotiations is not an offer - Preliminary communications in which parties only wish to open negotiations is an 'invitation to treat' Gibson v Manchester City Council - Mr. Gibson received a letter which indicated a price for the house and stated as follows: - 'The Corporation may be prepared to sell the house to you ... ' at that price. - The letter also instructed Mr. Gibson, if he wished to make a 'formal application', to complete a form and return it to the Council. Storer v Manchester City Council - Mr. Storer signed and returned a document titled 'Agreement for Sale' - The document amounted to an offer from the Council which Mr. Storer accepted by signing and returning it. - The document was deemed to be