CLAW1001 Lecture Notes - Lecture 4: Mobil, Contract, Estoppel
16 May 2018
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4: CONTRACTS
Elements of a binding contract
1. Agreement: offer and acceptance analysis
2. Intention to create legal relations
3. Consideration: payment of a price (monetary or otherwise) by the promisee which ensures
the promise or the promisor
4. Legal capacity
5. Consent
6. Legality
Agreement: Offer
o Definition: Objectively tested, an offer is a firm and definite promise to do something or
retrain from doing something
o Elements of an offer:
• Must be communicated to the offeree
• May be made to more than one person, or the world: Carlill v Carbolic Smoke Ball
Co
• Must be distinguished from an invitation to treat
Fisher v Bill – flick knives for sale: display of products with prices is not an
offer, merely an invitation to treat
Granger & Sons v Gough – distribution of price list of wines: price lists do
not constitute offers, merely invitations to treat; if it were an offer, the
merchant would be involved in an indeterminable amount of contractual
obligations to supply wine of the same description
Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd – At
time of sale, legislation says registered pharmacist must supervise, believed
to breach upon customer picking up drug without pharmacist present:
display of goods does not constitute an offer, picking up goods constitutes
acceptance of merely an invitation to treat
• Must be distinguished from a request for information or supply of information
Harvey v Facey – Lowest cash price for Bumper (all 900 pounds but
refused to go through with sale: valid, this was a supply of information
regarding the lowest price which does not constitute an offer, rather may be
seen as an invitiation to treat
• May be revoked any time before acceptance: Goldborough Mort v Quinn
Revocation must be communicated to the offeree – think back to Jack’s sneaky
telling Jill that he had sold off the car before she could accept
Routledge v Grant: revocation before acceptance can occur even if offeror
promises to keep the offer open for a certain period of time
But note, in cases of unilateral contracts where acceptance is by conduct,
revocation while offeree in the process of accepting through their conduct
can be effective but offeror may need to pay damages: Mobil Oil Australia
Ltd v Lyndel Nominees Pty Ltd
Also note, for unilateral contracts, revocation is effective if it is made in the
same manner as the original offer, does not manner if person aware of the
revocation
o Unilateral contracts: offer and acceptance: main authority is Carlill v Carbolic Smoke Ball
Co – advertisement of reward of 100 pounds to anyone who contracts influenza after using
the ball
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• Principle: Offer can be made to the world at large and not simply one person;
unilateral contract
• Principle: Acceptance of a unilateral contract does not have to be through words, but
through conduct, by performing the conditions on the faith of the advertisement
• Principle: Consideration in a unilateral contract was paid when Carlill contracted the
flu
• Principle: Revocation of the offer can occur even if offeree is in the process of
accepting, but damages may have to be paid: Mobil Oil Australia Ltd v Lyndel
Nominees Pty Ltd
• Principle: Revocation is effective if made in the same manner as the original offer,
does not matter if person aware of the revocation
o Termination of the offer:
• By revocation: Goldborough Mort v Quinn, Routledge v Grant, Mobil Oil Australia
Ltd v Lyndel Nominees Pty Ltd (unilateral)
• By lapse of time:
Offeror may specify time limit for offeree to accept
If no time limit, expiry occurs when not accepted within a reasonable
amount of time
• Condition in offer not fulfilled
• Death of a party:
Generally, contracts terminated upon death if not accepted
If no personal involved in contract, offeree can accept offer if unaware of
offerors death
Once accepted offer, death does not affect it, someone can act on behalf of the
deceased, UNLESS personal involved needed
• Change of circumstances: Financings Ltd v Stimson – dealer to buy customers car
but not yet accepted, car was stolen and damaged: offer terminated because implied
conditions at time offer was made, had changed
• Rejection by the offeree: can counter offer, but cannot accept again
o How the offeree responds:
• Offeree seeking more information: Stevenson Jacques & Co v McLean – request of
offeree asking if he could pay in instalments: this was not a counter offer so the offer
was still open to acceptance
• Counter offer: Hyde v Wrench – purchaser did not accept buying land for 1000
pounds, said they would buy for 900, rejected by seller, purchaser said they
accepted original 1000 pound offer: counter-offers extinguish the original offer
• Accept the offer
• Reject the offer
• Ignore the offer
Agreement: Acceptance
o Definition: A final and unqualified assent by the offeree to the terms of the offer
o Elements of valid acceptance:
• Must be final, absolute and unqualified: otherwise, it is a counter-offer or conditional
offer: Masters v Cameron – clause, this agreement is made subject to the
preparation of a formal contract of sale…
No conditional acceptance or subject to acceptances
BUT in determining whether it is even a conditional acceptance; HCA
considered three categories (Masters)
a) Intention to be bound on contract but want terms reinstated in more
precise manner: binding contract
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b) Intention to be bound but performance of terms conditional upon
execution of a formal conduct: binding
c) No intention to be bound unless formal contract executed: not binding
• Must be made in reliance on the offer: R v Clarke – monetary reward for information
about murder, Clarke made statement to police which led to conviction of other men
and release of himself, tried to claim the monetary award
Clarke had not given information in response to the offer
Isaacs ACJ: an offer to someone who can swim 100 metres in the harbour
would be met when people voluntarily perform the act, but not when
someone is thrown overboard and has to swim to shore to save his life
• Must be communicated to the offeror in the way the offeror indicates
Acceptance by silence is not satisfactory: Felthouse v Bindley
Communication through a third party is not satisfactory
BUT NOTE, unilateral contracts: performance of the condition is sufficient
acceptance without notification of it directly: Carlill
Postal acceptance rule:
▪ Acceptance by post only valid if contemplated by the parties
▪ Acceptance is when letter is posted, does not matter if offeror
receives letter or not
▪ Acceptance when posted is not satisfactory if letter stamped or
addressed incorrectly
Intention
o Presumptions:
• Business agreements: presumption that parties did intend to create a legally
enforceable agreement
• Social agreements: Presumption that parties did not intend to create a legally
enforceable agreement
• Presumptions may be rebutted, and are only a starting point for analysis
• Only of proving contrary intention rests with party seeking to rebut
o Social arrangements:
• Presumption: Balfour v Balfour – Mr would pay certain amount while Mrs in
London for health reasons, Mrs failed to return to Sri Lanka so Mr stopped
payments: presumption that negotiations between spouses not intended to create
legally binding consequences
• Rebutting presumption: Wakeling v Ripley – lonely elderly man urged sister and
her husband to come from England to live with him, promised home but did not
uphold promises: if consequences for parties are serious and there is evidence of an
intention to create assurance through contract, there is intention to be legally bound
• Rebutting presumption: McKeand v Thomas – informal conversations about laying
cables in front of Thomas land, to which he initially agreed but refused to sign
documents: Informal discussions do not negate intention to be legally bound,
particularly where conversation was about a serious topic
o Commercial arrangements:
• Rebutting presumption: Rose and Frank Co v Crompton and Bros Ltd: explicit and
clear expression of no legal intention is needed to rebut commercial presumption of
intention
• Honour clauses, rebutting presumption: Jones v Vernon Pools Ltd: arrangements
binding in honour only means no intention
• Policy statement: Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd – no
intention
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