HNC/D Business Studies Unit 5: Aspects of Contract and Negligence for Business

Business, Media, Music & Performing Arts Department

City of Bath College

What is contract?
A voluntary, deliberate and legally binding agreement between two or more
competent parties. Contracts are usually written but may be spoken or implied
and generally have to do with employment, sale or lease or tenancy
www.businessdictionary.com

What is it for?
the purpose of the law of contract is not to punish wrongdoing but to
satisfy the expectations of the party entitled to performance
Co-operative Insurance Society v Argyll Stores (Holdings) Ltd (1997)

Two different types of contract:

Bilateral and Unilateral
Bilateral:
-

Most common form

Parties make each other a promise to do something.
E.g. selling item in exchange for payment
May involve more than two parties

Unilateral:
-

Only one party assumes an obligation under contract.

E.g. offer calling for lost item to be returned for a reward.

Why should not an offer be made to all the world which is to ripen into a
contract with anybody who comes forward and performs the condition?
Carlill v Carbolic Smoke Balls (1893)

Eight elements that MUST be present for

contract to be binding:
1)
2)
3)
4)
5)
6)
7)
8)

Offer
Acceptance
Intention to create legal relations
Free consent
Legal consequences
Lawful consideration
Capacity of the parities
Certainty

Offer
An offer is an expression of willingness to contract on specified terms, made
with the intention that it is to be binding as soon as it is accepted by the
person to whom it is addressed.
Grecoair Inc v Tilling (2005)

Lecturer: Chris Lucas

January 2015

HNC/D Business Studies Unit 5: Aspects of Contract and Negligence for Business
Business, Media, Music & Performing Arts Department
City of Bath College

NO OFFER NO CONTRACT NO BREACH

- The offer MUST be communicated by the offeror to the offeree
- Can be written, spoken or implied
Taylor v Laird (1856)

Invitation to Treat
- Asking someone to make an offer for something you have to sell
Gibson v Manchester City Council (1979)

Advertisements
- How an arrangement is advertised is very important
- Differences between adverts for bilateral and unilateral contracts
- Bilateral
Partridge v Crittenden (1968)
- Unilateral
Carlill v Carbolic Smoke Balls (1893)

Shopping
- Prices in shops are invitations to treat NOT offers
- Shops do not have to sell at marked price
- Customer cannot insist on purchase last item
Fisher v Bell (1960)
- Customer makes offer to buy at cash desk
Pharmaceutical Society of Gt. Britain v Boots Cash Chemists (Southern)
Ltd. (1953)

Timetables & tickets for transport

- Bus Company makes offer with advertised schedule
- Passenger accepts/completes contracts on the platform or inside the bus.
Wilkie v London Passenger Board (1947)

Auctions
Parties:
- Bidder and seller
- Auctioneer: facilitator; provides the service

Lecturer: Chris Lucas

January 2015

HNC/D Business Studies Unit 5: Aspects of Contract and Negligence for Business
Business, Media, Music & Performing Arts Department
City of Bath College

Four steps:
- Advertising the auction
- Putting up goods for sale
- Bid
- The fall of the hammer
- Bids are offers; expire when higher bid received
- Final offer when hammer falls
- Bids can be withdrawn before hammer falls
- Seller/auctioneer can withdraw goods before hammer falls
Advertising the Auction
- Declaration of intent not an offer
Harris v Nickerson (1873)
Without reserve
- Bids are accepted offers
- Contract between highest bidder and seller
Barry v Davies (2000)

Tenders
Offer to carry out work, supply goods, or buy land, shares, or another asset
at a stated fixed price.
- Generally, an invitation to treat
- Person submitting a tender makes offer
- Acceptance is when the person inviting tenders accepts one
Harvela Investments Ltd. v Royal Trust of Canada (CI) Ltd. (1985)
- All tenders correctly submitted must be considered
Blackpool and Fylde Aero Club v Blackpool Borough Council (1990)
- Referential tenders not always a legal offer
Harvela Investments Ltd. v Royal Trust of Canada (CI) Ltd. (1985)

How long does an offer last?

- Specified time
- Reasonable Length: Ramsgate Victoria Hotel v Montefiore (1866)
- Failure of a pre-condition: Financing Ltd. v Stimson (1962)
- Rejection
- Counter-offer: Hyde v Wrench (1840)
- Requests for information: Stevenson Jacques & Co. v McLean (1880)
- Death of offeror: Bradbury v Morgan (1862)
- Death of offeree
- Revocation: Routledge v Grant (1828)
Communicated and Notified: Byrne & Co. v Leon Tienhouven (1880)

Lecturer: Chris Lucas

January 2015

HNC/D Business Studies Unit 5: Aspects of Contract and Negligence for Business
Business, Media, Music & Performing Arts Department
City of Bath College

Acceptance
The offer MUST be accepted to form a contract
- A contractual acceptance has to be a final and unqualified expression of
assent to the terms of the offer.
Day Morris Associates v Voyce (2003)
- The acceptance must correspond with the terms of the offer
- The mirror image rule
- Acceptance must mirror terms of the offer
- Acceptance v counter-offer v request for information
Hyde v Wrench (1840)
Stevenson Jacques & Co. v McLean (1880)
British Road Services v Arthur V Crutchley & Co. Ltd. (1968)
- The acceptance must be given in response to the offer
Gibbons v Proctor (1891)
- The acceptance must be made by the appropriate method
The acceptance must be communicated to the offeror:
Entores v Miles Far East Co. (1955)
- By conduct: Brogden v Metropolitan v Metropolitan Co. (1877)
- By silence: Felthouse v Bindley (1862)
- By post: Adams v Lindsell (1818)

contracts, when entered into

freely and voluntarily, shall be held
sacred and shall be enforced by the
Courts of Justice
Printing & Numerical Registering Co v Sampson (1875)
Still as relevant today as in the nineteenth century

Lecturer: Chris Lucas

January 2015