common law in contract

8/13/2019 Common Law in Contract

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Common Law of Contract


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RECOMMENDED TEXT

McQueen and Thomson

Contract Law in Scotland 2012


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Definition

Contract

An agreement between two or more partieshaving the capacity to make it, in the formdemanded by law, to perform, on one side orboth, acts which are not trifling, indeterminate,impossible or illegal.


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Context A contract is freely entered into

Limited interference by the state

Good for commercial transactions

Good for parties to be held to theircontract

Generally there is mutuality


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Essential Elements for a valid contract:

agreement (consensus in idem) on

all material aspects

Capacity (e.g. age 16 with safeguardsto 18)

Form which is enforceable (containsthe essential elements)

Purpose not illegal etc.


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Contract formation in writing

Orally exchange of words

inferred from the actings of the

parties


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Enforceable FormEssential elements:

Offer and acceptance

Identity of the Parties

Proper identification of the subject matter (inconstruction what is to be constructed and where)

Highly desirable elements:

The Price or a method of determining it (in the absenceof an agreed price quantum meruit is a fall back)

Start date and time to complete or a method ofdetermining it(in the absence of agree times reasonable times can be

established)


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Offer

a proposal from one party

definite terms an offer must be distinguished from

an invitation to treat.


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Invitation to treat

An invitation to treat is not an offer.It is an indication of the partys

willingness to negotiate and not tobe bound by a simple acceptance-the distinction can be fine but

important. Advertisements are generally

invitations to treat (otherwise multipleacceptances would be possible but see Carlill v Carbolic

Smokeball Co)


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Cases

Harvey v Facey [1983] A.C. 522(intimation of lowest price which would be considered forthe sale of a property was an invitation to treat (ItT) not anoffer)

Philp v Knoblauch 1907 S.C. 994(price quoted for linseed was an offer not an ItT)

Carlill v Carbolic Smokeball Co (1893)1 QB 256 CA(advertisement to pay 100 if anyone caught flu

after using the smokeball found to be a contract not ItTbecause defendant had deposited money to cover claims)


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Tenders Invitation to Tender normally treated

as an Invitation to Treat

A tender or quotation (as opposed to anestimate) is usually regarded as anoffer, not an invitation to treat


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Acceptance The final unqualified agreement to

the terms stipulated in the offer

Usually in words but can be inferredfrom the positive conduct of theofferee

Silence is not normally enoughdemonstrate acceptance


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Modes of communication

of acceptance telephone

Fax

E-mail

Post

All of above except post involveinstantaneous intimation.

Postal acceptance is a special case.


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Instantaneous Intimation

Telephone instantaneous but contract notformed if communication unintelligible forany reason.

Fax and E-mail generally considered tooccur when should have been picked read inthe ordinary course of business.

Acceptance occurs when communicated tothe offerror.


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Postal Rule Here the rule is that acceptance takes effect at

time of posting irrespective of when the letter isreceived (although the position is uncertain if

acceptance is never received)

Surprisingly, an acceptance can be withdrawnafter posting but before arrival. Countess ofDunmore v Alexander (1830) 9 S. 190 an

acceptance followed by a later revocationarrived simultaneously.


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If an offer is being revoked, revocation mustbe receivedby offeree BEFORE he accepts orposts acceptance (otherwise posting ofacceptance forms contract)

Jacobsen & Sons v Underwood(1894) 21R 654 (acceptance posted but not receivedbefore expiry of offer)

Implied revocation in one of three cases:

Time limit for acceptance in offer passeswithout reply, or, where none, a reasonabletime passes and no acceptance

Where counter offer received (see below)

Where either party dies or goes insane priorto acceptance

Revocation of offer


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Where a qualified acceptance isreceived (also known as a counter

offer), this kills the original offer. A qualified acceptance is one that

contains additional terms,contradictory terms or one in which

not all terms in the offer are acceptedSee, for example: Wolf and Wolf vForfar Potato Co. Ltd. 1990 S.L.T. 465

Counter offer


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Battle of the forms

Problems with offer and acceptance

Pre-printed terms

Conflicting standard terms

Use by parties as a matter of course

Last shot wins


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Error & Misrepresentation in

Formation of Contract Menzies v Menzies(1893) 20R HL

108

Lord Watson: "Error becomes essentialwhenever it is shown that but for it oneof the parties would have declined tocontract. He cannot rescind unless hiserror was induced by therepresentationsof the other contractingparty, or of his agent, made in thecourse of negotiation, and with

reference to the subject matter of thecontract"


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Statements not amounting to

misrepresentation Exaggerated/optimistic statements of

the nature of advertisement

Expressions of opinion

Expression of hope/expectation


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Types of Misrepresentation Innocent remedy reduction &

restitution parties put back totheir original position

Negligent or Fraudulent

reduction plus damages in delict.


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Fraudulent Misrepresentation Derry v Peek(1889) 14 AC 337

Lord Herschell: "fraud is proved

where it is shown that a falserepresentation has been made

(1) knowingly, or

(2) without belief in it's truth, or (3) recklessly, careless whether itbe true or false."

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