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Cases on Contract Essay

The defendant made the highest bid for the plaintiff’s goods at an auction sale, but he withdrew his bid before the fall of the auctioneer’s hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer. Note: The common law rule laid down in this case has now been codified in s57(2) Sale of Goods Act 1979. Fisher v Bell (1960)

A shopkeeper displayed a flick knife with a price tag in the window. The Restriction of Offensive Weapons Act 1959 made it an offence to ‘offer for sale’ a ‘flick knife’. The shopkeeper was prosecuted in the magistrates’ court but the Justices declined to convict on the basis that the knife had not, in law, been ‘offered for sale’. This decision was upheld by the Queen’s Bench Divisional Court. Lord Parker CJ stated: “It is perfectly clear that according to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract.” PSGB v Boots (1953)

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The defendants’ shop was adapted to the “self-service” system. The question for the Court of Appeal was whether the sales of certain drugs were effected by or under the supervision of a registered pharmacist. The question was answered in the affirmative. Somervell LJ stated that “in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract is completed.” Partridge v Crittenden (1968)

It was an offence to offer for sale certain wild birds. The defendant had advertised in a periodical ‘Quality Bramblefinch cocks, Bramblefinch hens, 25s each’. His conviction was quashed by the High Court. Lord Parker CJ stated that when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale. In a very different context Lord Herschell in Grainger v Gough (Surveyor of Taxes) [1896] AC 325, said this in dealing with a price list: “The transmission of such a price list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity. If it were so, the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out, his stock of wine of that description being necessarily limited.” Carlill v Carbolic Smoke Ball Co (1893)

An advert was placed for ‘smoke balls’ to prevent influenza. The advert offered to pay £100 if anyone contracted influenza after using the ball. The company deposited £1,000 with the Alliance Bank to show their sincerity in the matter. The plaintiff bought one of the balls but contracted influenza. It was held that she was entitled to recover the £100. The Court of Appeal held that: (a) the deposit of money showed an intention to be bound, therefore the advert was an offer; (b) it was possible to make an offer to the world at large, which is accepted by anyone who buys a smokeball; (c) the offer of protection would cover the period of use; and (d) the buying and using of the smokeball amounted to acceptance. Harvey v Facey (1893)

The plaintiffs sent a telegram to the defendant, “Will you sell Bumper Hall Pen? Telegraph lowest cash price”. The defendants reply was “Lowest price £900”. The plaintiffs telegraphed “We agree to buy … for £900 asked by you”. It was held by the Privy Council that the defendants telegram was not an offer but simply an indication of the minimum price the defendants would want, if they decided to sell. The plaintiffs second telegram could not be an acceptance. Gibson v MCC (1979)

The council sent to tenants details of a scheme for the sale of council houses. The plaintiff immediately replied, paying the £3 administration fee. The council replied: “The corporation may be prepared to sell the house to you at the purchase price of £2,725 less 20 per cent. £2,180 (freehold).” The letter gave details about a mortgage and went on “This letter should not be regarded as a firm offer of a mortgage. If you would like to make a formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible.” G filled in and returned the form. Labour took control of the council from the Conservatives and instructed their officers not to sell council houses unless they were legally bound to do so.

The council declined to sell to G. In the House of Lords, Lord Diplock stated that words italicised seem to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by G’s written acceptance of it. It was a letter setting out the financial terms on which it may be the council would be prepared to consider a sale and purchase in due course. Harvela v Royal Trust (1985)

Royal Trust invited offers by sealed tender for shares in a company and undertook to accept the highest offer. Harvela bid $2,175,000 and Sir Leonard Outerbridge bid $2,100,000 or $100,000 in excess of any other offer. Royal Trust accepted Sir Leonard’s offer. The trial judge gave judgment for Harvela. In the House of Lords, Lord Templeman stated: “To constitute a fixed bidding sale all that was necessary was that the vendors should invite confidential offers and should undertake to accept the highest offer. Such was the form of the invitation. It follows that the invitation upon its true construction created a fixed bidding sale and that Sir Leonard was not entitled to submit and the vendors were not entitled to accept a referential bid.”

Blackpool Aero Club v Blackpool Borough Council (1990) BBC invited tenders to operate an airport, to be submitted by noon on a fixed date. The plaintiffs tender was delivered by hand and put in the Town Hall letter box at 11am. However, the tender was recorded as having been received late and was not considered. The club sued for breach of an alleged warranty that a tender received by the deadline would be considered. The judge awarded damages for breach of contract and negligence. The council’s appeal was dismissed by the Court of Appeal. ACCEPTANCE

Brogden v MRC (1877) B supplied coal to MRC for many years without an agreement. MRC sent a draft agreement to B who filled in the name of an arbitrator, signed it and returned it to MRC’s agent who put it in his desk. Coal was ordered and supplied in accordance with the agreement but after a dispute arose B said there was no binding agreement. It was held that B’s returning of the amended document was not an acceptance but a counter-offer which could be regarded as accepted either when MRC ordered coal or when B actually supplied. By their conduct the parties had indicated their approval of the agreement.

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