Contract Law, Contract law key cases, Revocation of an offer

Dickinson v Dodds (1876) 2 Ch D 46

Negar Cetin

Court: Court of Appeal

Fact

On Wednesday 10 June 1874 Mr Dodds offered to sell his house to Mr Dickinson for £800, he stated that the offer ‘ to be left open until Friday 9 am’.

On Thursday the defendant sold the house to a third party named Allan. The claimant heard about this through another third party called Berry. Nevertheless, before 9 am on Friday the Claimant handed the defendant his letter of acceptance. But the defendant said it was too late. Mr Dickinson sued for breach of contract.

Issue

Had the offer been withdrawn?

Judgment

No contract had been concluded between the parties. The offer had already been revoked by the communication from the third party.

Since the promise to keep the offer open for a period of time was not supported with consideration, there was no obligation to keep the offer open and the offeror can revoke the offer at anytime before acceptance. This statement supported in Routledge v Grant (1828) 4 Bing 635, 130 ER 920.

Note: The offer can be withdrawn at anytime before acceptance by the offeror or some other reliable sources. If the offer revoke through a third party the third party must be “objectively reliable”.

Contract Law, Contract law key cases, Formation Of Contract /Offer and Acceptance

R v Clark (1927) 40 C.L.R. 227

Negar Cetin

In order to create a contract it is necessary to act in reliance upon the promises when accepting it.

Court: High Court of Australia

Judge(s) sitting: Isaacs ACJ, Higgins, Starke JJ

Fact

Crown had offered a reward of £1000 for information leading to conviction of murderers of 2 policemen. The government also promised that a pardon might be available to any accomplice giving required information. Clarke was under suspicion of the murder by crown. After his arrest he panicked and provided the information required in order to reduce his own sentence, forgetting, at the time, about the reward. Government refused to pay the reward.

Issue

Was there a contract between Clarke and the Crown?

Judgment

It was held that he was not entitled to the £1000 reward, as Mr. Clarke did not act “in reliance upon the offer or with the intention of entering into any contract”. He had no intention to claim the reward at the time of providing the information, therefore, he did not accept the offer.

The court ruled further than not only was a contract not formed, but Clarke had not fulfilled the terms of the contract, the information should lead to arrest and conviction of two murderers but one of the murderers was arrested before Clark give the information.

Note: The present case suggests that if the offeree knew of the offer in the past but has forgotten about it, they are treated as never having known about it.

Contract Law, Contract law key cases, Formation Of Contract /Offer and Acceptance, Offer

Gibbons v Proctor [1891] 64 LT 594 (also reported as Gibson v Proctor 55 JP 616)

Negar Cetin

Fact

A reward of £25 had been advised for information leading to the conviction of the perpetrator of a particular crime. The advertisement stipulated that the information must be given to the Superintendent Penn. The claimant, a police officer, had already shared the required information to a colleague (without knowing about the reward) with instructions to forward it to superintendent Penn. Before the information reached the Superintendent, the police officer became aware of the offer. The claimant attempted to claim the reward.

Issue

Was the police officer entitled to the reward without prior knowledge of the offer?

Judgment

The claimant was entitled to the reward. This case held that advertisements of reward is treated as an offer and the acceptance was the supply of the information to Penn, and by the time when information reached Penn, the officer had become aware of the offer.

Contract law key cases, Formation Of Contract /Offer and Acceptance, Offer

Carlill v Carbolic Smoke Ball Co Ltd [1893] 1 Q.B. 256

Negar Cetin

Offer by advertisement

Court: Court of Appeal

Judge(s) sitting: Lindley LJ, Bowen LJ and AL Smith LJ

fact:

The defendants, who made and sold ‘smokeballs’ issued an advertisement in the newspaper stating that if anyone used their smokeballs in a specified manner and for a specified time and still caught flue, can claim £100 reward, and they deposited £1,000 in the bank to show their good faith. The plaintiff on the faith of the advertisement purchase one of the balls, and nevertheless ended up with flue after using the product in the specified manner. She claimed the £100, which company refused to pay. In resisting Mrs. Carlill claim, the Smoke Ball Company advanced many defences, among them (1)the argument that their statement was ‘a mere puff’ and was a mere marketing device which was never intended to be taken seriously. They also argued that(2) their advertisement was an invitation to treat as it is not possible to make a contract with the whole world.

Judgment:

(1) It was held that the advertisement was not a mere puff and £1000 deposit with Alliance Bank is a proof of his sincerity of promise to pay £100 reward in the event which he stated.

(2) It was held that the advertisement was an offer to the whole world and the contract was made with those people who performed the acts stipulated by the Smoke Ball Company ‘on the faith of the advertisement’, and the performance of the conditions is the acceptance of the offer. The claimant was therefore entitled to recover £100.

Note:

It sometimes argued that it would be unjust to allow a party to sue on a contract, if that party could not be also sued on it. Unilateral contracts are the contracts in which one party can sue the other party but not be sued. In the present case Smoke Ball Company cannot sue Mrs. Carlill for not using the smokeball.

This case reaffirms objective approach takes by the court when assessing the issue of intention. Subjectively the company may not have intended to honour its promise , but objectively the £1000 deposit and the language used in the advertisement which was “clear, definite, and explicit, and left nothing open for negotiation” were clear evidence to the contrary.

Formation Of Contract /Offer and Acceptance, Uncategorized

Unilateral Contracts

Negar Cetin

In terms of the rules on offer and acceptance, there are two types of contracts: unilateral and bilateral.

The contract is described as being unilateral when the offeror makes a promise in exchange for the performance of a stipulated act.

In unilateral contracts only one party has obligations under the contract the other does something or refrain from something.

Acceptance of unilateral offer:

The acceptance of the unilateral offer can take place when the offeree performs the stipulated act. Once the offeree has performed the act offeror can not withdraw his/her offer. However, offeree can change his/her mind and not to continue her/his performance of a stipulated act anytime. Example in Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 . Mrs Calill makes no promise to the Carbolic Smoke Ball to use their products and can decide not to continue her use of the smoke ball at any time.

Communication of offers in unilateral contracts:

1. In both unilateral and bilateral contracts offer must be communicated to offeree to be valid. This means that no party can be bound by an offer of which they where unaware. This proposition is supported by Gibbons v. Proctor (1891). Furthermore, the offeree must not have forgotten about the offer, and must be aware of the offer at the time of acceptance, as, decided in R v. Clarke (1927). Indeed, the American case of Williams v Carwardine (1833) 5 C. & P. 566, suggests that a contract can be arise if the offeree accept the offer (with knowledge of the offer at the time of acceptance) even though his or her motivation is directed at some other reason for action. In this case the plaintiff knew that she will die soon and gave information to the police to satisfy her conscience and not motivated by the promise of the reward. The court decided that she was entitled to the reward. She was aware of the offer of reward when giving the information and her motivation was irrelevant.

2. General rule is that revocation of an offer must be communicated to the offeree. It can be by the offeror or a trusted person whom both parties can rely (Dickinson v Dodds (1876) 2 Ch D 463. Revocation in unilateral offer is different.

Since the advertisement of a unilateral contract is generally open to the public at large and can be accepted by anyone who performs the act stipulated in the offer, this creates problems for offeror in terms of communication of the revocation. Therefore, the courts will waive the strict need for actual communication. Instead,the offeror must take a reasonable steps to bring the withdrawal to the attention of those persons who might be likely to accept, even though it may not be possible to ensure that they all know about it. Thus, in American case of Shuey v United States (1875) 92 US 73, it was held that an offer made by advertisement in a newspaper could be revoke by a similar advertisement, even though the second advertisement was not read by all the offerees.

Note:

In advertisement of unilateral contracts offeror may be able to revoke without the need for communication if the revocation take place before performance has began.

Contract Law, Contract law key cases

Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274

Negar Cetin

Court: Court of Appeal (Civil Division)

This case is one of the key cases in English Contract Law and is about the possibility of an implied contract after a course of dealings between two businesses.

Fact:

Marks & Spencer (M&S) had been in a relationship with Baird Textiles Holdings (BTH) for more than 30 years. On 19th October 1999 M&S without notice, ended all supply arrangement between them with effect from the end of current production season. BTH sued M&S on the grounds that the arrangement could only be terminated on reasonable notice of 3 years based on an allegation that there was an implied contract between them which M&S ‘would acquire garments from BTH in quantities and at prices which in all the circumstances were reasonable’. The problem was there was no express contract under which such a term could be said to have arisen.

Issue

Whether a contract could be implied based on the parties’ business relationships?

Judgment

The appeal was dismissed.

The Court of Appeal found that the terms would be too uncertain to be part of a valid contract. Furthermore, an argument of estoppel could not succeed pointing out that promissory estoppel is not capable of creating its own cause of action where one did not already exist.

Note:

In the present case both parties had a good long commercial relationship M&S had no intention to be bound by a contract so that they had maximum flexibility and BTH accepted the absence of any express contract but believed that the continuation of their long-term good relationship with M&S nevertheless implied a contract that would be terminable only after reasonable notice.

For the Court to be able to implied a contract at least two facts must be present. An intention to be legally bound, and an agreement with a sufficient certainty regarding the details. In addition, contracts are only implied when it is necessary which were not presented in this case.

Contract Law

RTS Flexible Systems Limited v Molkerei Alois Muller Gmbh [2010] UKSC 14

Negar Cetin

Court: Supreme Court

Justices: Lord Phillips, Lord Mance, Lord Collins, Lord Kerr, Lord Clarke

Fact

RTS a supplier of the automated packaging agreed to install an automated system in Muller’s factory. A letter of intent (LOI) was drawn up and was due to be in force for four weeks of the date of the LOI. This LOI had set out the contractual price for the machinery and stated that the final contract will be on Muller’s contractual terms with amendment. The letter contained a clause that the contract would not be binding until each party has executed a counterpart, sign and exchanged it with the other. The parties proceeded with the agreement but they never signed the final contract. A dispute arose, RTS refused to finish installing the machinery and Muller refused to make any further payment. The parties referred preliminary issues regarding the formation of the contract and incorporation of terms to the court for determination.

Issue:

Did the parties enter into a contract following the expiry of the LOI and, if so, on what terms?

Held:

The High Court ruled that there was a contract but on limited terms. The Court of Appeal reversed this, finding that there could be no contract until the agreement was signed. Finally, the Supreme Court stated that there is a binding contract. The parties reveal a joint wish to give effect to the terms of the negotiated deal without formal signing and the counterparts clause had been waived by their conduct. Lord Justice Clarke summarised the principles as to whether or not there was a binding contract, and, if so, what the terms might be as follows:
“45… It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms or economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.” [Emphasis added]

Note:

Letters of intent or agreement to agree are promises that the parties intend to enter to an agreement at a future date. These agreements are sometimes described as ‘subject to contract’ on the basis that the parties are still negotiating and do not intend to be bound until a formal written contract has been signed by both parties.

The statement of Lord Clark establish that test for deciding whether an agreement has been reached is objective rather than subjective.

Uncategorized

Contracts underpin an auction process

Negar Cetin

1- Contract between bidders inter se. (Clark v Dunraven, The Satanita (1897)

If the yacht was damaged as a result of negligence the negligent party must pay all the damages. 

Held: By entering the race, the competitors entered into contract with each other on Yacht Racing Association terms. (All damages to be paid by the person disobeying the rules).

Note: When a bidder attends an auction and acquires and auction catalogue which contains the auction house terms and conditions, each bidders individually enter into contract with all the other bidders.       

2. Contract between the auction house and each bidder

In terms of consideration the auction house enters into a separate auction contract with each of its fellow bidder. 

When a bidder take part in auction he will provide a more competitive environment which helps force up the price and provides the auction house the opportunity to earn its commissions. 

3- seller/bidder sale contract

Contract between seller and the successful bidder.

4.Collateral contract between auctioneer and highest bidder

In an auction without reserve the auctioneer makes an offer to sell the lot and that offer is accepted by the bidder who makes a highest bid at the auction. 

In Warlow v Harrison (1859)

It has been held that obiter, no contract of sale can materialise between the owner and of the goods and the highest bidder where the auctioneer refuses the sale or for any reason fails to accept the bid of the highest bona fide bidder but a collateral contract is created between the highest bona fide bidder and the auctioneer himself.

Source: Brown, J. and PAWLOWSKI, M. HOW MANY CONTRACTS IN AN AUCTION SALE

Uncategorized

Hartog v Colin & Shields [1939] 3 All ER 566

Negar Cetin

 English Contract Law , Subjective approach, Mistake 

Court: High Court 

Case Opinion: Singleton J 

Fact: 

The defendant agreed to sell 30000 Argentine rabbit skin to the claimant per price which is £1250, but by mistake offered them at a price per pound (by weight). In the pre-sale negotiations, reference had always been made to the price per price and normally this type of skin were sold at price per price.The defendant refused to sell the plaintiff the skins per pound and the claimant sued for the breach of contract. 

Issue:

Where the contract binding?

Held: 

Since the claimant could not reasonably have supposed that the offer contained the offeror’s real intention, there was no binding contract. 

Note: 

Subjective approach may be relevant under the snap up doctrine. 

There is duty to correct a mistake that is known to not be the real intention of the person making it. People cannot simply take advantage and ‘Snap up’ the offer.

Under the snap up doctrine an offeree does not allowed to accept an offer which he knows is mistaken as to its terms.

Uncategorized

Smith V Hughes (1871) LR 6 QB 597

Negar Cetin

English Contract Law Case

Court: Queen’s Bench

Case opinions: Cockburn CJ, Blackburn J, and Hannen J

 Fact:

Defendant purchased 40-50 quarters of what he thought were old oats for horse feed based on a sample he had received; the purchase was, in fact, new oats; the defendant refused to pay for the delivery of remaining order and claimant sued for breach of contract.

Issue

Could the contract be avoided as Hughes had delivered the wrong type of oats

 Held: 

The claimant’s passive acquiescence to sell the oats did not amount to a misrepresentation.

It was held that there was a binding contract between parties. An objective test revealed that a reasonable person would expect the sale of good quality oats in a similar contract since there was no express discussion of old oats.

The sample gave him the chance to inspect the oats; If a buyer has a chance to inspect goods, and purchase those goods based on his own judgment then the rule of Caveat Emptor (buyer beware) applies.

Note: 

Affirmation of the principle of buyer beware, and that contractual agreements are objectively judged. More recently the same point on objective approach was made by Lord Clark in the judgment of the Supreme Court in RTS Flexible System Ltd v Molkerei Alois Müller GmbH & Co (UK Production) [2010] UKSC 14; [2010] 1 WLR 753, [45]