Outline the court's approach to the question of whether a contract has been formed and actually exists.

The question of whether a contract has been formed is, in reality, likely to be considered and answered long before a dispute reaches the courts but it should not be treated lightly and should not be treated as a forgone conclusion.

Grade: A-C | £0.00.

Formation of a Contract Blockbusters Quiz

Offer

Acceptance Of An Offer

Consideration

Legal Intent - Contract Law

Contract

 

The question of whether a contract has been formed is, in reality, likely to be considered and answered long before a dispute reaches the courts but it should not be treated lightly and should not be treated as a forgone conclusion.

 

There are four essentials of a contract - offer, acceptance, consideration and intention – not just that there exists an offer and an acceptance. For example there may be evidence of an offer and an acceptance but can it be said for certain that there was an agreement over the terms?

 

The courts will look for an agreement between the parties – the bargain struck. In this regard they will be looking for what we understand to be an offer, but the evidence must support the existence of a valid offer and that the party purporting to accept that offer agreed to them and put forward a valid acceptance. This may seem too simple but what seems to be an offer must stand up to scrutiny.

 

In the case of Harvey v Facey (1893) what appeared to be an offer was merely held to be a statement of the price which does not necessarily imply a willingness to sell. The case involved a dispute over some land in Jamaica. The defendant had been engaged in negotiations for the sale of the property to another party but the claimant who wanted the property sent a telegram to the potential seller saying 'Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid.' A reply was sent the same day which read 'Lowest price for Bumper Hall Pen £900.' The defendant refused to sell and the matter eventually reached the Judicial Committee of the Privy Council which held that the reply to the request for information did not amount to an offer that could be accepted.

 

Similarly an offer can be distinguished from an offer to treat as in Fisher v Bell (1961) which concerned the display of a 'flick knife' in the window of a shop next to a ticket bearing the words "Ejector knife 4s." Under the Restriction of Offensive Weapons Act 1959, section 1(1), it was illegal to manufacture, sell, hire, or offer for sale or hire, or lend to any other person, amongst other things, any knife "which has a blade which opens automatically by hand pressure applied to a button, spring or other device in or attached to the handle of the knife". On 14 December 1959, the Claimant, brought forward information against the Defendant alleging the Defendant has contravened section 1(1) by offering the flick knife for sale.

 

The Prosecutor submitted that the Defendant had displayed the knife and ticket in the window intending to attract a buyer, and that this constituted an offer of sale sufficient to create a criminal liability under section 1(1) of the Act. The Defendant submitted that this was not sufficient to constitute an offer. The judges at first instance found that displaying the knife was merely an invitation to treat, not an offer,and thus no liability arose. The Prosecutor appealed the judges' decision.

 

The court upheld the first instance decision. Lord Parker, C.J., delivering the judgement, noted that, although the display of a knife in a window might at first appear to "lay people" to be an offer inviting people to buy it, and that it would be "nonsense to say that [it] was not offering it for sale", whether an item is offered for the purpose of the statute in question must be construed in the context of the general law of the country. He stated that, according to the ordinary law of contract, the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract. the general law of the country clearly established that merely displaying an item constituted an invitation to treat. He also read the statute on an exclusive construction ("inclusio unius exclusio alterius est"), noting that other legislation prohibiting the sale of weapons referred to "offering "or exposing for sale" The court dismissed the appeal.

 

Another ingredient is the need for consideration and this represents the mutual agreement or bargain between the parties. Why should the courts enforce an agreement against another in the absence of a consideration of some kind to be given up or passing from the claimant? This is fundamental to how the law of contract has developed and there are extensive rules as to what amounts to a valid consideration alone.

 

It is the quid pro quo meaning that one thing is given in return for another. It is the very thing that gives us confidence that an agreement exists. It is the bargain struck between the parties. A party which is not privy (meaning that they have not participated in the mutual agreement) cannot enforce the contract – so one can see the importance of this ingredient.

 

Not all promises are intended to give rise to legally binding agreements which are enforceable in the courts. The courts recognise that some transactions are freely entered into as part of day to day life for the convenience of the participants but were never intended to be enforceable. So what sets these apart from true contracts? How does the court distinguish these apparent contracts from real ones which are entitled to the full protection of the courts? The answer is that there must be times when an intention to create legal relations gives rise to a contract and there must also be times when it was not so intended. For example agreements between friends and relatives are rarely seen as intended to give rise to legal relations and are therefore unenforceable.

 

In fact the case of Balfour v Balfour (1919) gave rise to the rebuttable presumption against an intention to create legal relations in a domestic relationship. The case concerned the question of whether a husband's promise to pay his wife £30 a month maintenance amounted to a contract. The matter reached the Court of Appeal who found that it lacked an intention to create legal relations. This case is often distinguished from the modern case of Merritt v Merritt (1970) on the basis that the parties had separated by the time the agreement was made and it was felt more likely that there was an intention to create legal relations with the effect that it was enforceable.

 

In some cases the law requires that the contract takes a particular form in order that formation is complete. This is the case with contracts for the sale of land and the Law of Property (Miscellaneous Provisions ) Act 1989 requires such contracts to be signed and evidenced in writing.

Not everyone can enter into a contract and the law has long since protected minors – persons under the age of 18 as well as drunkards and persons of mental incapacity. Extensive rules have been developed by Parliament and the courts but one can readily see the sense in such rules on the grounds of fairness.

 

We have already mentioned the issue of privity of contract and the rights of third parties. However there are exceptions but these are now controlled by Parliament in the form of the Contracts (Rights of Third Parties) Act 1999.

 

The rules relating to the formation of contracts were formed many years ago but they continue to develop to meet the needs of modern life and business. In the case of Thornton v Shoe Lane Parking (1971), Lord Denning had to consider the point at which a contract was concluded at an automatic ticket at the entrance of a multi storey car park.

 

The court concluded that a clause could not be made part of a contract after it had been completed and that in the case of an onerous condition proper notice and prominence needed to be given. It was not acceptable to put notices on pillars which could only be seen after paying and obtaining a ticket. Prior to that the courts had to consider a variety of cases where receipts and tickets of various kinds featured as part of the contracting process and raised issues about whether written contents formed part of the contract.


(Word count 1383)

This essay discusses the elements that need to come together to confirm that a contract has been formed.

It examines the existence of a valid offer and acceptance.

The case of Harvey v Facey (1893) is looked at along with Fisher v Bell (1961).

The need for consideration is discussed as is the fact that not all promises are intended to give rise to a legally binding agreement.

The cases of Balfour v Balfour (1919) and Merritt v Merritt (1970) are compared.

Also mentioned are:

The Law of Property (Miscellaneous Provisions ) Act 1989;

Contracts (Rights of Third Parties) Act 1999

Thornton v Shoe Lane Parking (1971)

As always the essay lends itself to further research and development according to individual needs.

 


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