Contract Formation

Contract formation mind mapo

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Contract Formation by Mind Map: Contract Formation

1. Offer

1.1. Has to be communicated

1.1.1. An offer cannot be accepted unless the person who is seeking to accept it knows it exists; therefore, the offer must be communicated. Carlill v Carbolic Smoke Ball Co (1892) - Where there is a unilateral contract, the advertisement may be an offer rather than an invitation to treat.

1.2. Offer not invitation to treat

1.2.1. a statement of the terms upon which a person is prepared to be bound by a contract Gibson v MCC (1979) councils letter was not an offer.The application to buy the council house was in fact the offer.

1.2.2. Advert, goods in a shop window, auction,

1.3. It remains open until it is closed

1.3.1. Time lapse if a fixed period is set , then the offer expires by then if there was no acceptance Ramsagate Victoria Hotel v Montefiore

1.3.2. Revocation can be withdrawn at any time prior to acceptance Routlet v Grant (1828)

1.3.3. Counter offer A counter-offer rejects the original offer and creates a new one. Hyde v Wrench

1.3.4. Death If a person makes an offer before their death that offer cannot be accepted if the other party is aware of their death. However, the offer can still be accepted if the party is not aware of their death.

2. Acceptance

2.1. Can be accepted by

2.1.1. Acceptance by conduct. Valid. Particularly in unilateral contracts. Carlill v Carbolic Smoke Ball Co.

2.1.2. Prescribed method of acceptance may be waived. Acceptance by different method to that in offer may be permitted. Reveille Independent LLC v Anotech International

2.1.3. Postal rules. If they apply, acceptance takes place at moment of posting of letter. Adams v Lindsell

2.1.4. Electronic methods of communication Acceptance occurs when the offeror is aware of the acceptance. Art 11 of Electronic Commerce Regulations 2002.

2.1.5. The general rule is that is acceptance has to be communicated - silence is not enough

2.2. Must be positive and unqualified

2.3. Acceptance by the use of post.

2.3.1. There are three rules that were set out in the case of Adams v Lindsell. 1. The rule only applies if post is the usual way of communication. if the parties agree they wanted a response by post 2. The letter is properly addressed and stamped. The party that sent it needs to be able to prove it . 3. The offeree must be able to prove that the letter was posted.

3. Intention

3.1. Commercial situations

3.1.1. Explanation Case law facts and ratio

3.1.2. business agreements = presumption to create legal intentions (Jones V Vernon Pools) Edwards v Skyways ltd. - burden of proof is on the person who is seeking to prove no legal intention Esso Petroleum v Commissioners - offer of a free gift can be legally binding when used to promote business

3.2. Domestic situations

3.2.1. No intention to create legal relations =Contract is not legally binding Balfour v Balfour - The agreement was not binding as it was a domestic agreement between a married couple

3.2.2. If there is an intention to create legal relations = legally binding Merrit v Merrit - Agreement between a seperated married couple about future maintainance payments

3.2.3. Interfamilial arrangements that appear to be business agreements are legally binding Jones v Padavatton - At the time of the agreement mother and daughter were very close,so considering the nature of their relationship during the first arrangement -no intention to create legal relations

3.2.4. If money has changed hands yet the agreement is made socially - more likely to be a business arrangement - legally binding Simpkins v Pays - Paid equal shares of the entry money with presuming that they would share any winnings - commercial nature

3.2.5. If parties put their financial security at risk for an agreement - presumption is that it is legally binding Parker v Clarke - Young couple was persuaded by an older couple to move in with them, and promised that they would inherit the property on their death.The young couple was asked to leave.Giving up their security - arrangement was legally binding.

3.3. Privity of contract

3.3.1. Only those who are parties to a contract are bound by it and can benefit from it. Contract Act 1999 allows third parties to enforce contract under certain conditions 1) third party is expressly identified by name, class or particular description Example: Dunlop Pneumatic v Sielfriedge (314)

4. Consideration

4.1. Rule 1: Consideration does not have to be adequate only sufficient

4.1.1. The parties themselves must agree on the value of what is exchanged – the courts do not need to get involved in this Thomas v Thomas - Payment of the very small rent was consideration,not the moral obligation to carry out the dead man's wishes Chappell v Nestle Co.Ltd - The chocolate bar wrappers amounted to consideration for the record.

4.2. Rule 2: Past consideration is not consideration

4.2.1. Consideration has no value if it has been performed at the time of the agreement. Re McArdle - The promise to make payment came after the work had been done,so it was past consideration and of no value

4.3. Rule 3: Consideration must move from the promise

4.3.1. You cannot sue of be sued unless you have provided something of value (consideration). Tweddle v Atkinson - Claim failed;No consideration and was not a party to the agreement himself.

4.4. Rule 4: Performance of an existing duty cannot be consideration for a new contract

4.4.1. A pre-existing duty is already a legal requirement; not consideration in itself, unless going beyond their prior duty Collins v Godefroy - No consideration as he was already under a duty to be in court.

4.5. Rule 5: Consideration may be found where contractual duties are owed to a third party

4.5.1. where someone is under a contractual duty to a third party, sometimes the performance of that duty provides good consideration for a contract Shadwell v Shadwell - A promise to marry a third party amounted to consideration

4.6. Rule 6: A promise to accept part payment of an existing debt in place of the whole is not consideration

4.6.1. Payment of the lesser debt is not satisfactory for the greater debt. The creditor (the person who is owed the money) can still claim the money even if he has agreed to lower the amount.(Pinnel’s) Pinnel Case + Foakes v Beer