Business Law Research Assignment: Elements of a Contract

Assignment guidance.

Ensure to focus your attention on the following areas and ask yourself the following questions:

Offer: Can an advertisement amount to an offer? What is a counter-offer?

Acceptance: In a contract when does acceptance take place? What are the rules relating to this area? When does revocation take place?

Consideration : Look at the rules relating to consideration with to regard to the performance of an existing duty – cases such as Stilk v Myrick.

Look also at past consideration.

Exclusion clauses: What are the rules relating to exclusion clauses –ask if the clause  is incorporated. Also ask does the clause apply to what has happened?

Rules /legal principles relating to the above areas

Offer

1)The offer must be communicated to the offeree – an offer cannot be accepted if you have no knowledge of it e.g. reward cases.

2) An offer can be made to one person but it can also be made to the whole world – Carlill v Carbolic Smoke Ball Co (1892)

3) An offer can be withdrawn at any time before acceptance –Routledge v Grant (1828)  4Bing 653

4) The offerror must communicate the withdrawal of the offer to the offeree – Byrne v Van Tienhoven (1880) 5 CPD 344

5) An offer should be distinguished from an invitation to treat: a) Shop displays –Fisher v Bell [1961] 1 QB 394; b) advertisements – Partridge v Crittenden [1968] 1 WLR 1204

Acceptance

1) Acceptance must be absolute [otherwise it becomes a counter-offer]

2) Acceptance must be communicated to the offeror – silence does not constitute acceptance – Felthouse v Bindley (1862)

3) Acceptance must generally be in the mode specified – if an offeror specifies a mode of acceptance, that method must be used. Eliason vHenshaw (1819)

4) Postal rule acceptance takes place when the letter is posted – Adams v Lindsell (1818); it must be correctly addressed and stamped – Henthorn v Fraser [1892] 2 Ch 27

5) Revocation takes place once received by the offeree. Bryne v Van Tienhoven

Consideration:-

Performing an Existing Duty – traditional approach -

Performing an existing duty does not constitute “extra” consideration

Stilk v Myrick (1809) 2 Camp 317

In the case of Stilk v Myrick (1809), two out of eleven ship's crew deserted before it had completed its voyage, the rest of the crew then threatened to leave unless the captain of the ship divided up the deserters pay amongst them. The captain promised to pay the remaining crew extra money if they sailed the ship back, but later refused to pay and was sued by the crew. The court said that the agreement was invalid: there was no new consideration provided by the crew, the ship’s crew had only done what they were already bound to do. Thus the captain did not have to pay the extra money.

However there are some situations where performing existing duty does constitute “extra” consideration.

Exceptions to the traditional approach - Hartley v Ponsonby (1857) 7 E & B 872

In this case, a ship left England with a crew of 36, but as a result of desertions these were reduced to only 19, including just five able seamen, who were promised extra pay if they would help to sail the ship back to England. The court said this promise was enforceable because the crew was so reduced that it was dangerous to sail on and the captain would have had no right to demand it. The original contract had come to an end, and the seamen were free to make a new contract on whatever terms might be agreed. The extra consideration was working in dangerous conditions

Glassbrooke Bros v Glamorgan County Council (1925) AC 270

In this case, a mining colliery requested police protection during a strike, in the form of a body of officers quartered on the premises and was promised by Glasbrook Brothers Ltd an agreed remuneration for their services. After the strike the police presented the Colliery with a bill for services rendered but colliery refused to pay. When the firm later reneged on the bargain, Glamorgan County Council pursued the agreed duty through a civil suit on behalf of the Police Authority which they won. Glasbrook later appealed but the initial judgement was upheld. It was held that although performing a statutory duty could not be sufficient consideration to support an agreement, the action of the police was beyond statutory requirements, and payment could be claimed. Although the police authority are bound to provide sufficient protection to life and property without payment, if in particular circumstances, at the request of an individual, they provide a special form of protection outside the scope of their public duty they may demand payment for it.

Economic duress – the courts  ask whether there was pressure brought in order to gain more money on the contract.

Roffey Bros were contracted by Shepherds Bush Housing Association Ltd to refurbish 27 flats in London. They subcontracted carpentry to Mr Williams for £20,000 payable in instalments. Some work was done and £16,200 was paid. Then Mr Williams ran into financial difficulty as the work was costed at too low a level. If the work was not completed on time then Roffey Bros would be liable under a penalty clause for late completion. It was agree by the parties that Williams should receive an extra £575 per flat. Williams completed a further eight flats and then stopped. New carpenters were brought in. Williams

Held Williams should get the eight times £575 with a few deductions for defects and some of the £2,200 owing from the original sum. He said that they had agreed that the original price was too low, and that raising it to a reasonable level was in both sides’ interests.

Glidewell LJ said that Williams had provided good [extra] consideration even though he was merely performing a pre-existing duty. The reasoning for this was that Roffey Bros received numerous benefits from agreeing to pay more: 1)  Ensures Williams continues work;2) Avoids penalty for delay:3) Avoiding trouble and expense of finding substitute.

Past Consideration

• Past consideration is no consideration:-  If the act is done and this act is then followed by a promise of consideration for the act done then the promise is not enforceable. Re McArdle [1951] Ch 669 - Mrs Mcardle made improvements to her house at a cost of £488.  After the work was completed her children signed a document stating they would reimburse her.  Held: this was past consideration and therefore not binding

Exclusion clauses

Ask two questions  -

1) Has the clause been incorporated into the contract ?

 It can be incorporated either – a) in writing – L’Estrange v Graucob [1934] 2KB 583; b) in an unsigned document – Chapelton  v Barry UDC[1940] 1 All ER 356; c) previous course of dealings – Olley v Marlborough Court Hotel [1949] 1 All ER 127.

2) Does the clause cover what has happened?

Note: see also the Unfair Contract Terms Act 1977 s1 – the reasonableness test; and s2 an attempt to exclude liability for negiligence.