Category Archives: Law

Statutory Interpretation I

When interpreting laws, there are three rules that the courts generally use. They are as follows: –

i) the Literal Rule

ii) the Golden Rule and

iii) the Mischief Rule or Heydon’s Rule

When the literal rule is applied, the courts will give the words their ordinary and natural meaning. Let’s look at a few examples. In Fisher v Bell (1961) – the respondent was the owner of a shop and had displayed in his shop window knives with tags attached that read “ejector knife”.

A policeman entered the shop to examine the weapon and took it back to the station for further investigation. The chief inspector of police, convinced that it was indeed a flick knife charged the owner of the shop.

Under s1.1 of the Restriction of Offensive Weapons Act 1959 it is an offence for anyone to manufacture, sell or hire or offer for sale or hire, a flick knife.

Most people looking at the display would come to the conclusion that the knifes were on sale or were offered for sale but under the ordinary law of contract the display of an item in a shop window with a price tag attached to it is merely an invitation to treat and it must be taken that parliament while legislating knew or was aware of the meaning that is attached to a display of items with a price tag attached in a shop window. Here the courts gave the words their ordinary and natural meaning.

In Partridge v Crittenden (1968) Mr. Partridge took out an advertisement stating that he had either in his possession or access to, Bramblefinch cocks and Bramblefinch hens, without using the words offer for sale. Mr. Crittenden upon reading the advertisement sent Mr. Partridge a cheque and Mr. Partridge in turn sent him a hen. Mr. Crittenden on behalf of the RSPCA brought the matter to the attention of the courts.

Under s. 1 of the Protection of Birds Act 1954 it is an offence, with the exception of those holding a license granted under section 10 of the Act, for any person to sell, to offer for sale or to have in his possession for sale, various species of wild birds.

The operative words here were “offer for sale” or “have in his possession for sale” and the words were not used in the advertisement. In addition to that, in contract law, advertisements in newspapers and catalogues (Grainger & Son v Gough (1896)) are construed as invitations to treat and not offers.

The next rule that is applied is the golden rule and it is applied when the application of the literal rule brings about an absurd result or a result that parliament could not have intended. When using the golden rule, the words have to be construed after taking into account the statute as a whole. However, if so construed, the words lead to an absurd result, the courts may infer an additional meaning (River Wear Commissioners v Adamson (1877).

The judge has to try and determine the intention of parliament and decide what parliament had in mind when it passed the law. In R v Allen the defendant was convicted of bigamy under s57 of the Offences Against the Persons Act (1861) which reads as follows: –

“Whosoever, being married, shall marry any other person during the life of the former husband or wife, whether the second marriage shall have taken place in England or Ireland or elsewhere, shall be guilty of felony, and being convicted thereof shall be liable . . .”

A person who is married cannot marry again and therefore the courts construed the words “shall marry” as “go through the ceremony of marriage”.

In Adler v George (1964), the case concerned s3 of the Official Secrets Act 1920 which reads “No person in the vicinity of any prohibited place shall obstruct, knowingly mislead or otherwise interfere with or impede, the chief officer or a superintendent or other officer of police, or any member of His Majesty’s forces engaged on guard, sentry, patrol, or other similar duty in relation to the prohibited place ….”.

The defendant somehow managed to enter an Air Force base and was charged under the act. While the act made it an offence to be in the vicinity of a prohibited place, it did not mention anything about being in it. The courts applied the golden road and construed “in the vicinity” to include being in a prohibited area.

The third rule that is used to interpret laws or acts of parliament was laid down in Heydon’s case (1584) where the defendant was tried for intruding into certain lands. When applying the rule the courts will take into account three factors: –

i) what was the common law before the making of the act?

ii) what was the mischief or the defect common law did not provide for? and

iii) what remedy has parliament resolved to provide?

In Corkery v Carpenter (1951) the defendant was drunk and was found pushing his bike along a street. He was subsequently charged under s12 of the Licensing Act 1872 which reads “Every person …. who is drunk while in charge on any highway or other public place of any carriage, horse, cattle, or steam engine, or who is drunk when in possession of any loaded firearms, ….”.

The defendant argued that s12 of the Licensing Act 1872 makes no mention of bicycles. The court applied the mischief rule and held that the purpose of the act was to prevent a person from being in charge of a vehicle or a mode of transport while the person was drunk. A bicycle was clearly a vehicle or a mode of transport.

In Elliot v Grey (1960) the defendant’s car was uninsured and he left it parked on a road, jacked up and with the battery removed. Under the Road Traffic Act 1930 it was an offence to use an uninsured car on the road.

The defendant was charged under the Road Traffic Act 1930 and he argued that he was not using his car because it is impossible to use a car without a battery. The courts applied the mischief rule and held that it was being used on the road because it represented a hazard and therefore insurance would be required in case of an accident.

In his dissenting statement, Lord Wilberforce in Royal College of Nursing of the United Kingdom v Department of Health and Social Security (1981) said that “when a new state of affairs, or a fresh set of facts, come into existence, the courts have to consider whether they fall within the Parliamentary intention. They may be held to do so, if they fall within the same genus of facts as those to which the expressed policy has been formulated.

Copyright © 2017 by Dyarne Ward

Elements in a Contract – Collateral Contracts

A collateral contract is a subsidiary contract which induces another party to enter into the main contract. A collateral contract is often an oral agreement or an undertaking given prior to the formalization of the main contract and is accepted as part of the contract on the basis that the parties came to an agreement in reliance of the promise or the oral undertaking.

In Bannerman v White (1861), the plaintiff (claimant) agreed to purchase some hops from the defendant for brewing purposes. The plaintiff stipulated that the hops must not be treated with sulphur prior to the purchase because it was intended for use in the manufacture of a consumable product.

The defendant assured the plaintiff that the hops had not been treated with sulphur but as it turned out they were. The defendant argued that the representation was not a term in the contract but the courts determined otherwise because the plaintiff had emphasized the importance of the term, prior to formalizing the agreement. The defendant’s oral assertion was a collateral contract.

In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) the plaintiffs were looking for a Bentley car and had certain criteria that they based their selection upon. The defendant a car dealer who was an expert on Bentley cars sold them a car based on the criteria that the plaintiffs had set. It later turned out that the car in question did not fit the criteria the plaintiffs had set and the plaintiffs sued. The courts held that the oral statements made prior to the formalization of the contract were indeed a part of the contract and the plaintiffs were successful in their claim. The main contract was dependent on the oral assertion being satisfied.

In J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd (1976) the defendant assured the plaintiff that the goods, will be ferried below deck, and entered into the contract based on the undertaking or in reliance of the promise, when in actual fact the goods were stored on the deck and were damaged in a storm. The plaintiff sued and was successful. The oral agreement was held to be a collateral contract i.e. a subsidiary contract which induced the party to enter into the main contract.

In Heilbut Symons v Buckleton (1913) the plaintiffs were rubber merchants who underwrote a large number of shares in the defendant company on the basis that they were bringing out a rubber company and the details were confirmed in a telephone conversation. It later turned out that the defendant did not bring out a rubber company i.e. the company couldn’t be described as a rubber company and the plaintiffs sued. The plaintiffs were successful.

In City and Westminster Properties Ltd v Mudd (1934) the tenant was party to a lease that stipulated that the premises the tenant was on could only be used for business purposes. Prior to that however the landlord had assured the tenant that, the tenant in addition to using the premises for business purposes could also reside on the premises and the tenant signed the lease based on the assurance.

The tenant used the premises for 10 years during which time he not only used it for business but he also used it as a residence before the landlords attempted to vacate him. It was held that the promise that the tenant could reside on the property was a collateral contract and the tenant was successful.

In Shanklin Pier Ltd v Detel Products Ltd (1951) the plaintiffs needed to have their pier painted and contacted Detel Products and made inquiries as to the paint. The defendants assured them that their paint would last for 7 years when in fact after 3 months of the pier being painted the paint began to deteriorate. The plaintiffs sued and were allowed to adduce the prior oral contract as evidence that they had entered into the contract based on the reliance of the oral promise and the oral contract was held to be a collateral contract.

In Wells (Merstham) Ltd v Buckland Sand and Silica Co Ltd (1965) the plaintiffs were chrysanthemum growers who purchased sand from the defendants based on its chemical composition. The sand did not contain the chemical composition that the plaintiffs were told it would and as a result the crop failed. It was held that the plaintiffs had signed the contract based on the defendants assurances and the plaintiffs were successful in their claim.

In Esso Petroluem v Mardon (1976) the plaintiff’s representative assured the defendant that his new petrol station would be able to sell at least 200,000 gallons of petrol per year. Following the representation, the local council made some changes to the site and as a result it was estimated that the sales would fall and would be lower than what was initially projected but the plaintiff’s representative failed to communicate the changes made by the local council and the ensuing changes in the estimated sales to the defendant.

As a result, the defendant fell in arrears and Esso Petroleum sued for the outstanding payment. The defendant made a counter claim and he was successful. In addition to negligent misrepresentation there was also a collateral contract in place in that the defendant had entered into the contract based on Esso’s estimates and projections.

Copyright © 2017 by Dyarne Ward

Elements in a Contract – Domestic and Social Agreements

Social and domestic agreements i.e. agreements made between friends and agreements made between family members are generally not treated or regarded as legally binding agreements unless there is some consideration that suggests or implies otherwise.

Charitable Agreements

In Re Hudson (1885) Hudson promised to pay £4,000 per year to a chapel, for 5 years, to help it pay off its debt. He died before the last 2 installments could be made and his estate refused to pay the outstanding installments. It was held that a contract had not come into existence and that there was only a gratuitous promise in place. As a result Hudson’s estate could discontinue the payments if they so desired.

Agreements between spouses and partners

In Balfour v Balfour (1919), the husband while working overseas agreed to send regular payments to his wife. Subsequently the relationship went downhill and the husband stopped sending his wife money. Mrs. Balfour brought an action against her husband and it was held that the agreement that was in place was a purely social agreement and that it didn’t amount to a contract.

The situation however is different when it comes to former partners who are legally separated. In Merritt v Merritt (1970) – a husband and wife separated and there was an outstanding debt owing on the house which the couple had jointly purchased. The couple entered into an agreement whereby the husband would pay the wife a certain amount of money each month until the mortgage was fully paid off and once the mortgage was out of the way, the house would be transferred to the wife.

The husband failed to transfer his interest in the house to the wife once the payments were complete and the wife brought an action against the husband. It was held that there was a binding agreement and that it was enforceable at law.

Agreements between other family members

In Jones v Padavatton (1969) a mother persuaded her daughter to leave her high paying job in the US and move to London to complete her bar. In addition to giving her a certain amount of money each month the mother also purchased a house for her to help her financially until she completed her exams. The daughter subsequently moved to London but did not complete her bar as agreed but chose to marry and settle down instead.

The mother then sought possession of the house and the court held that there wasn’t a legally binding agreement in place and that the agreement between the mother and daughter was not intended to have legal consequences.

In Todd v Nicol (1957) the defendant invited the plaintiff, her sister in law, to come and live with her, with the promise that upon her death the family house would eventually be hers. The plaintiff sold her belongings and moved to the defendant’s house in reliance of the defendant’s promise. The relationship took a turn for the worse and the defendant refused to honor her promise. It was held that there was a binding agreement on the grounds that the changes that took place were so substantial that consideration was implied.

In both Jones v Padavatton (1969) and Todd v Nicol (1957), the defendant in the former and the plaintiff in the latter, had made substantial changes to their lives and had to some degree acted to their detriment, based on the promise of another party and therefore had provided some form of consideration.

Social Agreements

In Simpkins v Payns (1955) a tenant, landlady and her granddaughter entered into a weekly competition run by a newspaper. A coupon was sent in, in the landlady’s name each week and all three took turns to send in the entries and the nominal sum which accompanied the entries based on an agreement that should any of them win the prize, it would be split or shared three-ways. The landlady won the prize and upon winning refused to give the tenant his share of the winnings. The tenant brought an action in court against the landlady and it was held that there was indeed a valid contract.

In Trevey v Grubb (1982) three friends contributed regularly to purchasing a lottery ticket and eventually the defendant won. The defendant refused to share the prize money and the plaintiff sued. The court decided along the lines of Simpkins v Payns (1955) and held that the plaintiff was entitled to his share of the prize money.

The plaintiffs in both the cases contributed regularly by either submitting the entries or purchasing the tickets and therefore had provided some form of consideration that entitled them to their share of the winnings. Hence there was some measure of certainty in the agreements.

In Wilson v Burnett (2007) three friends came to an agreement that if they were successful at bingo on a particular evening, they would split the prize money three-ways. One of the friends was extremely successful and won in excess of £100,000. The other two friends brought an action to claim their share of the prize money.

It was held that the issue before the courts was to decide whether there was a binding agreement made between the friends, prior to playing bingo that evening and if the agreement was of sufficient certainty. The plaintiffs were unsuccessful in their claim.

Copyright © 2017 by Dyarne Ward

Elements in a Contract IX – Parol Evidence Rule

When the terms of a contract have been formalized by a written agreement, the general rule is that the terms cannot be changed by adducing extrinsic (external) evidence to alter the terms of the contract. This is known as the Parol Evidence rule.

In Henderson v Arthur (1907) the defendant was party to a lease that stipulated that rent could be paid in advance. However, prior to that there was an oral agreement whereby the parties agreed that the rent could be paid in arrears.

The rent was outstanding and the plaintiff brought an action against the defendant. The defendant argued that there was a prior agreement that allowed him to pay the rent in arrears but the Court of Appeal held that an earlier oral agreement could not replace the terms of a later written agreement and the Parol Evidence rule prevented the earlier agreement from altering the terms of the new agreement.

There are however certain exceptions to the rule and instances or circumstances where the rule will not apply. The first exception is rectification i.e. when an oral contract is formalized in writing and there is an error in the written agreement, then extrinsic evidence may be allowed to show that there was an error, so that the contract may be rectified in the manner in which the contracting parties intended.

The next exception to the rule occurs when there is a partially written agreement i.e. the agreement is part oral and part written. In Couchman v Hill (1947) the plaintiff bought a heifer at an auction and prior to acquiring the heifer, he had related to the defendant that he intended that the heifer be “unserved” and the defendant was fully aware of the plaintiff’s intentions. It was later discovered that the heifer was carrying a calf and died as a result of carrying the calf too young. The plaintiff sued and was successful. He was allowed to adduce the prior oral agreement as evidence to support his claim.

Similarly, in J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd (1976) the defendant assured the plaintiff that goods will be ferried below deck when in actual fact the goods were stored on the deck and were damaged in a storm. The plaintiff sued and was successful. The oral agreement was held to be a collateral contract i.e. a subsidiary contract which induced the party to enter into the main contract.

When a term of a contract is ambiguous or worded in a manner that gives rise to more than one interpretation, extrinsic evidence may be adduce to show or determine the intention of the parties and hence ambiguous terms are also an exception to the Parol Evidence rule.

The Parol Evidence rule is also waivered when there is a need to show that existing custom or tradition gives the term or attaches a different meaning to the term than which would otherwise normally be applied. In Smith v Wilson (1832) it was held that the interpretation of 1,000 rabbits as 1,200 rabbits as dictated by local custom was valid.

In Hutton v Warren (1936) the plaintiff was a tenant in the defendant’s fields and had accordingly tilled the fields and sown it with seeds. The tenancy was then terminated prior to the crops being harvested and the defendant, contrary to local custom refused to pay the plaintiff for the cost he’d incurred and for the work he’d done because it was not stipulated in the written agreement. The plaintiff brought and action against the defendant and was successful.

Another exception to the Parol Evidence rule occurs when there are terms implied by law and those terms are not present in the contract. In Liverpool City Council v Irwin (1977) the tenants in a block of flats rented out by the City Council refused to pay the rent because the flats were in a state of disrepair and some of the basic amenities were either not available or were unusable. The council sued and in their claim they argued that the duty to keep the flats in good repair was not a term of the agreement. The House of Lords held that the landlord should take reasonable care to ensure that the facilities were kept in a good state of repair and the plaintiffs were unsuccessful in their claim.

The Parol Evidence rule will also not apply when a written contract is dependent on an event taking place prior to coming into operation. In Pym v Campbell (1856) the plaintiff signed an agreement with the defendant who agreed to acquire a portion of the profits that would result from the plaintiff’s invention and accordingly signed an agreement with the plaintiff.

Later one of the two inspectors who tested the invention failed to approve it and the defendant refused to continue with the agreement. The plaintiff brought an action in court. The courts found for the defendant and held that the agreement was subject to approval from the inspectors or would commence only after the invention had been approved.

Copyright © 2017 by Dyarne Ward

Elements in a Contract VIII – Express Terms II

Almost all written contracts these days are formalized by signatures which reflect the intention of the parties to be bound by the terms of the contract. There are instances however when parties to a contract sign the agreement without reading the terms that have been laid out.

In Thompson v London, Midland and Scottish Railway (1930), the plaintiff purchased a ticket from the railway company and thereafter boarded a train. On the ticket, which was obtained at the time of the purchase there was a clause (an exclusion clause) that stated that the Railway Co. will not be liable for any personal injury incurred during travel. The plaintiff was unable to read the clause because she was illiterate.

The plaintiff was injured during her journey and brought an action against the Railway Co. who relied on the exclusion clause to escape liability. It was held that the clause was a valid term of the contract and the fact that the plaintiff could not read did not make a difference.

In L’Estrange v Graucob (1934) the plaintiff purchased a vending machine and signed a contract with the defendant company without reading the fine print on it which contained an exclusion clause. The vending machine proved defective and the plaintiff brought an action against the defendant company. It was held that regardless of the fact that the plaintiff had not read the fine print in the contract, as long as the party signs the contract then it will be deemed that the party has read the terms in the contract and is thereby bound by the said terms.

However, the rule in L’Estrange v Graucob (1934) will not apply when there is a misrepresentation as to the nature of the document that was signed. In Curtis v Chemical Cleaning and Dyeing Co (1951), the plaintiff took her wedding dress into the dry cleaners to be cleaned. She was then asked to sign a document and when she queried the defendants as to the terms in the document, she was told that it exempted the defendants for being liable for the loss of beads or sequins, when in fact the document exempted the defendants from liability for any damage done to the dress.

When the plaintiff went to collect her dress, she realized that there was a stain on it that wasn’t there before. The plaintiff brought an action against the defendants and her claim was successful because she was misrepresented as to the nature of the document that she was signing.

In Wilton v Farnworth (1948) (High Court of Australia) it was held that in most instances a person is bound by the terms of an agreement he or she has signed, unless of course, there was fraud or some other special circumstances to prevent the signatory from being bound by the terms in the agreement.

Any term or stipulation that is to be part of the contract must be made prior to the formalization of the contract. In Chapleton v Barry Urban District Council (1940) the plaintiff hired a deck chair from Barry UDC and according to the sign that was posted, payment for the hire of the chair was to be made at a specified counter or booth. The plaintiff followed the instructions and once payment was made he was given a receipt which had an exclusion clause printed on it that excluded liability for injury incurred while using the chairs. The plaintiff sat on the chair and was injured as a result of a faulty chair. He brought an action against Barry UDC and was successful in his claim.

The court held that the terms in a contract must be made or stipulated prior to the acceptance or the formalization of the contract and any term, stipulation or clause that came after the formalization of the agreement would not be part of the contract.

Similarly, in Olley v Marlborough Court Ltd (1949) the plaintiff checked into a hotel and the contract came into existence at the reception or the front desk. The plaintiff then went into her room and when she shut the door she noticed a sign on the back of the door which purported to exclude liability for any items lost or stolen. The plaintiff’s fur court was later stolen and the plaintiff brought an action against the defendants. It was held that the contract had come into existence before the exclusion clause had been brought to the plaintiff’s attention and therefore it did not form part of the contract.

In Thornton v Shoe Lane Parking Ltd. (1971) the defendant was injured in a carpark after he had purchased a ticket from the ticketing machine and had driven his vehicle into the parking area. There were signs posted on the walls after he had passed the barrier that the company was not liable for any personal injuries incurred while in the parking area.

The matter before the courts was whether the signs posted on the walls constituted a term in the contract. It was held that the representation came after the contract had come into existence i.e. once the plaintiff had paid the money and obtained his ticket and therefore did not form part of the contract.

In order for exclusion clauses to be valid or enforceable they must be brought to the attention of the other party prior to the formalization of the contract or before the contract comes into existence.

Copyright © 2017 by Dyarne Ward

Elements in a Contract VII – Express Terms I

Now that we have identified the prerequisites to a contract, it is time for us to take a closer look at the terms in a contract, after it has come into existence. Terms may be either express or implied. The terms in a contract can be made orally, in writing or part orally and part in writing.

Whether an oral statement made prior to entering into a contract becomes a term of the contract or otherwise is dependent on the facts of the case. When a statement is made, without which the parties would not have entered into the contract to start with, the statement becomes a part of the contract.

In Bannerman v White (1861), the plaintiff (claimant) agreed to purchase some hops from the defendant for brewing purposes. The plaintiff stipulated that the hops must not be treated with sulphur prior to the purchase because it was intended for use in the manufacture of a consumable product.

The defendant assured the plaintiff that the hops had not been treated with sulphur but as it turned out they were. The defendant argued that the representation was not a term in the contract but the courts determined otherwise because the plaintiff had emphasized the importance of the term, prior to concluding or formalizing the agreement.

Under normal circumstances the more time that has lapsed between the representation and the conclusion or the formalization of the agreement, the higher the probability that the term would not be regarded as part of the contract.

In Routledge v McKay (1954) the plaintiff acquired a motorcycle and a sidecar from the defendant. According to the supporting documents, the motorcycle was listed as a 1942 model which was exactly what the defendant told the plaintiff it was, prior to the purchase.

It later turned out that the motorcycle was a 1936 model and the plaintiff brought an action against the defendant. The purchase however was not made at the time of the negotiations but a few days later, after the terms had been communicated during which time the plaintiff could have made further checks or made further enquiries if he so desired.

It was held that the statement as to the model of the motorcycle was not a term in the contract but a mere representation, especially so, because there was no mention of the model in the written agreement which followed the verbal representation. If the term was crucial it only stands to reason that the parties would have incorporated it into the written agreement that followed.

If the defendant however professes to have specialized knowledge or claims to be an expert in the field than the courts will be more willing to deem that any oral representation he or she has made to be a term of the contract.

In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) the plaintiffs were looking for a Bentley car and had certain criteria that they based their selection upon. The defendant a car dealer who was an expert on Bentley cars sold them a car based on the criteria that the plaintiffs had set. It later turned out that the car in question did not fit the criteria the plaintiffs had set and the plaintiffs sued. The courts held that the oral statements were indeed a part of the contract and the plaintiffs were successful in their claim.

In Oscar Chess v Williams (1957) however, the defendant had sold a car to the plaintiffs based on the model that was stated in the vehicle’s registration book. The car was in fact an older model and the market value of the car was much less to what the plaintiffs had paid. The plaintiffs sued for the difference but their claim failed because the defendant was not an expert on cars and he in good faith had sold them the car based on the details in the registration book which presumably had been altered by the previous owners.

When the terms of an oral agreement are transferred to a written contract the presumption is that all the terms that have been agreed upon would be condensed into writing and any term that has not been transferred to the written document is deemed to be a mere representation or part of the negotiations prior to entering into the contract and not as a term of the contract.

In Duffy & Ors v. Newcastle United Football Co. Ltd. the club offered its seasonal ticket holders the option to purchase a bond that guaranteed them a designated seat for 10 years. The seats however were subject to a clause in the contract which stipulated that should the seats not be available the club will provide them with the best possible alternative.

Relying on the clause the club later sought to move the seating of some of its supporters in order to expand the stadium. The supporters argued that there were verbal representations made, prior to entering into the contract that guaranteed them the best seats. It was held that the verbal representations did not form part of the contract and that the club was allowed to reallocate the seats if there was good and sufficient reason to do so.

Therefore, where possible it would be easier to incorporate any oral/verbal term(s) made during negotiations into a written agreement and if anything, it is evidence that goes to show that both parties intended the terms to be part of a binding agreement/contract (a contract is a legally binding agreement).

Despite the importance that is attached to the time factor or rather the lapse of it, if the term was of sufficient importance than it would be deemed to be part of the contract. Yet again it depends on the facts.

In Schawel v. Reade (1913) the plaintiff purchased a horse for stud purposes from the defendant. Prior to the purchase the plaintiff was told by the defendant that the horse was sound and that it suffered from no inherent illnesses. So sound in fact, that there wasn’t a need for a veterinary examination. The plaintiff accordingly purchased the horse without having it examined by a vet and it later turned out that the horse suffered from a hereditary disease and was not suitable for stud purposes.

It was held that the oral representation, despite the significant delay, was a term of the contract because the representation was so important that without it the purpose of the contract would be defeated.

Copyright © 2017 by Dyarne Ward

Elements in a Contract VI – Intention to Create Legal Relations

The next element in a contract is an intention to create legal relations. In most commercial transactions, there is a presumption that the parties intended to create a legal agreement unless it can be proved otherwise.

In Sandler v Reynolds (2005) the plaintiff had entered into an oral agreement with the defendant in that the plaintiff should be the ‘ghost writer’ of the defendant’s autobiography. The plaintiff had gone as far as proposing the title and outlining the first chapter when the defendant changed his mind and entered into an agreement with another writer. In was held that there was an intention to create legal relations based on the facts of the case and that the advance of £70,000 was to be shared equally between the plaintiff and the defendant.

However, if it is clearly stated or stipulated that the agreement was binding in honor only and that there was no intention to create legal relations than it would be deemed that there was no intention to create legal relations as in the case of Jones v Vernon Pools (1938).

The onus of proving that there wasn’t an intention to create legal relations is on the party that intends to establish that a contract did not come into existence.

In Edwards v Skyways Ltd. (1964) the plaintiff was a pilot in the defendant company and a member of the company’s pension fund. The plaintiff was later made redundant by the company but it informed the plaintiff that he would receive payments equivalent to his contribution to the pension fund.

The company failed to make the payments and the plaintiff sued. It was held that there was a contract in place and that the onus of disproving an intention to create legal relations rested on the party that sought to dispute the existence of a contract.

Not all agreements however are legally enforceable or mature into contracts. Despite the willingness of the parties to be bound by a contract, at the time the agreement was made, the courts may infer for public policy reasons, that there was no intention to create legal relations especially when it comes to contracts made within households. Therefore, certain agreements even if they do resemble contracts, may not be legally enforceable.

In the case of the husband who agreed to send his wife a certain amount of money, monthly, while working overseas and then refused to do so when the relationship broke down, it was held that there was no contract in place and that the agreement between the husband and the wife was a purely social agreement that could not be enforced – Balfour v Balfour (1919).

Agreements such as the one made in Balfour v Balfour (1919) are agreements between parties that do not result in contracts within the meaning of the term in law and the most common example of such agreements are agreements between husband and wife or partners.

Similarly, in the case of the kindly benefactor who had agreed to pay £4,000 per year to a chapel, for 5 years, to help it pay off its debts, it was held that the promise to assist was merely a gratuitous promise that did not amount to a contract – Re Hudson (1885).

The ratio or reasoning in Balfour v Balfour also extends to the parent child relationship. In Jones v Padavatton (1969) a mother persuaded her daughter to leave her high paying job in the US and move to London to complete her bar. In addition to giving her a certain amount of money each month the mother also purchased a house for her to help her financially until she completed her exams. The daughter subsequently moved to London but did not complete her bar as agreed but chose to marry and settle down instead. The mother then sought possession of the house and the court held that there wasn’t a legally binding agreement in place and that the agreement between the mother and daughter was not intended to have legal consequences.

The situation however is slightly different when it comes to former partners who are legally separated. In Merritt v Merritt (1970) – a husband and wife separated and there was an outstanding debt owing on the house which the couple had jointly purchased. The couple entered into an agreement whereby the husband would pay the wife a certain amount each month until the mortgage was fully paid off and once the mortgage was out of the way, the house would be transferred to the wife. The husband failed to transfer his interest in the house to the wife once the payments were complete and the wife brought an action against the husband. It was held that there was a binding agreement and that it was enforceable at law.

When it comes to social agreements, intention is inferred if there is some certainty that the parties intended to create a binding contract i.e. the element of certainty needs to be satisfied. In Simpkins v Payns (1955) a tenant, landlady and her granddaughter entered into a weekly competition run by a newspaper. A coupon was sent in, in the landlady’s name each week and all three took turns to send in the entries and the nominal sum which accompanied the entries based on an agreement that should any of them win the prize, it would be split or shared three-ways. The landlady won the prize and upon winning refused to give the tenant his share of the winnings. The tenant brought an action in court against the landlady and it was held that there was indeed a valid contract.

In the more recent case of Wilson v Burnett (2007) three friends came to an agreement that if they were successful at bingo on a particular evening, they would split the prize money three-ways. One of the friends was extremely successful and won in excess of £100,000. The other two friends brought an action to claim their share of the prize money. It was held that the issue before the courts was to decide whether there was a binding agreement made between the friends, prior to playing bingo that evening and if the agreement was of sufficient certainty. The plaintiffs were unsuccessful in their claim.

Copyright © 2017 by Dyarne Ward

Elements in a Contract V – Consideration

Having identified the first two elements in a contract, offer and acceptance, let’s move on to the third, consideration. Consideration can be in the form of abstaining from performing an act, it could be in the form of performing an act or acts stipulated by the offeror as in the case of Carlill v Carbolic Smoke Ball Co (1893), it could be inferred or implied by conduct as in the case of Brogden v Metropolitan Rly Co. (1877) and it could be part consideration provided in lieu of completing the terms stipulated in a contract, Dahlia v Four Millbank Nominees (1978).

In Currie v Misa (1875) it was held that consideration from the perspective of the law may consist of some right, benefit, interest or profit accruing to the party or some loss, sufferance, detriment, or responsibility incurred by the party.

Consideration must be distinguished from an outright gift and therefore it has to be either expressly or impliedly requested for by the promisor. In Dahlia v Four Millbank Nominees (1978) for example, the offeror requested for some form of consideration. If the plaintiff had taken it upon himself to arrange for a bank draft to be delivered to the defendant, without the defendant asking for it, then that might not have been deemed as consideration but might have instead been perceived as a gesture of goodwill.

Consideration must move from the offeree or from the promisee to the oferor or the promisor. In Tweddle v. Atkinson (1861) the parents of the bride and groom agreed to pay a certain sum to the groom upon his marriage to the bride. The bride’s father died before the payment could be made and the groom brought a claim against his estate. The court ruled that because consideration did not move from him, he was unable to claim i.e. a party who has not provided consideration for the promise cannot enforce the promise.

Past consideration is not good consideration. In Roscola v Thomas (1842) the seller of a horse made an assertion after the offer and acceptance had been concluded or after the agreement had passed, that the horse was free from vice. Following the sale, the buyer brought an action against the seller but his action was unsuccessful because the assertion was made after the sale was concluded.

In Eastwood v Kenyon (1840) the guardian of a young girl educated her on the promise that the young lady would repay the debt once she’d come of age. The young lady, once she’d come of age, did make some repayments but soon after married, following which, her husband promised to repay the loan on her behalf. The husband failed to do so and the guardian brought an action against him. It was held that while the husband had a moral obligation to honor his promise there was no legal obligation to do so.

In R v Clark (1927) (High Court of Australia) there was a reward for information given leading to the arrest of several murderers. Clark gave the information but at the time he did so he had forgotten about the reward that was offered. He later tried to claim the reward but was denied by a court because at the time that he had given the information he gave no thought to the reward

In Re McArdle (1951) the plaintiff had made some renovations and repairs to her father-in-law’s bungalow. The father-in-law had left the property first to his wife for life and subsequently on trust for her husband and his four siblings. The siblings later, once the work had been completed, promised to pay the plaintiff a certain amount for the work that had been done. The payment was not made and the plaintiff brought an action against the defendants but was unsuccessful because past consideration is not valid consideration or is no consideration.

Past consideration however is consideration or is regarded as good consideration when it is done at the request of the offeror or the promisor. In Lampleigh v Braithwaite (1615) the defendant had committed murder and was found guilty and sentenced to hang accordingly. The defendant asked the plaintiff to get him a pardon and the plaintiff was successful in doing so. The defendant then promised the plaintiff £100 for his efforts but later refused to pay. It was held that the plaintiff was entitled to his reward because the act was done at the request of the defendant.

Past consideration is also good consideration when there is an understanding between the parties that the act that is done is to be remunerated. In Re Casey Patent’s (1892) the plaintiff did some patenting work for the defendant and upon the completion of the work the defendant promised to give the plaintiff one-third of the share in the patents. The defendant later failed to comply and the plaintiff sued. The plaintiff was successful in his claim because the work was done on the understanding or the premise that the plaintiff would be given some form of remuneration or the other.

An act done before the giving of a promise to make a payment or to confer some other benefit could be consideration for the promise where

(i) the act was done at the promisor’s request,

(ii) the parties understood that the act was to be remunerated either by payment or the conferment of a benefit, and

(iii) the payment or conferment of benefit was legally enforceable.

Consideration however must not be something that is illegal. In Wyatt v Kreglinger and Fernau (1933) the plaintiff’s pension was dependent on him taking no further part in the wool trade. It was held that the stipulation was void because it was contrary to public interest.

Consideration must be sufficient but need not be adequate i.e. it does not need to correspond exactly or precisely, in monetary terms, to the offer or to what’s being offered but it must be in the form of monies or monies worth.

In Thomas v. Thomas (1842) a dying husband transferred the ownership of his seven houses to his brother but informed him prior to death, in front of two witnesses that, he wanted his wife to be permitted to live in one of those houses.

His brother Samuel complied with his wishes and after his death he allowed his brother’s wife (Eleanor) to stay in one of the houses and had a written agreement drawn up whereby his brother’s widow was to remain in the house on the conditions that she kept the house in good repair and paid a rent of £1 per annum. The agreement continued for some years until Samuel’s death whereby the executors refused to continue with the arrangement. It was held that the rent of £1 per annum was sufficient consideration and that Eleanor could continue to remain in the house.

In Chappell v. Nestlé (1960), Nestle ran a promotion whereby any person who sent in 3 wrappers and a postal order for 1s and 6d would be sent a record. Chappell a copyright owner in one of the records disputed Nestle’s offer and argued that the records would normally retail at 6s or more.

The matter before the courts was to decide if the wrappers formed part of the consideration and if they did there was no possible means to ascertain their value and Chappell would be successful in obtaining an injunction preventing Nestle from distributing the records. The court held that the wrappers were indeed part of the consideration and Chappell was successful in obtaining an injunction to stop Nestle from distributing the records.

Consideration however must have some economic value. In White v. Bluett (1853) the defendant owed his father some money but his father had promised him that he would write off the debt if his son stopped complaining as to how the property was distributed among the children.

Upon his death, the executor sued for the outstanding debt. It was held that not complaining was not sufficient consideration and the plaintiff was successful. Consideration must have some economic value i.e. it must be in the form of monies or monies worth.

The performance of an existing duty will not amount to consideration. In Collins v Godefrey (1831), the plaintiff had been subpoenaed for jury duty. While he didn’t actually go on duty, he was on standby for 6 days. He later brought an action against the defendant for expenses incurred. His claim failed. They court held that an existing public duty does not amount to consideration.

In instances of debts, the rule of thumb is that part payment will not amount to sufficient consideration. In Pinnel’s Case (1602) the defendant paid off part of his debt and hoped that he would be discharged. The plaintiff brought an action for the outstanding debt and was successful in his claim.

In Foakes v. Beer (1884) the defendant owed the plaintiff a certain amount of money and made an arrangement with the plaintiff to pay it off in installments but no mention was made of the interest. The defendant eventually paid off the full debt as promised but the plaintiff brought an action for the outstanding interest. Pinnel’s rule was applied and the plaintiff was successful.

A promise not to sue can also be sufficient consideration. In Alliance Bank Ltd v Broom (1864) the plaintiff, a bank, asked the defendant to provide some security for his overdraft. The defendant promised to do so but never provided the security and the plaintiff sued. The defendant argued that there was no consideration for his promise to provide security but the courts held that the bank’s implied promise not to sue should the defendant provide the appropriate or relevant security was consideration enough.

In Miles v New Zealand Alford Estate Co (1886) however, the plaintiffs purchased some land from the defendant and they were unhappy with their purchase and they informed the defendant of this. The defendant promised to make amends by making certain payments but failed to do so. The plaintiffs brought the matter before a court and argued that they had provided adequate consideration by not suing but the court found in favor of the defendant and found that not suing was not sufficient consideration in this particular instance.

If anything, the plaintiff should have at the very least inspected the land or asked for the advice of someone knowledgeable in the area prior to making the purchase.

If the party had done more than what was required or expected of him in the contract than that would be deemed to be sufficient consideration.

In Hartley v Ponsonby (1857) half the crew in a ship deserted while the ship was sailing to Mumbai. The captain of the ship promised the remainder of the crew extra wages should they be willing to carry on. The remainder of the crew agreed and upon reaching Mumbai the captain of the ship refused the crew the additional wages. The plaintiff sued.

It was held that by agreeing to take on the additional duties, the plaintiff had taken on duties that were not in his contract and was thus entitled to the extra wages.

In the earlier case of Stilk v Myrick (1809) however two sailors abandoned ship during a voyage and the captain of the ship promised the rest of the crew additional wages should the remainder of the crew take on their duties and help the ship complete its journey. Once the journey was completed the captain did not pay the additional wages and the plaintiff brought an action in court.

It was held that the plaintiff was not entitled to the additional wages because he had merely done what he was contracted to do i.e. complete the journey.

Hartley v Ponsonby (1857) can be distinguished from Stilk v Myrick (1809) in that, in the former the number of persons that had deserted the ship were so substantial that it would have jeopardized the entire voyage and in the latter the number of persons that had deserted the ship were so small that the additional duties may have been minimal.

In Glasbrook Brothers v Glarmorgan County Council (1925) the defendants owned a colliery and requested for protection from the police during a strike. Once the strike was over the police submitted a bill for the work that they had put in. The defendants refused to pay and an action was brought against the defendants. The plaintiffs were successful because in providing the additional resources that was required the police had gone over and above their duty.

If one party promises additional payments to complete an existing duty, than it would be deemed to be sufficient consideration, unless it is tainted with illegality.

In William v Roffey (1990) the plaintiff was a sub contractor who ran into financial difficulties while performing his duties under a contract and as a result didn’t look likely to complete his duties, which in turn would have resulted in a loss of income for the defendants.

The defendants in order to keep the plaintiff afloat promised an additional payment because the initial payment was too low and further amended the working conditions to accommodate the new promise. The plaintiff agreed and completed his duties but the defendants refused to make the additional payments.

It was held that the plaintiff was entitled to the additional payment because it allowed the defendants to complete the duties they were required to perform under a contract and as a result the defendants were remunerated accordingly.

With regards to third parties, when a party to a contract promises to provide a service or perform a duty, which it is already bound to do under an existing contact; the party can still receive or derive some form of remuneration from a third party.

In Shadwell v Shadwell (1860) the plaintiff was engaged to be married when his uncle wrote to him promising him £150 a year, until he was earning a specified sum from his practice. The plaintiff duly got married but he never reached the stipulated amount of earnings. The amount was not paid regularly and upon his uncle’s death the plaintiff sued for the arrears.

The court held that the plaintiff was entitled to the arrears because he had acted to his detriment by getting married, despite the fact that he was already engaged at the time of the agreement, and that he had incurred additional expenses by doing so.

In Scotson v Pegg (1861) the plaintiff brought and action against the defendant for failing to unload the coal that he had delivered. The plaintiff was in actual fact contracted to another party to deliver coal to any person that the contracting party nominated.

The defendant argued that he was not liable because the plaintiff was already contracted to deliver the coal to him under the terms of an existing contract.

The plaintiff was successful in his claim and it was held that the plaintiff had acted to his detriment by delivering the coal and the defendant benefitted from it regardless of the fact that the plaintiff was already obligated to do so under the terms of an existing contract.

Copyright © 2017 by Dyarne Ward

Elements in a Contract IV – Acceptance

An acceptance is an unconditional willingness to be bound by the terms of an offer. The acceptance can be in terms of performing an act, say for example painting a house for remuneration or abstaining from smoking for a reward, as in instances of unilateral contracts.

An acceptance can also be inferred or implied by conduct as in the case of Carlill v Carbolic Smoke Ball Co (1893) or without the formalization of an existing agreement as in the case of Brogden v Metropolitan Rly Co. (1877).

As a general rule an acceptance must be communicated to the offeror. There are however certain exceptions for example when the performance of an act constitutes an acceptance like in the case of Carlill v Carbolic Smoke Ball Co (1893).

When it comes to communications by post, it is deemed that the offeror is given sufficient notice of the acceptance as soon as the letter of acceptance is posted. In Adams v Lindsell (1818), the defendant wrote to the plaintiff offering to sell wool. The defendant misdirected the letter and there was a delay in the letter reaching the plaintiff. The defendant thinking that the plaintiff was no longer interested sold the wool to someone else. The plaintiff sued for a breach of contact.

The plaintiff was successful. In instances of posting the acceptance, the acceptance is deemed to have taken place as soon as the letter is posted. This rule is known as the postal rule and it is an exception to the requirement that, acceptance must be communicated to the offeror, though it might place the offeror at a disadvantage.

The postal rule applies even if the letter of acceptance is delayed or lost in the post. In Household Fire and Carriage Accident Insurance Co. v Grant (1879), Mr. Grant offered to buy shares in Household Fire and Carriage Accident Insurance. The company accepted the offer and allotted him the respective shares and sent him a letter informing him of this. The letter was lost in the post and Mr. Grant was not notified of the acceptance. In the meantime, Mr. Grant’s dividends were credited to his account.

Household Fire and Carriage Accident Insurance subsequently went bankrupt and the liquidators requested that the Mr. Grant make the outstanding payments on his shares. Mr. Grant refused.

It was held that there was a valid contract in place. The post office is such a common agent that as soon as the letter of acceptance makes it to the post office, the contract is concluded. It is as good as a messenger putting the letter of acceptance in the hands of the offeror.

The postal rule however does not apply if it was not reasonable to use the post as a means of communication as in instances where the offeror clearly stipulates that he must be notified in writing.

In Holwell Securities Ltd v Hughes (1974) the defendant offered to sell the plaintiff his house and the option was exercisable by a notice in writing to the defendant within 6 months of the offer being made. 5 days prior to the completion of the 6 months, the plaintiff sent a letter to the defendant communicating his acceptance but the letter never arrived.

The Court of Appeal decided that the offer which clearly stipulated that the defendant must be notified in writing could not be accepted by merely posting a letter. As a general rule if the offeror stipulates that an offer can only be accepted in a specific manner than the offer can only be accepted in the manner stipulated by the offeror.

If an acceptance takes place via an electronic medium say for example fax or e-mail, it will take place at the time it is received. In Entores Ltd v Miles Far East Corp (1955) – A telex was sent from England to Holland offering to purchase a certain quantity of cathodes. The office in Holland sent a telex back accepting the offer. The question before the courts was where did the acceptance take place? If the acceptance took place at the time the telex was sent it would be in Holland and if the acceptance took place at the time it was received it would be in England.

It was held that when an acceptance is communicated via electronic means, acceptance takes place or occurs when it is brought to the attention of the offeror i.e. it took place in England.

Silence however does not constitute acceptance and neither can the offeror stipulate otherwise. In Felthouse v Bindley (1862) a man wrote to his nephew informing him of his intention to purchase his nephew’s horse. He further stated that if he hears no more about the horse he’ll considered that the horse is his. The nephew did not reply to his uncle but he did instruct the auctioneer not to sell his horse along with his other farming stock. The auctioneer forgot and sold the horse.

The court held that despite the fact that the nephew may have intended to sell the horse to his uncle by instructing the auctioneer not to sell the horse along with his other farming stock, his intention was never communicated to his uncle and therefore there was no contract. As a general rule silence, does not constitute the acceptance of an offer.

The offer must be accepted on its original terms and any attempt to vary the terms of the offer will be viewed as a counter-offer and as a rejection of the original offer. In Hyde v Wrench (1840) the defendant wrote to the plaintiff offering to sell his farm for a £1,000 to which the plaintiff replied that he was willing to buy it for £950.

The defendant refused to sell the property for £950 and a few days later the plaintiff wrote to the defendant stating that he was willing to purchase the property for £1,000. It was held that the plaintiff’s counter offer was a rejection of the defendant’s offer and that the original offer could not be revived.

In Northland Airliners Ltd v Dennis Ferranti Meters Ltd (1970) the seller negotiated with the buyer for the sale of an aircraft. The seller then sent a telegram stating that the sale was confirmed and asked the buyer to remit the specified amount. The buyer remitted the said amount, with the condition that it was to be held in trust until the delivery of the aircraft and added that the delivery was to be made by a third party and within a specific date. The seller did not reply but sold the aircraft to another buyer for a higher price. The Court of Appeal held that there was no contract between the parties. The buyer’s reply introduced two new terms with regards to payment and delivery.

A counter-offer however must be distinguished from a mere request for additional information. In Stevenson, Jacques & Co. v McLean (1880) the defendant wrote to the plaintiff offering to sell a specific quantity of iron, cash, and left the offer open until Monday. On Monday morning, the plaintiff wrote to the defendant asking if the defendant would accept delivery over 2 months or otherwise the longest time permissible. The defendant did not reply but sold the iron instead to a third party.

The plaintiff not having heard from the defendant, later on the same day sent a telegram stating that he’d accepted the defendant’s offer. It was held that there was a valid contract in place because the plaintiff’s initial telegram did not amount to a counter proposal and that it was a mere inquiry.

An offer cannot be withdrawn after it is accepted but it can be withdrawn at any time prior to the acceptance. In Payne and Cave (1789) the defendant made an offer at an auction but withdrew his offer prior to fall of the auctioneer’s hammer. It was held that the defendant was free to withdraw his offer any time prior to the fall of the hammer.

Items at an auction are invitations to treat and it is up to any interested party to step up and make an offer which the auctioneer can either accept or reject.

In Routledge v Grant (1828) the defendant offered to take up a lease on the plaintiff’s premises and gave the plaintiff 6 weeks to make up his mind. 3 weeks later the defendant withdrew his offer and the plaintiff sued for a breach of contract. It was held that there was no breach of contract and that the defendant was free to withdraw his offer i.e. either party could either withdraw or reject the offer within the 6 weeks.

An exception to the rule that an offer may be withdrawn at any time prior to acceptance occurs when the plaintiff provides some form of consideration to keep the offer open for a fixed or specific period of time.

In Dahlia v Four Millbank Nominees (1978) the plaintiff had agreed to purchase some property from the defendant and the defendant agreed to keep the option open if the plaintiff arranged for a bank draft to be delivered to the defendant within a certain time and date. The plaintiff complied with the defendant’s request but the defendant refused to proceed with the sale.

It was held that there was a contract in place and that the acceptance was similar to an acceptance in a unilateral contract. Once the offeree has started performing the act, the offeror must not stop or prevent the condition or the stipulation from being satisfied.

The withdrawal of an offer must be communicated to the offeree. In Byrne v. Van Tienhoven (1880) the defendant mailed an offer to the plaintiff to sell tin pin plates. Approximately a week later he wrote to the plaintiff revoking the offer. The plaintiff accepted the offer as soon as the letter arrived and telegrammed his acceptance to the defendant.

Subsequent to that the plaintiff received the letter of revocation and sued for a breach of contract. It was held that there was a contract in place and the contract came into existence as soon as the plaintiff sent his telegram. The postal rule was applied

The withdrawal however does not have to be communicated in person. In Dickinson v Dodds (1876) the plaintiff was given an option to purchase some land from the defendant and the defendant stated that the option would remain open for 2 days. The defendant however sold the land to someone else the next day and the plaintiff came to know of it the same day. The plaintiff then decided to take up the offer, after coming to know that the land had been sold. It was held that there was no contract in place and it was clear that the defendant did not intend to sell the plaintiff the property – it was as obvious as if the defendant had told the plaintiff so himself.

Copyright © 2017 by Dyarne Ward

Elements in a Contract III – Offer (II)

An offer is best described as a willingness to be bound by the terms of a contract, once it has been accepted. It can either be expressed verbally or in writing or it may be implied.

In Brogden v Metropolitan Rly Co. (1877), Brogden had supplied the Metropolitan Rly Co. for years without a formal agreement. The parties then intended to formalize the arrangement and the Metropolitan Rly Co. sent Brogden a draft. Brogden completed the draft, filled in some of the details that had been left out including the name of the arbitrator and sent it back. The draft was handed to a manager and no further action was taken and the parties continued as per normal until a dispute arose. Brogden argued that there was no contract in place between the parties.

It was held that the fact that the parties continued to deal as per normal after the draft had been returned with the changes, indicated that there was a willingness to continue with the arrangement. The fact that both parties continued with their obligations as agreed constituted a contact.

In Storer v Manchester City Council (1974) – The city council wrote to a sitting tenant (a sitting tenant is a tenant who is already occupying a property and has a legal right to stay on the premises) asking him if he wished to purchase the property he was residing in and if so to sign and return the council’s standard form agreement, which the tenant did.

Soon after a new council took over and did not wish to proceed with the agreement and put forward the argument that the agreement had not been signed on the council’s behalf. It was held that the council had made a valid offer and its acceptance constituted a contract, despite the fact that, it was not signed by the council’s representative.

Storer however has to be read in light of Gibson v Manchester City Council (1979). The Manchester City Council advertised details of a scheme for tenants to buy their council houses. The plaintiff wrote to the council and the council accordingly replied with a price and certain terms. The house was then taken off the list of tenant-occupied houses maintained by the council and put on the house purchase list. A local election ensued and the new council reversed the policies of the former council and the sale did not go through. Gibson sued.

The Court of Appeal held that despite the fact that all the formalities had not been concluded, there was a clear intention to contract based on the transaction or what had transpired as a whole and found in favor of the plaintiff.

The council appealed. The House of Lords held that the fact that the council stated the price of the house and some other terms did not mean that there was an offer. It was merely a step in the negotiation process and the negotiations had not yet ripened into a contract.

An offer can be addressed to a specific person or to the world at large. Let’s look at an example. Mr. Smith wants to sell his car and in the past his neighbor Mr. Jones had indicated that should Mr. Smith ever wish to sell his car, he’d be happy to purchase it.

Mr. Smith informs Mr. Jones of his intention to sell his car and names a price. Mr. Jones accepts and hands him the specified amount, in return for which, Mr. Jones receives the car. The contract that ensues following the negotiations is a bilateral contract made between two parties.

Now let’s say for example that Smith Industries have concocted a remedy that will cure the common cold and confident of their new product they place an advertisement in the local daily stating that they are willing to pay £100 to anyone who catches a cold after using their product for two weeks in the prescribed or stipulated manner.

Let us say that half the residents of Slone Country, purchased the product and all of them despite having used the remedy concocted by Smith Industries, in the prescribed manner, ended up with a cold after using their product for two weeks. Smith Industries is only required to pay the aggrieved residents £100 each if there was a contract in place.

In Carlill v Carbolic Smoke Ball Co. (1893), the defendant placed an advert in the newspaper stating that the Smoke Ball Co. would pay anyone £100 if they caught influenza after using their smoke balls in the prescribed manner for two weeks. In order to show their sincerity, the Smoke Ball Co. had deposited £1000 in their bank account.

The plaintiff used the smoke balls in the prescribed manner and after two weeks, she caught influenza. The plaintiff sued.

The defendant argued that is not possible to make an offer to the world at large. It was held that it is in fact quite possible to make an offer to the world at large.

An offer is an expression of a willingness to enter into a contract in accordance with the specified terms, and the Smoke Ball Co. depositing £1000 in their bank account indicates their willingness to be bound by the terms. Mrs. Carlill in purchasing the smoke balls and using them in the manner that had been prescribed had accepted the offer.

An offer may be made orally, in writing or it may be implied by conduct and acceptance need not always be conveyed. It suffices that the offeree acted in the prescribed and stipulated manner.

In Carlill v Carbolic Smoke Ball Co. (1893), the court rejected the argument that the plaintiff did not convey her acceptance. The fact that she had purchased the smoke balls and used them as instructed, in the prescribed manner, was sufficient to constitute an acceptance.

Ticketing and vending machines are modern mechanisms used to convey an offer. In Thornton v Shoe Lane Parking Ltd. (1971) the defendant was injured in a carpark after he had purchased a ticket from the ticketing machine and had driven his vehicle into the parking area. There were signs posted on the walls after he had passed the barrier that the company was not liable for any personal injuries incurred while in the parking area.

It was held that tickets in ticketing machines and items in vending machines are in fact offers and therefore the contract comes into existence as soon as the offeree accepts the offer by providing consideration i.e. slotting in the coins. The exemption clauses or the clauses attempting to exempt liability for personal injury were not valid because the said clauses were brought to the attention of the offeree after the contract had come into existence.

Copyright © 2017 by Dyarne Ward