FORMATION OF CONTRACT

Formation of Contract                                                                                             

 

Offer and Acceptance

 

General Test

In resolving questions surrounding offer, acceptance and consideration, courts will adopt an objective (reasonable person) standard.

 

Policy

Balance the need to enforce promises (reasonable expectations) and the avoidance of surprising parties with unanticipated liabilities (unfair surprise).

 

Offer

 

General

 

The recipient of the communication (audience) enjoys the power to bind the offeror to a K and subsequently claim expectation damages if the offer is not complied with.

 

1.      Offer v. Invitation to Treat

a.           Products on shelves with prices are only an “invitation to treat”

b.           Pharma Society of GB v. Boots Cash Chemists

a.      K occurs at the counter when customer accepts terms

 

 

 

Specific Rules

 

1.      Intent to be bound- An Objective Test

There must be a manifestation of an intent to be bound; generally a mere advertisement, enticement or “invitation to treat” (i.e. negotiate) is insufficient. (Smith v. Hughes)

2.      An ad may be binding if it is clear and specific (Lefkowitz v. Great Minneapolis Surplus Store)

2. Fact that Plf “reasonably” relied on ad may also be a factor

 

1.      Sufficiently specific

The offer must be sufficiently specific and comprehensive that the terms of the agreement can be identified (the problem of uncertainty).

 

2.      Expiry after Reasonable time frame

An offer ceases to exist if it is rejected and in any event expires after a reasonable time, the length of which  will be contextually determined.

 

2.      Revocation before Acceptance

An offer can be revoked anytime before being accepted. However, unless the offer has expired (passage of a reasonable period of time), effective revocation may require notice of revocation.

a.      No duty to keep promise of offer open (in absence of consideration)

b.      Dickinson v. Dodds

                                                               i.      Def. made offer in writing, said offer was open for 48 hours

                                                             ii.      Def. sold property to someone else before the 48 hours expired

 

3.      Once Accepted--Bound

An offer is binding once it is accepted (unequivocally) and thereafter cannot be revoked.

 

 

Acceptance

 

General

 

Acceptance by word/return promise produces a bilateral contract

 

Acceptance by performance/action results in a unilateral contract.

 

Problem in unilateral K – Revocation occurs after performance begun but before completion

 

 

Specific Rules

 

1.      Intent to be bound

Must be clear manifestation of an intent to be bound.

 

2.      Acceptance of terms “as is” – Mirror Image Rule

Must sufficiently correspond to the offer;  otherwise it will be viewed as a counter-offer.

 

1.      Communicated to Offeror

Generally must be communicated to the offeror and must be done before the offer has expired or been revoked.

 

2.      Silence is not Acceptance

a. Must be an express communication

1.      Felthouse

2.      Offeror said if I don’t hear from you then we have K

3.      Court said there must be express communication

 

      b. Courts may imply acceptance, especially when there’s a pre-existing relationship

3.      St. John’s Tug Boat

4.      Wheeler v. Klaholt

 

      c. This rule ensures proof of acceptance, and intent to be bound

 

      d. Protects the consumer from inertial sales

 

 

Communication of Offer and Acceptance

 

1.         Method of communication may be stipulated by offeror (no absolute rule)

 

2.         Acceptance of offer occurs upon receipt of acceptance by offeror

 

3.         Postal Exception Rule

 

a. Offer is accepted the moment it’s in the mailbox (Adams v. Lindsell)

 

b. Revocation occurs upon receipt – it’s not necessary for the letter, email, or vmail to be opened

 

c. Postal Acceptance rule – Offeror takes the risk that acceptance mailed by offeree is lost in mail

Household Fire & Carriage Accident Insurance v. Grant

 

 

4.         E-Contracts

a.      Deemed to be received when it is entered your mailbox.

b.      Postal acceptance does not apply to email

c.      Once it gets to the mail server you use, then it’s received.

 

Cases

Smith v. Hughes

Held                 Objective test determines intent to be bound, regardless of “real” intention, if reasonable person would think an offer is being made then that meets the test

 

 

Lefkowitz v. Great Minneapolis Surplus Store

Facts               Def published ad: “3 brand new coats for sale, only $1. First come, first served” Def. then wouldn’t sell Plf the coat.

 

Held                 1. Def. made a legal offer with the ad.

                        2. Based on reasonable understanding of Plf.

                        3. Unlikely to an unfair surprise for the Def.

 

 

Dickinson v. Dodds

Facts               Def. was selling property, made an offer in writing saying the offer was open for 48 hours. Before 48 hours expired, the Def sold the property to someone else.

 

Held                 In absence of consideration, a promise to keep an offer open is not enforceable.

 

 

 

Felthouse v. Bindley

Facts               Plf said “We have a binding K if I don’t here from you”

 

Held                 Silence is not acceptance. There must be an express acceptance.

 

 

 

 

St. John’s Tug Boat v. Irving Oil

Facts               Tug on standby for Irving Oil. Relational K, extended a number of times. K expired, tug still on standby. Then several months later Irving refused to pay.

 

Held                 1. Acceptance is implied because of ongoing nature of K

                        2. Irving took advantage of the benefit, therefore treated it like a K

 

 

 

 

 

 

 

 

 

Schiller v. Fisher

Facts               Lengthy negotiations for purchase of building lots. Plf provides deposit of $20K for any purchase should negotiations be successful. $20K deposit to be returned to Plf if no agreement for any reason other than default of Plf.

 

Held                 1. General rule is acceptance occurs when offer is mailed, but parties can specify sufficiency of communication, i.e. when the acceptance is deemed to have been made.

                                    a. Plf cover letter stated “initialing”(METHOD) and (TIMING) “ASAP”

                        2. Def. initialing the K on Sept 1. was when the acceptance occurred.

 

 

Policy              1. Protecting reasonable expectations of Plf, by not allowing Def. to get out of K when there was a clear intention to be bound

                        2. Test – a promise has been made are there good reasons to enforce it?

 

 

 

 

Adams v. Lindsell

Held                 A binding K is formed by mailing the acceptance, even if offeror has changed his mind by the time acceptance is made

 

 

 

Household Fire & Carriage Accident Insurance v. Grant

Held                 Established Postal Acceptance Rule – Allocating risk of loss to the offeror

 

 

 

Uncertainty in Formation

 

General Rule

 

A contract must be certain to be enforceable. Courts will not fill in the blanks.

Certainty

1.      Parties – Who is the K with?

2.      Property – What is the property the K deals with?

3.      Price – What is the amount of the K?

 

Policy

 

For the courts to fill in the blanks where a K is uncertain would risk the danger of both unfair surprise and upsetting reasonable expectations.

 

Types of Uncertainty

 

1.      K incomplete

a.      Part of K is missing.

b.      Hasn’t defined property to be sold

c.      Court will normally refuse to enforce the promise

 

2.      Vagueness

a.      An offer that says I will take your butter if good.

                                                               i.      Contrast with “I will take your eggs Canada grade A medium”

 

b.      Courts will often use the context, practices of the trade to enforce the K

                                                               i.      e.g. “good butter” may have established meaning in dairy trade

 

3.      Agreements to Agree

 

a.      General Rule (Walford v. Miles)

                                                               i.      Court will not enforce agreement to agree

 

b.      Context

                                                               i.      Common in long term relationships or in preliminary relationships

 

c.      Exceptions

                                                               i.      If court is just interpreting what parties really meant then they may enforce

                                                            ii.      Foley v. Classique Motors

1.      Part of long-term sale of land was agreement to buy gas “at agreed upon price”

2.      Even though some vagueness fact that agreement existed for 3 years w/o a problem means the court can just read in gas at “reasonable price” into K

 

d.      Agreement to negotiate not certain enough to enforce actually coming to a K

                                                               i.      Courtney v. Fairbairn

 

 

 

 

 

 

4.      Good Faith in K negotiation of agreements to agree

 

a. General Rule

i. CL doctrine says there is no duty to negotiate in good faith

ii. Lower courts in BC bound by Empress, that says there is a duty to negotiate in    good faith

 

b. Policy

i. Parties are in the best place to determine their needs

ii. Empress decision has not been widely picked up, but the dissent has been cited

 

5.      Good Faith in performance of Contractual Obligations

 

a.      General Rule

                                                               i.      Some court have held there is a duty of GF in CO – not address by SCC yet

                                                             ii.      Arises in cases where one party is performing duty to technical requirements of the K, but in a way that substantially undermines the interests of the other party

b.      McKinlay, cited in Elite Specialty Nursing Services, Gateway Realty

McKinlay Motors v. Honda Canada

Facts               Def had K with Plf to supply cars to Plf dealership. Plf asked Def to upgrade premises. Plf did so at great expense. Def. began withholding cars to drive the Plf out of business.

 

Held (NFSC)   1. Def. acted in bad faith

                        2. Implied term in K that parties would act in good faith toward each other

 

 

 

6.      Good Faith in formation of Contracts (In bargaining)

a.      General Rule

                                                               i.      No duty to negotiate in good faith

                                                            ii.      Martel Building v. Canada

                                                            iii.      Implied rule expressly rejected in Walford v. Miles

 

 

Cases

Walford v. Miles

Facts               Agreement in principle, that Def. would sell photo business plus premises to Plf, together with warranty that business would make at least $300K profits in first year. Def agreed not to consider any third parties (i.e. “lock-out” agreement) provided they get letter from Plf’s bank saying loan for purchase has been offered. Def. sold to 3^rd party citing staff relations with Plf and thus warranty would fail.

 

Held                 1. No enforceable K, agreement to negotiate is not enforceable

                        2. Agreements to not negotiate with other parties (lock-out K) may be enforceable sometimes

                        3. No duty to negotiate in good faith.

 

Policy              1. Agreements to agree go against adversarial nature of negotiations

 

 

Foley v. Classique Motors Ltd.

Facts               Plf sold land to Def. and as part of the K, Def. agreed to long-term clause to buy gas from Plf at a price to be decided from time to time. No problem for first 3 years, then Def. backed out of gas deal.

 

Held                 1. There was a K in this case

                        2. Parties believed or acted as if there was a K for 3 years

                        3. Def. contention is not honest

                        4. Given long-term nature “reasonable” price for gas can be read into the K

                                    a. Send parties to arbitration

 

Policy              1. To find no K would go against reasonable expectations of Plf

                        2. The Def. could not have been unfairly surprised by the existence of the K

                        3. Unjust enrichment of Def - land price prob. affected by K for gas (Radford)

 

 

 

Courtney and Fairbairn v. Toliani Bros.

Facts               Def. agreed to have Plf build a hotel if Plf would find financing. Plf found financing, but Def. got someone else to build the hotel.

 

Held                 1. No K, just and agreement to agree

a.      Fundamental issues left undecided

b.      Damages difficult to calculate

                        2. Only an agreement to negotiate not to actual form K

 

Policy              1. Even if parties negotiate in good faith they may still not be able to reach an agreement

 

Critique            1. Damages could be assessed by restitution – finder’s fee for the Plf

                        2. Unjust enrichment – Def. got the financing for free

 

Distinguish

From Foley      1. Relational K, gone on for 3 years

                        2. Dishonest attempt to get out of deal

                        3. Gas was part of land deal

 

Empress v. Bank of Nova Scotia

Facts               Bank of NS renting from Empress. 5 year lease. Renewal lease should be nmutaully agreed upon market price. If parties do not agree on price by end of current lease, then either party may terminate the lease at its option. Bank proposes renewal rent of $3100 to $5400. On day lease to expire, Empress requests 15K up front plus $5400 rent, and lease would be terminable on 9 days notice.

 

Held                 Majority

1. Landlord cannot be compelled to enter into rent that it does not agree is market price

2. Req for mutual agreement carries with it an imply term of good faith for landlord

3. Agreement on rental rate will not be unreasonable withheld

4. There was a lack of good faith on part of landlord

 

Minority

1. Original lease provided for binding arbitration, this clause was dropped from second lease and replaced by this other clause, this was choice of the parties

2. Privity of K

3. No such thing as req for good faith negotiation

 

Comments      1. Is the renewal clause void for uncertainty? Is this just an agreement to agree?

                  2. Case binding on lower BC courts, but not picked up by any other courts

Words From Cambridge LLM Grad

Hi Jun Hong:

Thanks for the email. In a nutshell, securing good results for the LLB degree depends on hard work and consistency, but most importantly good exam technique. I would not say that the LLB is extremely tough, but you should realise there is considerably less spoon feeding in UK universities. I should also note that to secure a particular result (e.g. 1st class) at Brookes you need to score an average of 70% over all subjects you take, so it may be a bit more difficult compared to universities which have a 'technical' marking convention (e.g. Four 1sts out of 8 subjects = overall 1st). 

If i may offer some advice, I think the most important thing for a law student to bear in mind is that the law is all about words and phrases, so you might find it beneficial to improve your English as much as possible. As you are still in pre-u, I wouldn't worry too much about Brookes or life in UK yet, but would concentrate on getting a good foundation in law during your 1st year, and try to get some legal work experience at law firms etc. It would be a good idea to build up a good CV from early on.

Grammar plays a very very important part in legal studies. The ability to express yourself well in English is a good examination technique, and I think it is even more important than just knowing what the law is. But I also agree that reading is important - it doesn't have to be law, just english books in general. To that I will add: do not be afraid to speak more often in English. Always remember that words are a lawyer's weapon.

I can only say that practice makes perfect. I'm sure you're familiar with the phrase 玉不琢不成器. There is still time to improve. Don't get discouraged and stay focused.

There is no use knowing so much vocabulary if you can't use it for your benefit. Law exams are not a game of scrabble. It is a test of understanding the law and applying them to the facts.  Remember that examiners want to know what the reasons for your conclusion are. Those reasons can only be properly understood if they are expressed in good grammar, and not by some fanciful vocabulary which the examiners might not even understand themselves. Good grammar ensures that people who read what you write will always understand what you are trying to say. 

Simple English is enough, as long as you cite the correct legal authorities, and give your reasons for your conclusions. My opinion is that the examiners are only looking at two main factors: whether you know the correct law, and whether you have your own opinion. 

You should bear in mind that the nature of the work of a lawyer: he provides a service to his client, and achieving his client's objectives is not easy, and can be ugly. You should consider whether you want to become a practicing lawyer or for example an academic. Life in practice is definitely not going to be easy or pleasant.

Regards,

Weng 

LLB First Class Honours in Oxford Brookes University 

LLM from University of Cambridge , UK.

A Member of Middle Temple.

Assisted Suicide Case - Law Still Absurd ! REFORM?

A woman with multiple sclerosis has lost her Appeal Court case to clarify the law on assisted suicide.

Debbie Purdy, 45, from Bradford, is considering going to a Swiss clinic to end her life, but fears her husband may be charged on his return to the UK.

She wanted clarification of where her husband, Omar Puente would stand legally if he helped her in any way.

But Ms Purdy said after the ruling: "I feel that I have won my argument, despite having lost the appeal."

I'm not prepared for him to face the British justice system without me  Debbie Purdy

She was diagnosed with primary progressive MS in 1995 and is now losing strength in her upper body. She has been in a wheelchair since 2001.

Ms Purdy has said she will take legal advice on what to do next, but said it was likely she would take her case to the House of Lords.

High Court judges ruled in October that official guidance did not need to change.

'Parliament's decision'

The Appeal Court judges had been asked to reconsider that judgement.

But they said: "Notwithstanding our sympathy for the dreadful predicament in which Mrs Purdy and Mr Puente find themselves, this appeal must be dismissed."

They said the Director of Public Prosecutions (DPP) could not adopt a "case-specific policy in the kind of certain terms sought by Ms Purdy".

Their ruling said it had to be parliament which decided if the law should change.

It is time for parliament to remove the doubt which makes an upsetting situation even more traumatic  Evan Harris MP

And they added that, even if a defendant in an assisted suicide case were to be convicted, a court could decide that no sanction was appropriate.

Ms Purdy told the BBC: "The court has made it clear that they don't believe they are able to give me the clarity that I feel I need."

She added that if she could not be "100% certain" that her husband would not be prosecuted, she would go to Switzerland "earlier than I would otherwise want to".

"I'm not prepared for him to face the British justice system without me.

"That would be a nightmare, and far more painful than facing dying early."

Travel aid

Ms Purdy has always said she would still consider travelling to Switzerland to take a lethal dose of barbiturates prescribed by Dignitas doctors.

She wants her husband at her side, but has wanted to know if he could face prosecution on his return to Britain for helping her by buying train tickets, or by accompanying her abroad.

Liberal Democrat MP Dr Evan Harris backed Ms Purdy's call for parliament to consider the issue.

""The DPP has never found a basis for prosecution in over hundred cases of assisted dying - including one where the patient was not even terminally ill - so it is time for parliament to remove the doubt which makes an upsetting situation even more traumatic

No prosecutions

It is not the first time the issue has been raised in the courts.

In 2001 Diane Pretty, who had motor neurone disease, failed to get immunity from prosecution for her husband if he helped her to die in the UK.

Several attempts to legalise suicide in Britain have also been rejected.

In England and Wales, aiding or abetting a suicide is a crime punishable by up to 14 years imprisonment.

There have so far been no prosecutions of relatives of 101 UK citizens who have gone to the Dignitas clinic. 

from - BBC NEWS