INTRODUCTION

A contract can be described as a legally binding oral or written agreement which exchanges any
combination of goods, services, money and property. It is a common misconception that a
contract may only be in written form, as oral or conduct agreements can be just as credible in
contract formation. The assignment seeks to render advice to the two parties involved as to
whether there was a valid contract between the seller and the buyer and their legal obligation.
This However for the purpose of this assignment we shall first start by we shall first start by
stating and adumbrating the nature of a contract as well as what constitutes a valid contract and
thereafter give a conclusion based on the discussion.

NATURE OF A CONTRACT

A contract is an agreement which is legally binding on the parties. It gives rise to obligations for
the parties involved. The law of contract determines which agreements are enforceable and
regulates those agreements, providing remedies if contractual obligations, that is, undertakings or
promises are broken.

The term contract is defined as an agreement between two or more parties which has a binding
nature, in essence, the agreement with legal enforceability is said to be a contract. It creates and
defines the duties and obligations of the parties involved.1

A contract is an agreement between two or more parties to perform a service, provide a product
or commit to an act, and is enforceable by law.2

Unilateral and bilateral contracts

In order to understand the law on offer and acceptance, you need to understand the concepts of
unilateral and bilateral contracts. Most contracts are bilateral. This means that each party takes
on an obligation, usually by promising the other something for example, Ann promises to sell
something and Ben to buy it. (Although contracts where there are mutual obligations are always
called bilateral, there may in fact be more than two parties to such a contract.) By contrast, a
unilateral contract arises where only one party assumes an obligation under the contract.
1
https://www.studymode.com/essays/a-Contract-Is-An-Agreement-Between-74369020.
2
https://globtaxgov.weblog.leidenuniv.nl/files/2019/11/Regulatory-framework-for-tax-incentives-in-developing-
countries-.pdf?msclkid
Examples might be promising to give your mother k500 if she gives up smoking for a year, or to
pay a k150 reward to anyone who finds your lost purse, or, as the court suggested in Great
Northern Railway Co v Witham,3to pay someone £100 to walk from London to York. What
makes these situations unilateral contracts is that only one party has assumed an obligation – you
are obliged to pay your mother if she gives up smoking, but she has not promised in turn to give
up smoking. Similarly, you are obliged to pay the reward to anyone who finds your purse, but
nobody need actually have undertaken to do so.4

A common example of a unilateral contract is that between estate agents and people trying to
sell their houses – the seller promises to pay a specified percentage of the house price to the
estate agent if the house is sold, but the estate agent is not required to promise in return to sell the
house, or even to try to do so.5

THE ELEMENTS OF A CONTRACT

For a contract to be valid there are however four elements that makes a contract legally binding,
namely an officer, acceptance, consideration and intention to create legal relations.

What then is an offer?

The person making an offer is called the offeror, and the person to whom the offer is made is
called the offeree. A communication will be treated as an offer if it indicates the terms on which
the offeror is prepared to make a contract (such as the price of the goods for sale), and gives a
clear indication that the offeror intends to be bound by those terms if they are accepted by the
offeree.

For a contract to be created parties must reach an agreement. The idea of agreement is therefore
central to an understanding of the law of contract. Whether or not there is an agreement between
the parties is a question, which can be answered by looking at the way parties have conducted
themselves and examine what they have said and done. As alluded to in the case of in Smith v.
Hughes, where Blackburn J stated that: “If, whatever a man’s real intention may be, he so
conducts himself that a reasonable man would believe that he was assenting to the terms
3
(1873)
4
Jansen and Zimmerman ‘Restating the Acquis Communautaire? A critical examination of the “Principles of the
Existing EC Contract Law”’ (2008) 71(4) Modern Law Review 505
5
Adams and Brownsword, ‘The ideologies of contract’ (1987) 7 Legal Studies 205
proposed by the other party, and that other party upon that belief enters into the contract with
him, the man thus conducting himself would be equally bound as if he had intended to agree to
the other party’s terms”.6

Lord Denning in Storer v. Manchester City Council, 7 had propounded that In contracts you do
not look into the actual intent in a man’s mind. You look at what he said and did. A contract is
formed when there is, to all outward appearances, a contract”.

An offer can be stated as being a promise or proposal by one party (the offeror) to enter into a
contract, on a particular set of terms, with the intention of being bound as soon as the other party
to whom the proposal or promise is made (the offeree) signifies his acceptance. An offer may be
made either to an individual person, or to a particular group of persons, or it may be made to the
general public, as in the case of a reward offered for the provision of information.8

It can be noted that there is generally no requirement that the offer be made in any particular
form, as it may be made orally, in writing or by conduct.

However, care must be taken in distinguishing between an offer and an invitation to treat.
Invitation to treat (or "bargain" in the US) is a contract law term. It comes from the Latin phrase
invitatio ad offerendum and means an "inviting an offer". An invitation to treat is simply an
expression of willingness to enter into negotiations which, it is hoped will lead to the conclusion
of the contract at a later date. The distinction between an offer and invitation to treat is said to be
primarily one of intention, that is, did the maker of the statement intend to be bound by an
acceptance of his terms without further negotiation or did he only intend his statement to be part
of the continuing negotiation process as was in the case of Gibson v. Manchester City Council9
The House of Lords held that the letter written by the treasurer, which stated that the council may
be prepared to sell, was not an offer as it did not finally commit the council to selling the house.
It was simply an expression of their willingness to enter into negotiations for the sale of the
house and was capable of being accepted.

6
(1871) L R 6 QB 597
7
[1974] 3 ALL ER 824
8
Marvin Chirelstein, Concepts and Case Analysis in the Law of Contracts
9
[1979] 1 WLR 294
In the famous case of Carlill v. Carbolic Smoke Ball Co.10 It was held that the advertisement
was not an invitation to treat but was an offer to the whole world and that a contract was made
with those persons who performed the condition ‘on the faith of the advertisement’. The plaintiff
was therefore entitled to recover £100.

Failure of a precondition

Some offers are made subject to certain conditions, and if such conditions are not in place, the
offer may lapse. For example, a person might offer to sell their bike for k700 if they manage to
buy a car at the weekend.as alluded to in the case of In Financings Ltd v Stimson11 the
defendant saw a car for sale at £350 by a second-hand car dealer on 16 March. He decided to buy
it on hire-purchase terms. The way that hire purchase works in such cases is that the finance
company buys the car outright from the dealer, and then sells it to the buyer, who pays in
instalments. The defendant would therefore be buying the car from the finance company (the
claimants), rather than from the dealer. The Court of Appeal ruled in favour of the defendant, as
the so-called ‘agreement’ was really an offer to make a contract with the claimants, which was
subject to the implied condition that the car remained in much the same state as it was in when
the offer was made, until that offer was accepted. The claimants were arguing that they had
accepted the offer by signing the document on 25 March. As the implied condition had been
broken by then, the offer was no longer open so no contract had been concluded.

Counter-offer

The legal Principle is that a counter-offer terminates the original offer as was in the Hyde v
Wrench12the defendant offered to sell his farm for £1,000, and the claimant responded by
offering to buy it at £950 – this is called making a counter-offer. The farm owner refused to sell
at that price, and when the claimant later tried to accept the offer to buy at £1,000, it was held
that this offer was no longer available; it had been terminated by the counter-offer. In this
situation the offeror can make a new offer on exactly the same terms, but is not obliged to do so.

ACCEPTANCE

10
[1893] 1 QB
11
(1962)
12
(1840)
Acceptance of an offer means unconditional agreement to all the terms of that offer. Acceptance
will often be oral or in writing, but in some cases an offeree may accept an offer by doing
something, such as delivering goods in response to an offer to buy. The courts will only interpret
conduct as indicating acceptance if it seems reasonable to infer that the offeree acted with the
intention of accepting the offer as was in the case of in Brogden v Metropolitan Rail Co13
where the courts held that by inserting the arbitrator’s name, Brogden added a new term to the
potential contract, and therefore, in returning it to the railway company, he was offering (in fact
counter-offering) to supply coal under the contract. 14 But when was that offer accepted? The
House of Lords decided that an acceptance by conduct could be inferred from the parties’
behaviour, and a valid contract was completed either when the company first ordered coal after
receiving the draft agreement from Brogden, or at the latest when he supplied the first lot of coal.

An acceptance does not usually take effect until it is communicated to the offeror. As Lord
Denning explained in Entores Ltd v Miles Far East Corporation.15 Where parties negotiate
face to face, communication of the acceptance is unlikely to be a problem; any difficulties tend
to arise where the parties are communicating at a distance, for example by post, telephone,
telegram, telex, fax or messenger.

Exceptions to the communication rule

Conduct of the offeror

An offeror who fails to receive an acceptance through their own fault may be prevented from
claiming that the non-communication means they should not be bound by the contract. In the
Entores16 case it was suggested that this principle could apply where an offer was accepted by
telephone, and the offeror did not catch the words of acceptance, but failed to ask for them to be
repeated; and in The Brimnes (1975), where the acceptance is sent by telex during business
hours, but is simply not read by anyone in the offeror’s office.

CONSIDERATION

Consideration is an essential element to the creation of a valid contract.

13
(1877)
14
Brian A. Blum, Examples & Explanations for Contracts
15
(1955),
16
(1955)
The consideration must be of some value that can be objectively determined. Consideration is
often defined as a benefit or detriment. A person will be found to have provided consideration if
he can show he has conferred a benefit on the other party in return for that party’s promise or
that he has incurred a detriment for which the other party’s promise was intended to compensate
as in the case of Currie v Misa 17
offers a definition of consideration as “some right, interest ,
profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.”

There are three types of consideration:

1. executor,

2. executed,

3. and past consideration.

Past Consideration is some act carried out before a promise is made. Past consideration does not
amount to sufficient consideration. As was in the case of Roscorla v Thomas18.

The Common Law takes the view that not all promises are enforceable. For a promise to be
enforceable it must be shown that the person to whom the promise is made has given something
in return for the promise i.e a quid pro quo. One exception to the general rule is that a promise
contained in a deed under seal does not require consideration. If there is no consideration a
promise will be unenforceable at Law. As was in the case of Aga Khan v Firestone and
Firestone19 where Morris J found that a promise of first refusal on the sale of a property was
unenforceable for want of consideration.

“once there is consideration its adequacy in this sort of case is irrelevant to its validity and
enforceability if the agreement itself has been proved”

The effect of this rule is that worthless consideration will not be regarded as insufficient merely
because it is worthless. In Haugh v Brooks20 the defendant received, as per his request , a
worthless piece of paper in return for a promise made by him to pay £10,000. It was held to be
17
(1875)
18
(1842) 3 QB 234
19
(1992)
20
(1839)
sufficient consideration. Whilst the adequacy of the consideration is not relevant to whether it is
a valid consideration, the requirement that consideration be sufficient means that it must be
something of value in the eyes of the law.21 Sufficiency means that the consideration is of a type
recognised by the law as effective to enforce a promise given in return as was in the case of
O’Neill v Murphy22

The plaintiff builder sued the defendant a canon, for payment in respect of works done to the
parish buildings. The defendant claimed that a contract existed between the parties whereby the
defendant would offer prayers for the benefit of the plaintiff in return for the work done on the
buildings. The N I Court of Appeal found that saying prayers could not be said to be sufficient
consideration. And in Re Wilson23 Johnston J held there was no agreement for valuable
consideration where a father made over a property to a son ‘for natural love and affection’ and
then promised an allowance to the son to assist in maintaining the property.

The performance of a duty already owned cannot constitute consideration.

In Stilk v Myrick24 two seamen deserted on a voyage, the Captain agreed with the rest of the
crew that if they worked to get the ship back to London without the two seamen being replaced
that he would divide the two extra wages with the crew. On arrival the extra pay was refused.
The Court held that there was no consideration for the extra pay promised.

However an agreement to do something over and above the call of duty can amount to
consideration. In Glasbrook Brothers v Ganmorgan County Council25

The owners of a coal mine requested static police protection for their mine during a strike.
However the police authority took the view that the mine could be adequately protected by
patrolling the area. The static police presence was agreed in return for payment of the extra cost
involved. The owners refused arguing that the police were under a public duty to provide the
protection. The House of Lords rejected this argument and held that the police providing more
protection than they deemed necessary was capable of amounting to consideration.

21
Furmston & others, The Law of Contract (1999) para 2.42)
22
(1936) N.I 16.
23
(1933) IR 729
24
(1809)
25
(1925) A.C 270
ANALYSIS OF THE FACTS AND ISSUE AT HAND

In analyzing the legal and the facts in contention is whether there was a binding contract between
the buyer and the seller for the sale of a machine. It is pertinent to mention that an offer For a
contract to be created parties must reach an agreement. The idea of agreement is therefore central
to an understanding of the law of contract. Whether or not there is an agreement between the
parties is a question, which can be answered by looking at the way parties have conducted
themselves and examine what they have said and done. As alluded to in the case of in Smith v.
Hughes, it is however evident that there was an offer between the seller and the buyer for the sell
of the machine at k75,000 and an increase in price variation by the seller. The buyer had
accepted as to the offer by proposing his own terms without the price variation clause. However,
there parties carried on a long process of negotiation, which was difficult to pinpoint exactly
when an offer had been made and accepted. Of which in this case there was a ‘battle of the
forms’ which occurred between the parties. Where one party sends a form stating that the
contract is on their standard terms of business, and the other party responds by returning their
own form and stating that the contract is on their terms.

In this regards the general rule in such cases is that the ‘last shot’ wins the battle. Each new form
issued is treated as a counter-offer, so that when one party performs its obligation under the
contract (by delivering goods for example), that action will be seen as acceptance by conduct of
the offer in the last form. As was in the case of British Road Services v Arthur V Crutchley &
Co Ltd.26 the claimants delivered some whisky to the defendants for storage. The BRS driver
handed the defendants a delivery note, which listed his company’s ‘conditions of carriage’.
Crutchley’s employee stamped the note ‘Received under [our] conditions’ and handed it back to
the driver. The court held that stamping the delivery note in this way amounted to a counter-
offer, which BRS accepted by handing over the goods. The contract therefore incorporated
Crutchley’s conditions, rather than those of BRS.

However, a more recent case shows that the ‘last shot’ will not always succeed Butler Machine
Tool Ltd v Ex-Cell-O Corp (England) 27 were the Court of Appeal held that the buyers’ reply
to the quotation was not an unconditional acceptance, and therefore constituted a
26
(1968)
27
Ltd (1979)
counter-offer. The sellers had accepted that counter-offer by returning the
acknowledgement slip, which referred back to the buyers’ conditions. The sellers
pointed out that they had stated in their accompanying letter that the order was booked
in accordance with the earlier quotation, but this was interpreted by the Court of Appeal
as referring back to the type and price of the machine tool, rather than to the terms
listed on the back of the sellers’ document. It merely confirmed that the machine in
question was the one originally quoted for, and did not modify the conditions of the
contract. The contract was therefore made under the buyers’ conditions. The Court of
Appeal also contemplated what the legal position would have been if the slip had not
been returned by the sellers. The majority thought that the usual rules of offer and
counter-offer would have to be applied, which in many cases would mean that there
was no contract until the goods were delivered and accepted by the buyer, with either
party being free to withdraw before that 28

Once the offer has been made by the offeror containing terms and conditions specified
by the offeror, the offeree is only supposed to either accept or reject the offer. When the
offeree decides to respond to the offer with he’s own terms that becomes a counter offer
29
which terminates the original offer as was in the case of Hyde v Wrench. In the case
of Sterling Hydraulics Ltd v Dichtomatick Ltd.30 when the first set of terms and
conditions supplied by the purchaser were held to be the ones which governed the
contract. They sent an order to the supplier which referred to the terms and conditions
set out on the back of the order. The supplier faxed back an acknowledgement stating
that the contract would be subject to their General terms of sale which were not
identified expressly in the fax, it was held that this was insufficient to indicate that this
fax was a counter offer. The view could be taken that letter issued by the seller
accepting the seller of the machine with the initial price variation on the 23 rd of May did
on clearly identified what their terms and condition were so were the buyer chose to pay
the k75000 without considering the price variation amounted to a counter offer and
under the battle of forms the sellers last shot of accepting to sell and maintain the same

28
Catherine Elliot and frances quinn seventh edition
29
1840
30
standard of increasing the in any event was the prime offer and the buyers decline
amounted to a counter offer create a counter offer.

CONCLUSION

It can therefore be concluded, that the seller has a right to rescind the contract since the
buyer has not acknowledged the terms of the original offer hence there was no contract
between the parties.

BIBLIOGRAPHY

BOOKS

Adams and Brownsword, ‘The ideologies of contract’ (1987) 7 Legal Studies 205

Catherine Elliot and frances quinn seventh edition

Marvin Chirelstein, Concepts and Case Analysis in the Law of Contracts

Furmston & others, The Law of Contract (1999) para 2.42)

Jansen and Zimmerman ‘Restating the Acquis Communautaire? A critical examination

of the “Principles of the Existing EC Contract Law”’ (2008) 71(4) Modern Law Review
505

CASES

Great Northern Railway Co v Witham (1873)

Storer v. Manchester City Council [1974] 3 ALL ER 824

Gibson v. Manchester City Council [1979] 1 WLR 294

Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB

Financings Ltd v Stimson (1962)

Hyde v Wrench (1840)

Brogden v Metropolitan Rail Co (1877)

Entores Ltd v Miles Far East Corporation (1955)

Currie v Misa (1875)

Haugh v Brooks (1839)

O’Neill v Murphy (1936) N.I 16.

Butler Machine Tool Ltd v Ex-Cell-O Corp (England Ltd (1979)

SITES

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in-developing-countries-.pdf?msclkid