Paper type: Essay Pages: 10 (2424 words)
Critically discuss the concept of a contract using relevant cases and explain the meaning of the objective test.In this essay I will analyse, explain and discuss aspects of a contract which includes the following: offer and acceptance, certainty, intention to create legal relations, capacity, formalities, consideration and finally, the objective test. Firstly, A contract is a legally enforceable agreement made between two or more parties. As defined by Beatson in Anson’s law of contract, who takes his definition a little further than this, defining it as: A legally binding agreement made between two or more persons, by which rights are acquired by one or more acts or forbearances on the part of the other or others.
Furthermore, Treitel in The Law of contract defines as a contract as: An agreement giving a rise to obligations or recognised by Law. The factor which distinguishes contractual from other legal obligations is that they are based on the agreement of the contracting parties.
A party who wishes to establish that a legally binding contract has been formed between himself and another party must prove a number of matters. The first is that the parties have reached an agreement. This is usually done by demonstrating that one party has made an offer that the other has accepted. Secondly, the agreement must be expressed in a form that is sufficiently certain for the court to be able to enforce. For a contract to exist, usually one party must have made an offer, and the other must have accepted it. Once acceptance takes effect, a contract will usually be binding on both parties, and the rules of offer and acceptance are typically used to pinpoint when a series of negotiations has passed that point in order to decide whether the parties are obliged to fulfil their promises . To understand the law on offer and acceptance, you need to apprehend the concepts of unilateral and bilateral contracts. Most contracts are bilateral; therefore, each party takes on an obligation, most often by promising the other something. A unilateral contract arises where only one party assumes an obligation under the contract. For example, someone may promise to give your mother Ј50 if she gives up smoking for a year, or to pay a Ј100 reward to anyone who finds your lost purse, or, as the court suggested in Great Northern Railway Co v Witham (1873) 11 WLUK 12, to pay someone Ј100 to walk from London to York. What makes these situations unilateral contracts is that only one party has assumed an obligation- you are obliged to pay your mother if she gives up smoking, but she has not promised in turn to give up smoking. Similarly, you are obliged to pay the reward to anyone who finds your purse, but nobody need actually have undertaken to do so. The person making an offer is called the offeror, and the person to whom the offer is made is called the offeree, in addition to this, A contract is formed when an offeror makes an offer setting out his terms and the offeree accepts. A key case that relates to this Is Carlill v Carbolic smoke ball co (1893), in this case the defendants were the manufactures of smokeballs’ which they claimed could prevent flu. They published advertisements stating that if anyone used their smokeballs for a specified time and still caught the flu, they would pay that person Ј100, and to prove they were serious about the claim, they had deposited Ј1000 with their bankers. Mrs carlill bought and used a smokeball, but nevertheless ended up with the flu, she therefore claimed the Ј100, which the company refused to pay. They argued that their advertisement could not give rise to a contract, since it was impossible to make a contract with the whole world, and therefore they were not legally bound to pay the money. The court rejected the argument and Mrs Carlill was entitled to the Ј100. Acceptance of an offer means unconditional agreement to all the terms of that offer. In Tinn v Hoffman (1873) one party offered to sell the other 1,200 tons of iron. It was held that the other party’s order for 800 tons was not an acceptance. Acceptance will often be oral or in writing, but in some cases an offeree may accept an offer by doing something, such as delivering goods in response to an offer to buy. However, something may seem to be an acceptance but, if it proposes terms that are in any respect different from those which have been offered, it’s a counter-offer. And, a counter-offer amounts to a rejection of the offer that has just been made. An acceptance also cannot be withdrawn once it has been accepted, it may be revoked at any time beforehand. An example of this can be looked at in the case of Dualia v Four Millbank Nominees (1978) 2 All E R 557. In order for a revocation to be effective, notice of the withdrawal of the offer must be communicated to the offeree. A case to support this is Byrne & Co. v Van Tienhoven & Co. (1880) 5 C.P.D. 344. With presence of a valid offer and acceptance, the court may fail to find for a binding contract even where agreement is present, there will not be a binding contract if the agreement lacks sufficient certainty and such an agreement will be declared invalid by the courts. There are no set rules for certainty because whether a contract is enforceable or not depends on the vagueness or incompleteness of terms. This brings us to the two types of uncertain agreements, vague agreements and incomplete agreements. A vague agreement is where the words of a contract are vague, the court will attempt to uphold the contract by divining the intention of the parties. The attitudes of the courts may be seen in the case Scammell and Nethew ltd v Ouston (1941) AC 251 (HL), the defendant wrote to a claimant offering to sell a van for Ј286 and also offering to take its Bedford van for Ј100 in part-exchange. The agreement provided that this order given on the understanding that the balance of purchase price can be on hire-purchase terms over a period of two years. The defendant refused to accept the Bedford van due to its poor condition and the claimant sued for breach of the contract. carrying on from this, An incomplete agreement is where the parties may agree on broad terms but may wish to leave certain matters for future negotiations such as in The Bear Stearns Bank plc v Forum Global Equity ltd (2007) EWHC 1576 (comm) were the defendant wished to purchase from the claimant loan notes. The parties entered into negotiations and reached agreement on price, but several minor terms were not agreed on. Believing that that the agreement was made, the claimant agreed to sell the loan notes to the defendant. Before the details were finalised, the defendant decided not to proceed with the purchase. The claimant sued for a breach of contract.consideration is usually described as being something which represents either some benefit to the person making a promise or some detriment to the person to whom the promise is made, or both. Traditionally, the doctrine of consideration has been defined in terms of either a detriment to the promise or a benefit to the promisor. In Currie v Misa (1875) LR 10 EX 153, consideration was defined as: a valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss of responsibility given, suffered or undertaken by the other. In Dunlop Pneumatic Tyre co. Ltd v Selfridge and Co. Ltd (1915) AC 847, the House of Lords explained consideration in terms of purchase and sale- the claimant must show that he or she has bought the defendants promise, by doing, giving or promising something in return for it. Consideration is not a single principle but a body or rules or sub-principles with their exceptions. These sub-principles may be expressed as follows: consideration may be executed or executory but not past’, it must move from the promise but not necessarily to promisor’ and it must be sufficient though not necessarily adequate’. consideration may be executed or executory but not past reflects the methods by which the claimant purchases the promise of the defendant. In executory consideration, the form of the consideration arises by the way of a promise by the defendant in return for a promise by the claimant. An example of this type of consideration would arise where A promises to purchase B’s car on credit, delivery to take place next week. Here both A’s and B’s considerations are to be performed in the future- as it is executory. Executed considerations is where at the time of the formation of the contract the consideration has already been performed, so they have executed’ their side of the bargain. Past consideration means simply means past in relation to the promise that the claimant is seeking to enforce and not in relation to the time at which the claimant is seeking to enforce the defendants promise. An example of a past consideration may be seen where A paints the outside of Bs house as a voluntary act while B’s on holiday. When B returns from holiday B is pleasantly surprised by A’s kindness and promises to pay A Ј50. If B refuses to pay, can A claim their Ј50? The answer is no, because A cannot enforce that promise as A did not paint the outside of B’s house in return for money, A had already painted the house. A Case that relates with the example above is Roscorla v Thomas (1842) 3 QB 234, in this case the defendant sold the claimant a horse, after the sale was completed, the defendant told the claimant that the animal was sound and free from any vice’. This turned out to be rather far from the truth, and the claimant sued. The court held that the defendants promise was unenforceable, because it was made after the sale. If the promise about the horse’s condition had been made before, the claimant would have provided consideration for it by buying the horse, as it was made after the sale, the consideration past, for it had not been given in return for the promise. Past consideration will be regarded as good if the following three-part test is satisfied. Firstly, the act must have been done at the promisor’s request. Secondly, the parties must have understood that the act was to be remunerated either by payment or the conferment of some other benefit, and finally, payment or conferment of benefit, must have been legally enforceable, had it been promised in advance.In order for there to be a valid legal contract in existence, it must be shown that there is an intention to create legal relations. Not every agreement that is furnished with a consideration is legally enforceable. There must be an intention on the part of the parties to wish to enter the contract. As far as intent to be legally bound is concerned, contracts can be divided into domestic and social agreements on the one hand and commercial transactions on the other. Most social and domestic arrangements do not amount to binding since they are not intended to be such. cases that amount to social/domestic arrangements tend to fall into two areas, family arrangements and other arrangements. Balfour v Balfour (1919) 2 KB 571, this case forms a leading authority in this area. In this case, a husband, who was a civil servant based in Sri Lanka, brought his wife to England, eventually he had to return but his wife had to stay in England due to medical reasons, he agreed to pay for her Ј30 per month maintenance during his absence. When he failed to pay the allowance. She sued. Her action failed on two grounds: first, she had not provided any consideration for the allowance, and second, the parties had no intention of creating a legally binding agreement. it should be noted that agreements between husband and wife can, from time to time, produce legally binding consequences. Furthermore, there is a strong presumption in commercial agreement that the parties intend to be legally bound, and, unless there is very clear contrary evidence, this presumption will not be rebutted. There are three main exceptions where this presumption will be rebutted, the first being mere puffs’ were an offer is extremely vague and the law will not give its acceptance contractual effect. The second, being ambiguity’, where the words of a business agreement are ambitious, the courts will favour the interpretation of which suggests that the parties did intend to create legal relations, and therefore find that there is a contract and thirdly, collective bargaining agreements’. This agreement is not intended to be legally binding. In conclusion I would like to discuss the objective test’ or the objective approach’. The reasonable man or the man on the Clapham omnibus- used by the courts in English law where it is necessary to decide whether a party has acted as a reasonable person would. If a reasonable man’ would believe that there is an agreement, looking at all the circumstances, then contract law says there is a contract. for example, if you get in a taxi and say, take me to lime street station, a reasonable man would assume that you are agreeing to pay for the ride. Your behaviour indicates that you are entering a contract under which you are obliged to pay the fare and the taxi driver is obliged to take you to the destination. You cannot say to the driver, at the end of the journey, I never intended to pay you. Therefore, there’s no contract. In negotiation, things, sometimes become a little complex. There are two approaches, the Traditional Approach’, this approach finds the objective intention of the parties to an agreement by reducing the agreement in terms of offers, acceptances, revocations etc. and the laissez-faire’ approach which in this approach, can be used in assessing the presence of an agreement. This approach tends to look at the subjective intentions of the parties, in addition to everything else, and therefore makes the law, uncertain and unpredictable.Bibliography Catherine Elliot & Frances Quinn (2018) Contract Law, eleventh edition Richards, P (2017) The Law of Contract, thirteenth editionMcKendrick, E (2014) Contract Law, Text, Cases and Materials, Sixth Edition
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critically discuss the concept of a contract using relevent cases, and explain the meaning of the objective test. (2019, Aug 20). Retrieved from https://studymoose.com/critically-discuss-the-concept-of-a-contract-using-relevent-cases-and-explain-the-meaning-of-the-objective-test-essay