LWZ118 Lecture 1: Contracts_LWZ118 (Summary)
LWZ118 Contracts
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OFFER & ACCEPTANCE
Key elements of a Contract are:
1. Offer;
2. Acceptance;
3. An agreement that is sufficiently certain and complete;
4. An intention to create legal relations; and
5. Consideration (exchange of something for value)
Remedies for breach of contract:
1. Monetary Damages equivalent to the damage suffered due to breach of contract.
2. Specific performance of the contract entered into by a party.
3. Grant Injunction to prevent a breach.
Standards of contract do not result in a breach of contract but can give rise to different kind of remedies,
particularly in equity e.g. misrepresentation, misleading or deceptive conduct e.t.c
The fact of the agreement – the meeting of the mind. – the concept of communication, what and what not
constitutes an offer, what and what not constitutes an acceptance.
Meeting of the minds is determined objectively. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR
165 at 179
‘It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern
their contractual relations. What matters is what each party by words and conduct would have led a
reasonable person in the position of the other party to believe. … The meaning of the terms of a
contractual document is to be determined by what a reasonable person would have understood them to
mean.’
In order to determine whether a contract exists, we need to consider the rules of Offer and Acceptance,
application of which will tell us whether there is a contract or not. The rules will also tell us WHEN and
WHERE the contract was entered into and will give the correct terms of the contract.
OFFER:
In Nielsen v Dysart Timbers Limited [2009] 3 NZLR 160 at 168 (Tipping and Wilson JJ)
‘An offer is a statement of the terms upon which the offeror is prepared to be bound if acceptance is
communicated while the offer remains alive.’
In Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd [2010] EWCA Civ 1331 at [25]
‘the correct approach is to ask whether [the offeree] (having the knowledge of the relevant circumstances
which [the offeree] had), acting reasonably, would understand that [the offeror] was making a proposal to
which he intended to be bound in the event of an unequivocal acceptance’.
Intentions to be bound must be objective i.e. a reasonable person, on the other side of the transaction,
hearing and reading the words and offeror spoke and wrote, would have deduced that an offeror had the
requisite intention to be bound.
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The Offer must also be communicated by the offeror to the offeree. Communication can be direct
or through agents. Once communicated, the Offeree has to communicate the acceptance or non-
acceptance to the Offeror.
As already discussed, central to the concept of offer, is the will or intent of the Offeror to be bound
in contract by the terms of the offer. Where such an intent is found absent, then we have an Invitation to
treat/offer (make me an offer).
In Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 at 269 (Bowen LJ) explained the term Invitation to
treat:
‘you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses
to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to
negotiate - offers to receive offers - offers to chaffer, as, I think, some learned judge in one of the cases
has said.’
In Gibson v Manchester City Council [1979] 1 All ER 972, Conservative ruling party of Manchester
City Council had a policy of selling council houses to tenants. After the elections, the Labour Party gained
control of the council, repealing selling policy. The Labour Party however agrees to honour all previous
agreements. Gibson was in the negotiating stage and gave a letter from council that they “may be
prepared to sell at a price of 2,725 less 20% freehold” stating that the letter was not a firm offer of a
mortgage. Gibson was invited to make formal application for purchase and to fill in form.
Gibson completes and returns form, leaving the price blank due to repairs which are needed on the
house. Council states that they took repairs into fixing the price, Gibson asks for process to continue.
The court found that since the council’s reply did not consist of an affirmative statement declaring a
contract, and instead uses the wording of “may be willing to sell”, no contract was established. The court
held that the Council's letter was not an offer as the letter stated that "The Corporation may be prepared
to sell the house to you" and that "If you would like to make formal application to buy your Council house,
please complete the enclosed application form and return it to me as soon as possible." As there was never
an offer available to be accepted, no contract had been formed and by extension the council had not been
in breach.
However, In Storer v Manchester City Council [1974] 3 All ER 824, Manchester City Council decided
to sell council houses to tenants and told its town clerk to create a simple form to create quick
agreements which dispensed with the legal formalities. Mr Storer applied to buy his council
house, and on 9 March 1971 the town clerk wrote to him stating 'I understand you wish to
buy your council house and I enclose the Agreement for Sale. If you will sign the Agreement and return it
to me, I will send you the Agreement signed on behalf of the Council, in exchange'. The Agreement for Sale
had been completed with details including the purchase price, the amount of the mortgage and the
monthly repayments, although the date the tenancy was to cease and the mortgage repayment begin had
been left blank. On 20 March Mr Storer signed and returned the Agreement, but before the town clerk had
signed the Agreement for the Council, the Council changed political control and discontinued sales unless
contracts had already been exchanged. Mr Storer sought specific performance alleging a binding contract.
The court held that a binding contract had been concluded. The Council's intention was to become
contractually bound when Storer had signed the Agreement and returned it, particularly as there was
definite language used in
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At the end of the day, what we are really looking at is whether there is an offer or not. We can look at
certain examples in different contexts.
The general rule: circulars, catalogues and advertisements setting out price lists or promoting the
sale of products are invitations to treat, not offers: Partridge v Crittenden [1968] 2 All ER 421
Exception to the general rule: if it is clear from the advertisement that the seller is limiting their
liability to the amount of stock in hand: Lefkowitz v Great Minneapolis Surplus Store 86 NW 2d 689
(1957) READ because when advertised, for e.g. Lollies for $1, it cannot be ensured or cannot be
guaranteed that the promise of the advertised product in the catalogue will be fulfilled and the
store will not run out of lollies once the customer arrives at the store and demands to purchase the
advertised product.
Application of the Rule: In Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, 268, A Newspaper
advert placed by the defendant stated, “£100 reward will be paid by the Carbolic Smoke Ball Company to
any person who contracts the influenza after having used the ball three times daily for two weeks
according to the printed directions supplied with each ball...£1000 is deposited with the Alliance Bank,
shewing our sincerity in the matter."
Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu.
She sought to claim the stated £100 reward. The defendant raised the following arguments to demonstrate
the advertisement was a mere invitation to treat rather than an offer:
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as to
catching the flu.
5. There was no consideration provided since the 'offer' did not specify that the user of the balls
must have purchased them.
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an
offer of a unilateral contract which she had accepted by performing the conditions stated in the offer. The
court rejected all the arguments put forward by the defendants for the following reasons:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a
mere sales puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an intention to
accept, since acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved by
applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls.
5. The defendants would have value in people using the balls even if they had not been purchased
by them directly.
Display of Goods
General rule: A display of priced goods in a shop window, or on shelves in store, is an invitation to
treat and not an offer. The customer makes an offer for the goods which the retailer either accepts or
rejects.
Document Summary
Key elements of a contract are: offer, acceptance, an agreement that is sufficiently certain and complete, an intention to create legal relations; and, consideration (exchange of something for value) Remedies for breach of contract: monetary damages equivalent to the damage suffered due to breach of contract, specific performance of the contract entered into by a party, grant injunction to prevent a breach. Standards of contract do not result in a breach of contract but can give rise to different kind of remedies, particularly in equity e. g. misrepresentation, misleading or deceptive conduct e. t. c. The fact of the agreement the meeting of the mind. The concept of communication, what and what not constitutes an offer, what and what not constitutes an acceptance. In toll (fgct) pty ltd v alphapharm pty ltd (2004) 219 clr. 165 at 179 (cid:858)it is (cid:374)ot the su(cid:271)je(cid:272)ti(cid:448)e (cid:271)eliefs o(cid:396) u(cid:374)de(cid:396)sta(cid:374)di(cid:374)gs of the pa(cid:396)ties a(cid:271)out thei(cid:396) (cid:396)ights a(cid:374)d lia(cid:271)ilities that go(cid:448)e(cid:396)(cid:374) their contractual relations.
