BUSINESS

Making Deals

Doctor x Patient

Buyers x Sellers

Bank x Borrowers

CONTRACTS

CONTRACTS

AgreementTwo or more personsLegally enforceable

Requirements :1. Agreement2. Intend 3. Consideration

AGREEMENT

meeting of minds ; Share understanding and intention

Two or more persons

1. Offeror – made and offer2. Oferee - accepted the offer3. Oferee communicated their acceptance to

offeror

Generally characterised by an ‘offer’ by one party and ‘acceptance’ by another

AGREEMENT = OFFER and ACCEPTANCE

OFFER

An expression of willingness to enter into an enforceable relationship with the person to whom

the offer is directed

• One person to another• Group of people• World at large

OFFER

Accepted : the offer is accepted by the oferee

Rejected : the offer may be rejected by oferee

Revoke : the offeror entitled to revoke the offer, if…. The offer has not been accepted or

rejected The oferee has not provide consideration

for the offeror to make the offer open for a particular period

Lapse : the offer is not accepted, rejected or validly revoke, It will lapse after the expiry of a reasonable amount of time

Quinn offered to sell his land to GMC and promised to keep the offer open for one week in return for GMC paying to Quinn a deposit of fifty cents. Before the week had expired Quinn informed GMC that he was revoking his offer and selling the land to someone else. GMC then accepted the offer and sued Quinn for breach of contract.

Goldsborough Mort [GMC] & Co Ltd v Quinn (1910)

The court decided that because GMC had paid Quinn to keep his offer open

for one week Quinn was not permitted to withdraw the offer, which meant that

when GMC accepted the offer a contract was formed. Quinn had breach

the contract by selling the land to someone else

On 8 June Montefiore made an offer to RVH to purchase shares in that company. More than 5 months later, on 23 November, RVH wrote back to montefiore accepting the offer and informing montefiore that the balance owing on the shares was now due. Montefiore refused to pay and RVH sued him for breach of contract.

Ramsgate Victoria Hotel Co Ltd [RVH] v Montefiore (1866)

The court decided that there was no contract because there was no agreement.

Montefiore’s offer has lapsed before RVH accepted it because more than reasonable

period of time had lapsed

OFFER X INVITATION TO TREAT

An invitation to another person to make an offer, which he or she (another person) is then free to

accept or reject.

1. Advertisement Advertisement of goods for sale are normally interpreted as invitation to treat

However, can be offer as well, depending on its wording and on the circumstances.

OFFER X INVITATION TO TREAT

2. Display of goodsThe display of goods with a price ticket attached in a shop window or on a supermarket shelf is not an offer to sell but an invitation for customers to make an offer to buy

3. Auction In an auction the auctioneer’s call for bids is an invitation to treat, a request for offers. The bids made by persons at the auctioneer offers, which is the auctioneer can accept or reject as he chooses. Similarly, the bidder may retract his bid before it is accepted

OFFER X INVITATION TO TREAT

4. TendersWhere goods are advertised for sale by tender, the statement is not an offer, but an invitation to treat; that is, it is a request by the owner of the goods for offers to purchase them.

OFFER X INVITATION TO TREAT

Example : a shop owner puts a very low price of an

product in the shop window. If you take the item to the counter, the shopkeeper does not have to sell it to you.

Because it is you that makes the offer by offering to buy the product with your money. A shopkeeper who has mistakenly priced a product too cheaply is therefore not obliged to sell at that price.

ACCEPTANCE

An indication by an oferee by words or by action that they are willing to immediately enter into a legally enforceable relationship with the offerror

on the terms offered.

Who may accept ?An offer can be accepted by the person to whom it is made.Offer is made by A to B, the acceptance to C would be inappropriate.

VALID ACCEPTANCE

The offeree must accept the offer without qualification.

An acceptance must be unconditional and unqualified. Accepting an offer with condition and variation and reservation amounts to counter offer and rejection of original offer.

Counter offer – a response to an offer that modifies the terms of the offer.

COMMUNICATION

The agreement is not complete until the oferee communicates their acceptance to the offeror

• Acceptance must be communicated• The method of acceptance must conform with

the offeror’s requirements• Only the offeree or someone with actual

authority to do so can communicate acceptance.

Powell v Lee (1908)

Powell applied for the position of headmaster with the school. The school board decided to appoint Powell, but did not immediately inform him of the decision. A member of the board, without the authority of the board, told Powell that the board had accepted his offer of employment. The board subsequently changed its decision and appointed another person as headmaster. Powell sued the board claiming that a contract had already been formed. The court decided that there was no

agreement between Powell and the board. The board had not communicated its acceptance and an agreement is nor

formed until acceptance of the offer is communicated to the offeror. The

communication by the board member acting without authority is invalid.

COMMUNICATION

There are 3 exceptions to the requirement of communicating the acceptance.

1. where there is an ongoing commercial relationship between the parties. In these circumtances, a failure to respond to an offer that similar to previously accepted offers and that was previously accepted effectively by silence can amount to an indication of acceptance, and the agreement can be enforce by either party.

COMMUNICATION

2. Unilateral contract, a contract where acceptance of the offer and performance by the offeree are achieved by the same act.

example : if john puts up a notice offering a reward to

whoever find his lost dog, ken’s finding and returning the dog is both acceptance of the offer and performance of hi side of bargain. Ken does not need to communicate his acceptance of the offer prior to his performance.

COMMUNICATION

3. Postral Rules

a contractual negotiations that are taking place through the post. An offeree’s acceptance is effective, and a contract is formed, as soon as the offeree posts the letter of acceptance. Not when the offeror actually receives the letter.

COMMUNICATION

Adams v Lindsell (1818)

Lindsell made an offer to sell goods to adams ina letter posted on 2 september. The letter was incorrectly addresed and Adams did not receive the letter until 5 september. Adams immediately wrote back accepting the offer. On 8 september Lindsell, assuming that Adams was not going to respond, sold the goods to someone else. Lindswell received Adam’s acceptance 9 september. Adams sued Linswell for breach of contract ?

COMMUNICATION

The court decided that there was a contract between adams and Lindsell:

Adams’ acceptance was effective 5 september and the contract was formed

on that date.

QUESTION OF THE DAY

What the difference between an offer, and invitation to treat?

In what circumstances will an acceptance be valid, even though it is not communicated to the

offeror?

Three requirement of contract need to be satisfied, before becoming a legally enforceable

agreement?

THANK YOU