LLB202 Study Guide - Final Guide: Hughes Aircraft Company, Airservices Australia, Tinn
AGREEMENT pg 29
In order for a contract to be valid, the parties must have reached a concluded agreement.
A valid agreement based on offer and acceptance can exist between two or more parties:
Clarke v Dunraven
Material facts:
Owners of yachts entered in a race by a club and bound by club sailing rules. Rules stated
that any yacht disobeying the rules is liable for any damages resulting. One yacht ran into and
sank another
Held:
House of Lords stated there was a contractual relationship between the two yacht owners as
they both entered the race bound by rules to the knowledge pf each other.
It may, though, be necessary to look at the whole of the relationship in order to determine
whether there has been agreement, rather trying to isolate an ‘offer’ and an ‘acceptance’.
Empirnall Holdings v Machon Paul Partners (1988) 14 NSWLR 523 per Kirby P
See also Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust)
Pty Ltd (1988) BPR 11,110 per McHugh JA at 11,117-11,118 and Marist Bros
Community v Harvey SC (1994) 14 WAR 69 at 75.
1. OFFER
An offer is ‘the expression to another of a willingness to be legally bound by the stated
terms’ (May and Butcher Ltd v The King).
The test is how the statement would be regarded by a reasonable person in the position of the
offeree when considering all the circumstances.
Offers to the word at large
An offer to the world at large can constitute an offer and does not need to be directed to a
particular person (Carlill v Carbolic Smoke Ball Co)
Offers through the internet
The ability for electronic advertisements to reach a wider audience does not affect the legal
principles.
Legislation in Australia states that internet information accessible to parties making use of
this information system is invitation to treat
However this is not the case if communication clearly indicates that it’s the party's
intention for the proposal to be bound upon acceptance
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For offer to be legally effective
Statement by offeror containing stated terms (verbal, written, email, ad, tv, radio,
internet etc)- must contain all essentials of agreement and terms must be certain
Statement made to another person (legal entity)- can be to one, two or the whole
world
Offeror indicates preparedness to be bound
Offers in bilateral contracts
Contract where both parties must do/or not do something in exchange and if failure to
perform undertaking then the other party is provided a remedy- United Dominons Trust
(Commercial) Ltd v Eagle Aircraft Services Ltd
Eg A offers to buy computer from B for $3000. If B accepts then A promises to pay
$3000 to B in exchange for the title of the computer.
Offers in unilateral contracts
An offer where the promisor undertakes to do or not to do something on his part if the
promisee does or refrains from doing something- United Dominons Trust (Commercial) Ltd v
Eagle Aircraft Services Ltd
Examples
Offers of reward: government offers money in exchange for information
Offers for prizes: manufacturer advertises that if one buys a certain quantity of a
product they receive a prize
1.1 Not an offer:
a mere statement of the price of which someone would contract if they decided to sell does
not amount to an offer: Harvey v Facey
1.1.1 Mere Puff
Exaggerated or unsubstantiated claims will be considered an invitation to treat rather than an
offer.
The court will consider how a reasonable person in the plaintiff’s position would interpret the
advertisement (Manufacturers’ Material Insurance v John H Boardman Insurance Brokers).
Advertisements can be distinguished from mere puff if the offeror has undertaken an act
which shows their intentions as genuine (Carlill v Carbolic Smoke Ball Co).
Court determines how a reasonable person may interpret the ad. Vagueness of statement is a
considered factor
Example: ‘Use our shampoo and you can have hair like Anne Hathaway’
In cases like Carlill the deposit of 100 pounds in the bank was an indication that the
manufacturer intended the offer to be genuine.
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Example: if they say they will pay your dentist bill
1.1.2 Supply of Information
Information provided during contractual negotiations can be difficult to decide whether it
constitutes an offer or merely response to information
Case example
Harvey v Facey
Facts:
Harvey sent a telegraph enquiring ''will you sell us Bumper Hall Pen (their house)? Telegraph
lowest cash price''. Facey replied, ''lowest price for Bumper Hall Pen 900''. To which Harvey
replied ''we agree to buy Bumper Hall Pen for the sum of 900 asked by you''. Harvey brought
an action against Facey as he refused to sell the property.
Decision
Court found in favour of defendant as a contract had not been formed. Plaintiff simply asked
two questions to the owners: whether they will sell and what the lowest price would be.
Defendant only responded to the second question by supplying information. Not implied that
they responded to agree to sell.
1.1.3 Invitations to treat
An invitation to treat is an invitation for offers. There is no intention to be immediately bound
and only indicates a willingness to begin negotiations.
1. Advertisement of goods in a catalogue: Grainger v Gough
Where ''offer'' for sale of particular items is regulated by statute. Legislation may
restrict which items may be offered for sale. Retailers have to comply with legislation
if the advertisement is an offer. Otherwise its invitation to treat
Retailer may be in breach of contract if sold all the stock and advertisement is an offer
2. Advertisement in newspaper or magazine or periodical : Partridge v
Crittenden
Savelot Supermarket will sell all 15 washing machines on its shop floor to the first 15
customers who enter the floor on Monday and can pay $200 cash. Limit 1 machine
per person.
This ad is an offer capable of acceptance
Offer: expression to another of a willingness to be bound by the stated terms
There is the promise as plain as words can make it
Promise to sell 15 washing machines on the shop floor to the first 15 customers on
Monday who have $200 cash.
3. Goods Displayed in Shops: Pharmaceutical Society of Great Britain v
Boots Cash Chemists; Fisher v Bell
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Document Summary
In order for a contract to be valid, the parties must have reached a concluded agreement. A valid agreement based on offer and acceptance can exist between two or more parties: Owners of yachts entered in a race by a club and bound by club sailing rules. Rules stated that any yacht disobeying the rules is liable for any damages resulting. House of lords stated there was a contractual relationship between the two yacht owners as they both entered the race bound by rules to the knowledge pf each other. It may, though, be necessary to look at the whole of the relationship in order to determine whether there has been agreement, rather trying to isolate an offer" and an acceptance". Empirnall holdings v machon paul partners (1988) 14 nswlr 523 per kirby p. See also integrated computer services pty ltd v digital equipment corporation (aust) Pty ltd (1988) bpr 11,110 per mchugh ja at 11,117-11,118 and marist bros.
