Law of Contract
Law of Contract
Law of Contract
a) Bilateral Contract: Each party takes an obligation, usually by promising the other for
something. Example: Ann Promises to sell something and Ben to buy it.
b) Unilateral Contract: Only one party assumes an obligation under the contract. Example:
Promising to give your friend Tk 100, if he gives up smoking for a year. Here one party
has assumed an obligation; and you are obliged to pay your friend if he gives up
smoking, but he has not promised in turn to give up smoking.
Method of Formation –
a. Express Contract - Expressed in words spoken or written.
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b. Implied Contract – Understood from the acts, the conduct of the parties and/or the course of
dealing between them.
c. Quasi Contract
There are certain dealings, which are not contracts strictly, though the parties act as if there is a
contract.
c) Lawful Consideration:
• An agreement is legally enforceable only when each of the parties [gives something and
gets something in return-is called consideration].
• An agreement to do something for nothing is usually not enforceable by law.
• The consideration may be an act (doing something or not) or a promise to do or not to do.
• Consideration may be past, present or future. But only valid considerations are "lawful
consideration”
d) Capacity of Parties:
• Legally capable of entering into an agreement otherwise not enforceable by a court of
law.
• The agreement is not enforceable by law if any of the parties suffers from minority,
lunacy, idiocy, drunkenness, and similar other factors.
e) Free Consent:
• An agreement must be based on the free consent of the parties.
• Absence of genuine consent of the agreement is induced by coercion, undue influence,
mistake, misrepresentation, and fraud.
g) Certainty:
• Terms must not be vague.
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h) Possibility of Performance:
• The agreement must be capable of being performed.
• A promise to do an impossible thing cannot be enforced.
i) Void Agreements
2. An offer may be made to a definite person; to some definite class of people; or to the world at
large.
3. Legal relationship is required
4. The terms of the offer must be certain, definite, unambiguous and not vague
5. A mere statement of intention is not an offer
a) intention to sell
b) Quotation of prices
c) Advertisements
d) Catalogue
e) time-table
f) Question and Reply
g) Auction
6. Offer must be communicated to the offeree
7. An offer may be conditional
a) Strict enforcement of Clauses
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b) No reasonable notice
c) Against public interest
d) Unreasonable
Revocation of offer:
1. By notice
2. By lapse of time
3. After expiry of reasonable time
4. By failure of a condition precedent
5. By death or insanity
6. Death of the Offeror
7. Death of the Offeree
8. Counter Offer
9. By refusal
Revocation of Acceptance:
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Section 5 of the Contract Act provides that an acceptance can be revoked any time before the
acceptance comes to the knowledge of the offeror but not afterwards
v) An offer may only be accepted by a person to whom the offer has been made.
Carlill v Carbolic Smokeball Co: The manufacturers of a patent medicine published an
advertisement by which they undertook to pay `£ l00 reward ... to any person who
contracts …. influenza, colds, .... after having used the Smokeball three times daily for
two weeks.
Held: it was an offer to the whole world which C could accept and had accepted. Point
(1) did not succeed since the court found that the terms of the offer were sufficiently
clear. They were not vague.
An offer may only be accepted while the offer is still open. An offer is terminated in any of
the following circumstances:
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if it has expired by lapse of time,
if the offeror has revoked it;
if the offeree has rejected it:
if the offeree dies or if the offeror dies.
ii) The offeror may revoke his offer at any time before acceptance.
Routledge v Grant: G offered to buy R's house, requiring acceptance within six weeks.
Within the six weeks G withdrew his offer. Held: as there was no option agreement, G
could revoke his offer at any time.
Revocation may be an express statement or an act of the offeror to that effect.
Byrne v Van Tienhoven: The offeror was in Cardiff: the offeree in New York. Held: the
letter of revocation could not take effect until received (20 October); it could not revoke
the contract made by acceptance of the offer on 11 October. Simply posting a letter does
not revoke the offer until it is received.
iii) An offer may be rejected outright or by a counter-offer made by the offeree. Either
form of rejection terminates the original offer.
Hyde v Wrench: W offered to sell property to H for £ 1,000. H made a counter offer
of £ 950 which W rejected three weeks later.
Held: the original offer of £ 1,000 had been terminated by the counter offer of £ 950; it
could not therefore be accepted.
iv) Death of the offeree terminates the offer. Death of the offeror terminates the offer
unless the offeree accepts it in ignorance of the offeror's death, and the offer is not of a
personal nature.
Bradbury v Morgan: A offered to guarantee payment (up to $ 100) for X in respect of
goods to be supplied by B on credit to X. A died and B, in ignorance of his death,
continued to supply goods to X. Held: A's offer was a continuing commercial offer which
B had accepted by supply of goods after A's death.
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Brogden v Metropolitan Railway Co: For many years B supplied coal to M. He suggested
that they should enter into a written agreement and M's agent sent a draft to him for
consideration.
Held: the draft agreement became the contract between the parties as soon as M ordered and
B supplied coal after the return by B of the draft to M's agent.
2. There must be some act by the offeree to indicate his acceptance.
Felthouse v Bindley: After previous negotiations had produced an agreed price P wrote to J
offering to buy a horse for £ 30.75, adding `If I hear no more about him, I consider the horse
mine at that price'.
Held: there could be no acceptance by silence in these circumstances - the offeror cannot
impose acceptance merely because the offeree does not reject the offer.
3. Goods which are sent or services which are rendered to a person who did not request them
are not ‘accepted’ merely because he does not return them to the sender.
4. Acceptance must be unqualified agreement to the terms of the offer.
Neale v Merrett: A offered to sell land for £280 to B. B replied accepting the offer,
enclosing £80 and undertaking to pay the balance of £200 by monthly installments of £50.
Held: there had been no acceptance. The normal terms are that the entire price is payable as a
single sum at completion.
5. It is possible to respond to an offer without accepting or rejecting it by a request for
information or by acceptance 'subject to contract'.
Stevenson v. McLean: M offered to sell iron at £2 per ton. S enquired whether M would
agree to a contract by which delivery would be spread over two months.
Held: there was a contract since S had merely enquired as to a variation of terms which was
not a rejection.
6. Acceptance 'subject to contract' is neither acceptance nor rejection by counter offer.
Branca v Cobarro: A vendor agreed to sell a mushroom farm under a contract which ended
'this is a provisional agreement until a fully legalised agreement drawn up by a solicitor and
embodying all the conditions herewith stated is signed.'
Held: the parties were bound by their provisional contract until, by mutual agreement, they
made another to replace it.
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D. Communication of acceptance: (caselaws)
1. The general rule is that acceptance must be communicated to the offeror and is not
effective until this has been done.
Entores v Miles Far Eastern Corporation: The offeror sent off an offer by telex to the
offeree's agent in Amsterdam and the latter sent an acceptance by telex. '
Held: the acceptance took effect when the telex message was printed out on the offeror's
terminal in London.
2. But the offeror may by his offer dispense with communication of acceptance.
3. The offeror may call for acceptance by specified means.
Yates Building Co v R J Pulleyn & Sons (York): The offer called for acceptance by
registered or recorded delivery letter. The offeree sent an ordinary letter which arrived
without delay.
Held: the offeror had suffered no disadvantage and had not stipulated that acceptance must be
made in this way only. The acceptance was valid.
4. The offeror may expressly or by implication indicate that he expects acceptance by letter
sent through the post.
Adams v Lindsell: L made an offer by letter to A requiring an answer ‘in course of post'.
Held: the acceptance was made 'in course of post' and effective when posted.
5. The intention to use the post for communication of acceptance may be deduced from the
circumstances -
Household Fire and Carriage Accident Insurance Co v Grant: G handed a letter of
application for shares to the company's agent in Swansea with the intention that it should be
posted to the company in London.
Held: the parties intended to use the Post Office as their common agent and delivery of the
letters of allotment to the Post Office was acceptance of G's offer.