Introduction

• a contract is a binding agreement between parties, which requires offer and acceptance of that offer
• objective test to determine if there is agreement: whether a reasonable man would conclude there is agreement
• must be complete meeting of the minds of the parties, involves not only an agreement in fact but also for offeree to communicate acceptance
• Professor Treitel defines acceptance: .. a final and unqualified expression of assent to the terms of an offer... (The Law of Contract).

Awareness of the offer

• offer can only be accepted if party was aware offer existed

  R v Clarke (1927) 40 CLR 227

  Facts:

  • Australian High Court case
  • Government advertised offer of a reward: £1000 for information leading to arrest of murderers of two police officers
  • Clarke saw offer but forgot about reward, he was later accused of murders and then gave information leading to conviction of the murderers

  Issue:

  • can there be acceptance without knowingly accepting the offer?

  Held:

  • Higgins J: There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or forgetting it after hearing...

  Williams v Carwardine [1833] EWHC KB J44

  Facts:

  • defendant (D) placed adverts: whosoever would give such information as might lead to a discovery of the murderer of the said Walter Carwardine, should, on conviction, receive a reward of £20
  • plaintiff (P) knew of reward but gave information because she was dying and wished to ease her conscience

  Issue:

  • was there acceptance of the offer?

  Held:

  • supply of the information was acceptance, P's motive was irrelevant
  • Parke MJ: .. the plaintiff gave the information which led to the discovery of the murderers; but that she did not give that information for the sake of the £20 reward... but from stings of conscience...
  • money should be paid

Battle of the forms

• battle of the forms : in business deals where two partiesexchange differing standard terms and conditions during negotiation
• can lead to disputes over which party's terms are effective

  Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. Ltd [1979] 1 All ER 965

  Facts:

  • 23 May: P sent letter to D offering new machinery for £75535 to be delivered in 10 months, on the back of the quotation was a copy of P's standard terms and conditions, including a price variation clause (meaning D would be liable for any increase in manufacturing costs
  • 27 May: D ordered the machinery and changed delivery date details to 10/11 months, on the back of their order was a copy of D's standard terms, with no price variation clause
  • 5 June: P returned the tear-off slip from D's order, which read: We accept your order on the terms and conditions stated therein
  • P also sent a note stating items would be: delivered in accordance with our revised quotation of 23rd May for delivery in 10/11 months
  • on delivery P requested £75535 and an additional £2892 in increased costs, D refused to pay the excess charge

  Issue:

  • Denning MR: No doubt a contract was then concluded. But on what terms? The sellers rely on their general conditions and on their last letter which said 'in accordance with our revised quotation of 25rd May' (which had on the back the price variation clause). The buyers rely on the acknowledgement signed by the sellers which accepted the buyer's order 'on the terms and conditions stated thereon' (which did not include a price variation clause)....

  Held:

  • contract was made on D's terms, the judges differed in their reasoning
  • Denning MR: In many cases our traditional analysis of offer, counter offer, rejection, acceptance and so forth is out of date... The better way is to look at all the documents passing between the parties and glean from them or from the conduct of the parties, whether they have reached agreement on all material points... I think the acknowledgement of the 5th June, 1969 is the decisive document. It makes it clear that the contract was on the buyers' terms and not on the sellers' terms: and the buyers' terms did not include a price variation clause....
  • Lawton and Bridge LJJ took a more traditional approach: D had made a counter offer which P accepted by returning the tear-off slip
  • traditional approach is generally preferred because it promotes certainty which is crucial in commercial agreements

Acceptance by conduct

• if a battle of the forms exists and two incompatible terms have been exchanged, sometimes a dispute over whether a contract has been formed at all arises

  Brogden v Metropolitan Railway Co. (1877) 2 App Cas 666

  Facts:

  • Ps supplied coal to D for many years, parties decided to formalise agreement in a written contract
  • D sent a draft contract to P, P made minor adjustments and completed some blanks, returning it to D marked approved
  • without further communication, D filed the document and P continued to supply the coal, then a dispute arose

  Issue:

  • was the written contract valid?

  Held:

  • there was a valid agreement
  • amendments made by P constituted a counter offer, which was clearly accepted by D (by continuing to receive the coal)
  • conduct can amount to acceptance
  • not necessary to consider so unclear when D had in fact accepted the offer: on ordering or when D took delivery of the coal (after receipt of the offer)

  British Steel Corp. v Cleveland Bridge & Engineering Co. [1984] 1 All ER 504

  Facts:

  • D invited P to manufacture steel for a large construction project
  • P submitted a tender, which D rejected, but parties entered negotiations
  • D sent a letter to P stating their intention to enter into a contract, subject to further negotiation on some details, on the D's standard terms, D also requested P commence manufacture .. pending the preparation and issuing to you of the official form of sub-contract...
  • P did not respond to letter as a formal agreement was expected imminently, P would not have agreed to D's standard terms, because included a clause which provided for unlimited liability for consequential loss arising from late delivery
  • negotiations continued alongside P manufacturing and delivering the steel to D, but the parties were unable to conclude negotiations
  • P sued for payment for steel already provided and D counter claimed on the ground that P had broken the contract by delivering the steel too late

  Issue:

  • did a valid contract exist?

  Held:

  • there was no contract: D had rejected P's tender (on P's standard terms) and P had not replied to D's letter (on D's standard terms)
  • P's conduct (commencing manufacture of the steel) on D's request did not create a valid contract because the negotiations were ongoing: work was being carried in anticipation of a contract being agreed
  • Goff MJ: Both parties confidently expected a contract to eventuate. In the circumstances, to expedite performance under that anticipated contract, one requested the other to commence the contract work and the other complied with that request. If, contrary to their expectation, no contract was entered into, then the performance of the work is not referable to any contract of which the terms can be ascertained, and the law simply imposes an obligation on the party who made the request to pay a reasonable sum for such work as has been done pursuant to that request, such an obligation sounding in quasi-contract or, as we now say, in restitution...

Certainty

• certainty is a requirement, parties appearing to have reached an agreement may not be sufficient
• courts may refuse to enforce the terms if unclear or an important term is left undecided

  Scammell v Ouston [1941] AC 251

  Facts:

  • P supplied D with a van
  • D traded in his old van and agreed to pay an additional £286 on hire-purchase terms over two years (no further details of instalments were given)

  Issue:

  • was there sufficient certainty for an enforceable contract?

  Held:

  • words on hire-purchase terms were too vague
  • contract was unenforceable

  Branca v Cobarro [1947] 2 All ER 101

  Facts:

  • D agreed to sell his mushroom farm to P for £5000
  • D wrote: This is a provisional agreement until a fully legalised agreement drawn up by a solicitor and embodying all the conditions herewith stated is signed...

  Issue:

  • was there a valid contract?

  Held:

  • there was an immediately binding document, precise language may be formalised at a later date but the terms were clear and the parties had reached an agreement
  • contracts do not have to be in a particular form

  Nicolene Ltd v Simmonds [1953] 1 QB 543

  Facts:

  • D agreed to sell P steel bars
  • letters between the parties (the alleged contract) it was stated: I assume that the usual conditions of acceptance apply...
  • D failed to deliver and sought to rely upon the statement to create uncertainty

  Issue:

  • did a lack of explicit agreement on the conditions of acceptance mean that there was no contract?

  Held:

  • a valid contract existed as meaningless clauses are irrelevant
  • Denning LJ: There were no usual conditions of acceptance and so it is said that those words are meaningless, that there is nothing to which they can apply, and that, therefore, there was never any contract between the parties. In my opinion, a distinction must be drawn between a clause which is meaningless and a clause which is yet to be agreed. A clause which is meaningless can often be ignored, while still leaving the contract good, whereas a clause which has yet to be agreed may mean that there is no contract at all, because the parties have not agreed on all the essential terms...

  Hillas v Arcos (1930) 147 LT 503

  Facts:

  • P agreed to purchase 22,000 standards of softwood of fair specification from D, there was an option to purchase an additional 100,000 standards
  • P attempted to exercise the option to buy more, D refused
  • D argued there was .. was an agreement to make an agreement, the terms of which were not defined, and so was unenforceable....

  Issue:

  • was fair specification too vague a term for an agreement?

  Held:

  • there was an enforceable contract
  • on the basis of previous agreements between the parties the seemingly vague words fair specification had sufficient specific meaning
  • also relevant that parties acted on the assumption there was a contract