Tuesday March 18
Introduction to Contract Law
• Sam and the million dollar house
o Sam walks to school every day down a parkway. She sees a house that
she loves, and it has a for sale sign. She finds that it’s for sale for $1
million. Since she doesn’t have the money, she puts it out of her mind.
Three weeks later she wins $10 million, so she knocks on the front door of
the house and says she accepts the offer.
o Do the owner of the house and Sam have a contract?
o There is no contract because there was no offer that could be accepted
• Donna and the gift to the university
o Donna is a rich alumnus of UWO, and she pledges to give $200,000. She
signs a pledge form, but changes her mind a couple of weeks later.
o Do Donna and the university have a contract?
o There is no contract on the facts of the case. Even though something was
signed, the university didn’t give consideration to Donna.
• Gabrielle and her Dad’s promised car
o Gabrielle’s dad promises her a car if she gets a B+ average. Gabrielle
gets an A- average, but her dad tells her that she shouldn’t need him to
promise her a car to get an A-.
o Do Gabrielle and her dad have a contract?
o No, because Gabrielle and her dad didn’t have an intention to enter into a
contract since they are family members.
Contract law has 2 functions:
1. Facilitates exchange – without being sure that the other side will do what you’ve
agreed upon, it is hard to facilitate exchange
• eg. no one would build a building with a promise of $100 million unless
they could be guaranteed that they would receive the money
2. Separates legal from moral – there are certain promises the law will enforce
(legal), and there are certain promises that they will not enforce (moral)
• Atiyah: “Nobody can seriously propose that all promises should be
enforceable; to abolish [the rules of contract formation], therefore it is
In our legal system, almost all contract law is judge made. Why?
1) Tradition (that’s how we do things in the common law)
2) Practicalities (no matter how smart we are, we can’t design a code to deal with
every situation) Special Contracts
The main area of contracts has been left to the judges, but there are special
contracts that are laid out
Technical Aspects of Contract Formation
1) Offer and Acceptance
3) Intention to Create Legal Relations
“An offer is an expression by one party of his assent to certain definitive terms,
which looks forward to acceptance by the other party to the exact same terms.” –
Offeror: the one making the offer
Offeree: the one to whom the offer is made
o Inclusive Terms
The offer has to say both what the offeror will do, and what the
offeree will do
eg. I will sell you my house for $500,000, and the acceptance would
be, “I will purchase your house for $500,000”
o Outward Directed Expression
It has to be something that a reasonable person would think is
directed towards them
eg. If you make an offer to Joe for your car but Mark accepts it, it is
not a valid offer
An offer cannot be a joke
o Sufficiently Certain
The court has to know what both sides will do
Contracts to agree or to negotiate are not sufficiently certain
enough to be enforced
• Example: Scammell v. Ouston (in textbook)
o Objective Standard
Whether or not there has been an offer and acceptance is judged
It doesn’t matter what you thought you were saying – we care what
a reasonable person would think
Case: Storer v. Manchester City Council
• Storer was living in a rental house, and City Council decided
everyone should be given the opportunity to own their own
house. They sent a letter to Mr. Storer, he signed it, and
agreed to all of the terms. In the meantime there was an
election, and the government changed. The new
government thought the state should own all housing, and
they declined to go through with the contract. Storer sued, and the City Council said they didn’t have a contract
because the clerk didn’t know what he was doing.
• Lord Denning: “In contracts you do not look into the actual
intent in a man’s mind. You look to what he said what he
• The court said there was a contract even though the clerk
didn’t know what he was doing.
o Time Requirements
The offer must come before the acceptance.
You must be able to think of the process of contract formation as
offer, followed by acceptance.
Two identical offers sent by different parties to one another do not
make a contract but rather are cross-offers both awaiting
o Willingness to be Bound
To count as an offer, the statement must show a willingness
(seriousness) to be bound.
Statements of intent (“we intend to sell widgets at $5) do not
Price questions (“we sell widgets at $5 per unit”) do not constitute
Calls for information do not constitute offers
These are all invitations to treat
Offer vs. Invitation to Treat
The common law makes a distinction between an offer, and invitation to treat
Pharmaceutical Society v. Boots Cash Chemists
o The sale took place when the customer put the item in their basket. Why?
o Offer: The display of merchandise with a price was an offer made by
o Acceptance: It was accepted by the customer when they put the item in
o Therefore: The sale was not under the supervision of a pharmacist since
the pharmacist could not refuse to accept the customers payment
The sale did not take place until the goods were paid for at the cash
Invitation: The display of priced goods was an invitation to treat
Offer: The customer made an offer to the cashier
Acceptance: Which the cashier accepted under the supervision of
the pharmacist. Therefore the pharmacist could refuse to sell if
there was a problem.
o Boots won because the court decided it was the most realistic
General rule: The display of merchandise is not an offer which can be accepted,
but an invitation to the customer to make an offer to the merchant. Unilateral Contracts and Offers to the World
There are two types of contracts:
Example: A & B are negotiating over the purchase of a horse.
• B’s offer is to promise to sell the horse for $100. A’s
acceptance is to promise to buy the horse for $100.
It is a bilateral contract because it is a promise exchanged for a
This is the most common type of a contract.
Example: B promises to pay A $100 to mow the lawn. A’s
acceptance of the offer is to actually mow the lawn.
It is a unilateral contract because it is a promise exchanged for an
Both types of contracts are equally enforceable, the only difference
is in the type of acceptance.
Problems with Unilateral Contracts:
o The person performing has mixed motives for performing
eg. A billionaire promises to pay $100 million to whatever Maple
Leaf scores the winning goal in the playoffs. The problem is that
the hockey player has a contract with his team to play hockey, and
would also be in a contract with the billionaire.
The law says that it doesn’t matter if there are mixed motives, as
long as it is seen as possible to an outside observer that you could
be performing the contract with the billionaire.
o What if the act is performed in a situation where the promise is not known
by the offeree?
eg. A person finds a dog and returns it to the owner. After they
return the dog, they find a sign that is offering a reward for the
return of that dog to the owner. Is there a contract even though the
offeree didn’t know of the offer? The law says there is no contract
because the rescuer must know of the reward.
You can’t accept an offer that you are ignorant of.
o What happens when the act is to be performed in a place where it will not
be obvious to the offeror (in secret) that the offer has been accepted and