Category: Formation Of Contract /Offer and Acceptance

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

R v Clark (1927) 40 C.L.R. 227

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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)

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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

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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

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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.