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Western University
Philosophy 2080
James Hildebrand

Week 3 - Contracts: Introduction and Consideration Chapters 6 and 7 (7th edition) Chapters 7 and 8 (8th edition) Chapter 6 (7th edition)/Chapter 7 (8th edition)- Introduction to the Legal Relationship CONTRACTS: In general: in contract law parties attempt to create their own legal rights and obligations. In tort law, rights and obligations are imposed based on a judgment about conduct. A contract is an attempt to make an agreement that the courts will recognize as legally enforceable. The presumption is that individuals are free to agree to do what they please. There are still important elements to establish before an agreement becomes a legally enforceable agreement, in other words, a contract. A contract is not a piece of paper. Simply stated, a contract is an agreement that is legally enforceable. Some like to discuss the creation of a “valid” contract, but this word “valid” (and I thank professor Bruce Welling for this observation) is redundant. A contract by definition is a legally enforceable agreement, if it is not legally binding, it is not a contract. ELEMENTS OF A CONTRACT: • intention to create legal relations • offer • acceptance • consideration • capacity • legality I disagree with the author’s discussion about an intention to create legal relations. It is not a presumption, the courts are often asked to look at the circumstances of the case to determine if the parties intended their promises to be legally binding. Finding the other elements of contract in the fact situation can help support the conclusion that the parties intended to contract, but still, it remains one of the elements that can be an issue. Offer: a proposal to contract that is open to be accepted or rejected (I find the author’s discussion about an offer being “subject to a condition” unnecessary, and distracting -- it is more appropriate to say an offer is subject to acceptance) 1 Offeror: person making an offer Offeree: person that the offer is being made to -an offer must be communicated by the offeror to the offeree before acceptance may occur -essential point is that: no one can agree to an offer of which he or she is unaware -offer is not valid until it is received by the offeree; and offeror is not bound by the contract until the offer is accepted by the offeree Gratuitous, done for free, no corresponding obligation, no contract. This is a characterization or a conclusion about the nature of a promise or act. Only the person to whom an offer is made can accept the offer -but if an offer is made to the public at large, this rule doesn’t apply since its implying that the identity of the offeree is not important in the contract < Acceptance of an Offer > Acceptance: a statement or act given in response to and in accordance with an offer Rules of acceptance: The acceptance of the offer must be communicated to the offeror in the manner requested or implied by offeror in the offer - (offeror needs to be informed, otherwise can withdraw) - verbal, acceptance when spoken = contract - this particular issue was raised in the Carlill v. Carbolic Smoke Ball Co, where a Carbolic Smoke Ball was offered to the public at large as a cure and prevention for influenza -one of the arguments raised by the manufacturer was the fact that the plaintiff had not communicated her acceptance of the offer before using the product; hence, no contract existed -the court disposed of this argument by saying that if the terms of the offer indicate a particular mode of acceptance to make the promise binding, it is sufficient for the offeree to comply with the indicated mode of acceptance (notification to the offeror of the acceptance would then be unnecessary) Postal acceptance rule: - at the time this rule was created, the postal service was the main mode of communication, especially for business and legal matters 2 - acceptance occurs when letter of acceptance is posted: “the acceptance of the offer takes place when the letter of acceptance is placed in the post-box or post-office” - acceptance by mail where specified or implied by normal business practice - telegraph, acceptance when message delivered to telegraph office to be transmitted - otherwise, acceptance when communicated to and received by the offeror Electronic offer and Acceptance: Instantaneous communication’s general rule: In its simplest form, when parties are together they communicate offer and acceptance more or less instantaneously. This means that an offer is accepted and a contract is made when and where the offeror hears the communication of acceptance. -Courts have held that a telephone conversation, or a telex, or a fax, is instantaneous. This means that when and where the offeror receives the acceptance is when and where the contract is made. This can have huge implications for international or inter-jurisdictional contracts. A contract may be subject to different laws if it is made in Canada than if made in the United States. This is also true as between provinces within Canada. Different jurisdictions have different laws that will affect the nature and effect of the contract. 3 Offer v counter-offer: a counter - offer revokes original offer - if the offeree responds to the offer by suggesting different terms, this is a counter- offer, and the party making a counter-offer is now the offeror, original offeror is the offeree of a counter-offer - inquire as to whether offeree would consider different deal, original offer still stands - offeror makes conditional offer, conditions must be met for acceptance Silence is not acceptance unless specified - or unless offeree’s conduct reasonably implies acceptance -- can't be compelled to refuse, but you can't stand by and watch other party perform book clubs, "pre-existing arrangements" , don't send in refusal, silence = acceptance, still the initial agreement must authorize this If a method of acceptance other than that specified in offer is used, acceptance occurs when communicated to offeror Unilateral offer- method of acceptance is offeree completing its part of the agreement - usually precludes offeror from withdrawal, unless express term of contract allows it - return of lost dog for reward -- bring the dog back, performance = acceptance - Carlill v Carbolic Smoke Ball case is a case of unilateral offer Lapse: lapses over the passage of time - question of fact as to whether an offer has lapsed 4 Revocation: offeror can revoke prior to acceptance - revocation must be communicated to offeree, only effective when communicated, no postal rule - must be communicated to offeree before acceptance Option: separate promise obliging offeror to keep offer open, kept open in return for compensation (consideration), or under seal Indirect communication of revocation The text and other legal pundits say that the Dickinson v Dodds case is about indirect communication of revocation. In other words, just because the offeree hears about an offer being revoked from someone other than the offeror, is the revocation still effective? I, on the other hand, think the case is mostly about consideration. Suffice it to say, for now, that the promise to keep the offer open until Friday morning was gratuitous, there was nothing given in return for that promise. However, the revocation issue is dealt with, read and enjoy. I suspect some of the convoluted reasoning was in response to the plaintiff’s heroic efforts. I should also point out that this neat little excerpt will show you how it is difficult to pick a single statement that represents the ratio decendi of a case. Dickinson v Dodds: page 106-7 (7th edition), page 129 (8th edition) Dodds offers property for sale to Dickinson, promises in written offer to keep offer open until Friday, Thursday Dodds offers same property to Allen, Allen accepts, friend of Dickinson tells him of Dodds’ offer to Allan; Dickinson goes to Dodds’ residence, delivers written acceptance to Dodds' mother-in-law; Dodds doesn't receive it; Dickinson delivers copy of acceptance in person to Dodds Friday morning before expiry of time, Dodds says too late, already sold; Dickinson sues Dodds. Issues: was Dodds legally bound to keep the offer open - or was the offer revoked by the indirect communication to Dickinson? Held: - offer was a mere offer, offer and promise to keep it open was no more than a mere promise, dependant on acceptance in order to make a contract; 5 - the offer to a third party showed offer was revoked, [reliable source meant offeree had notice of revocation], cannot accept an offer that you know is no longer open - no consensus ad idem, (meeting of the minds) - offeree knows of sale to another, knows contract cannot be performed Pharmaceutical Society v Boots Cash Chemist; page 109 (7th edition), page 122 (8th edition) Facts: you read and determine the facts in this case. In particular, who is the plaintiff, and who is the defendant? Is someone trying to enforce a contract? Is someone suing for breach of contract? What are the allegations against the defendant? Issue: Does placement on shelf constitute an offer by shopkeeper to sell that is then accepted by customer when it selects goods? Or does customer make an offer to buy that is accepted or rejected by Pharmacist at the check-out counter? Held: - offer to buy from customer, accepted or rejected by shopkeeper - placing goods on shelf is only an invitation to contract, not an offer (technically called an invitation to treat) Carlill v Carbolic Smoke Ball Co., page 110 (7th edition), pages 120 - 121 (8th edition) Def manufacturers of "smoke ball", advertised cured influenza, made an offer of 100£ reward to anyone who got sick after using product as directed, had 100£ on deposit to show sincerity in the matter Issues: is it an offer or invitation to contract? Held: Not mere "puff" but an express promise, express claim money on deposit, indicating the defendant’s sincerity, therefore express promise
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