Below is a breakdown of contract law, and how to contest contracts as well as case law to help your studies.
Sept 2021
A contract is an agreement giving rise to obligations which are enforced or recognised by law. … Generally speaking, an agreement is reached when one party makes an offer, which is accepted by another party. In deciding whether the parties have reached agreement, the courts will apply an objective test.
Contractual agreement has traditionally been analysed in terms of offer and acceptance. One party, the offeror, makes an offer which once accepted by another party, the offeree, creates a binding contract. Key concepts that you need to familiarise yourself with in relation to offer and acceptance include the distinction between an offer and an invitation to treat – you need to be able to identify specific examples of where an offer or an invitation to treat exists. Also it is important to know the difference between bilateral and unilateral contracts. The case of Carlill v Carbolic Smoke ball co. is the leading case in both these areas so it worth concentrating your efforts in obtaining a good understanding of this case.
The requirement of intention to create legal relations in contract law is aimed at sifting out cases which are not really appropriate for court action. Not every agreement leads to a binding contract which can be enforced through the courts. For example you may have an agreement to meet a friend at a pub. You may have a moral duty to honour that agreement but not a legal duty to do so. This is because in general the parties to such agreements do not intend to be legally bound and the law seeks to mirror the party’s wishes. In order to determine which agreements are legally binding and have an intention to create legal relations, the law draws a distinction between social and domestic agreements and agreements made in a commercial context.
Contractual agreement has traditionally been analysed in terms of offer and acceptance. One party, the offeror, makes an offer which once accepted by another party, the offeree, creates a binding contract. Key concepts that you need to familiarise yourself with in relation to offer and acceptance include the distinction between an offer and an invitation to treat – you need to be able to identify specific examples of where an offer or an invitation to treat exists. Also it is important to know the difference between bilateral and unilateral contracts. The case of Carlill v Carbolic Smoke ball co. is the leading case in both these areas so it worth concentrating your efforts in obtaining a good understanding of this case.
Offer: In order to amount to an offer it must be shown that the offeror had the intention to be bound:
Invitation to treat: An offer needs to be distinguished from an invitation to treat. Whereas an offer will lead to a binding contract on acceptance, an invitation to treat can not be accepted it is merely an invitation for offers.
Goods on display in shops: Goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods. The trader will decide whether to accept the offer:
Contracts by Tender: The request for tenders represents an invitation to treat and each tender submitted amounts to an offer unless the request specifies that it will accept the lowest or highest tender or specifies any other condition. If the request contains such a condition this will amount to an offer of a unilateral contract where acceptance takes place on performance of the condition:
Auctions: Where an auction takes place with reserve, each bid is an offer which is then accepted by the auctioneer. Where the auction takes place without reserve, the auctioneer makes a unilateral offer which is accepted by the placing of the highest bid:
In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffer a detriment. This benefit or detriment is referred to as consideration.
Consideration must be something of value in the eyes of the law – (Thomas v Thomas) (1842) 2 QB 851. This excludes promises of love and affection, gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed.
Whilst the common law strictly adheres to the requirement of consideration (although in some instances the courts seem to go to some lengths to invent consideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros [1990] 2 WLR 1153) equity will, in some instances, uphold promises which are not supported by consideration through the doctrine of promissory estoppel.
Promissory estoppel is an equitable doctrine which in some instances can stop a person going back on a promise which is not supported by consideration. Promissory estoppel was developed by an obiter statement by Denning J (as he then was) in Central London Property Trust Ltd v High Trees Ltd [1947] KB 130. Denning J based the doctrine on the decision in Hughes v Metropolitan Railway (1876-77) L.R. 2 App. Cas. 439. The House of Lords affirmed the existence of promissory estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761
Damages in contract law are a legal remedy available for breach of contract. Damages are an award of money to compensate the innocent party. The primary purpose of damages in contract law is to place the injured party in the position they would have been in had the contract been performed. Various remedies exist in contract law. These include:
Specific performance is an equitable remedy available at the discretion of the judge. It is an order by the court requiring one party to perform their contractual obligation. Whilst it is often said that contracts are made to be performed and parties should be held to their contractual obligations, the courts are often reluctant to order a party to unwillingly perform the contract and specific performance is only available in limited circumstances. In considering whether to grant specific performance the courts look to whether damages would be an adequate remedy, the type of contract and whether equity requires such an order.
1. Where damages are an inadequate remedy:Â If the claimant could adequately be compensated by an award of damages for the breach of contract, the courts are unlikely to order specific performance.
Compare the cases:
Nutbrown v Thornton (1805) 10 Ves 159
Cohen v Roche [1927] 1 KB 169
2. Type of contract: Specific performance is most commonly ordered for contracts for the sale of land The courts are unlikely to order specific performance for contracts for personal service.
3. EquityÂ
Clean hands:
Walters v Morgan (1861) 3 DF & J 718
Lamare v Dixon (1873) LR 6 HL 414
Hardship:
Co-op insurance v Argyll Stores [1997] 2 WLR 898
Patel v Ali [1984] 1 All ER 978
Injunctions:Â are another form of an equitable remedy available only at the discretion of the judge. There are three types:
1) Interlocutory or interim (temporary injunction until a court hearing)
2) Prohibitory (a court order that a party must not do something)
3) Mandatory (an order that a party must do something)
There is an overlap between mandatory injunctions and specific performance which has been recognised by the courts. The courts will not grant an injunction in circumstances that would in effect be an order for specific performance where it would not generally be allowed:
Page One Records v Britton [1968] 1 WLR 157
However, this does not prevent the ordering of a prohibitory injunction which may be an indirect way of ensuring compliance with contract:
Lumley v Wagner (1852) 42 ER 687
The court may sever terms and only order an injunction in respect of partial obligations:
Warner Bros v Nelson [1937] 1 KB 209
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