Category: Uncategorized

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.

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Contracts underpin an auction process

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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

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

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 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.

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Smith V Hughes (1871) LR 6 QB 597

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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]