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Contract Formation - Agreement Thursday, 24 June 2010 10:26 a.m.
1. Is there an offer?
No (e.g. offer to treat)
Yes No contract
Offer is: Unilateral
By performance Yes Valid k
Yes On posting
Is there correspondence?
3. When was acceptance communicated?
Postal PAR applies?
No On receipt by reasonable offeror
2-Way instantaneous (e.g. Telephone)
When and where offeror is notified
When reasonable for offeror to access message
4. Was offer still 'live' at that time? (Revocation etc.)
Yes - agreement
No - no contract
Carlill v Carbolic Smoke Ball Company  HL Advertisement, offers 100 pound reward to anyone who used smokeball three times daily for 2 weeks and contracted the flu whil e doing so. Arguments against the ad being an offer
? Too vague for contract to be intended
# Specious, no substance to them
# Intended contract to be binding, was serious, as they deposited 1000 pounds to pay claimants
? Can't have contract to world in general
# Bowen: no, making an offer to the world
# You don't need to make an offer to an individual person
# There will only be a contract with those members of the public who agree with the terms of the offer.
? A unilateral contract
# Those accepting have fully performed their obligations before they accept
? Obligation = to use the smoke ball as advertised.
? Once accepted, obligations are now only on smoke ball company.
# Where an offeror implies that a particular mode of acceptance is sufficient to make the bargain binding, this method will suffice.
? Too extravagant a promise to be taken seriously
# Up to the offeror how extravagant the promise is. The principle of the freedom of contract is that one is free to make bad bargains as well as good bargains, and the law will still enforce the contracts. To be interpreted as an 'ordinary person' reading the document would understand it, using the natural language of the adverti sement.
Bowerman v Assoc of British Travel Agents Ltd, Eng CA, 21 Nov 1995
- if travel agents have made an arrangement the travel agents have to go through with whatever. Fuck, missed it. Courts with an agenda, using reasonable person.
The claimant was to take part in a school skiing trip. The first operator was a member of the defendant association, and ceased trading through insolvency. Held: The ABTA notice displayed in the travel agent's offices created a contract between ABTA and the client. The advert 'ABTA arranges re-imbursement' constituted a unilateral offer to contract in this context. The notice would be seen to create legal relations, and satisfied the criterion in Carlill. The promises covered ABTA tour operat ors against any failure of ABTA travel agents who had taken money from the public and not passed it on to the tour operator. ABTA should not be allowed to go back on his promise, without looking at the impact of the promise on those who buy travel ag ents. Unilateral offer, like in Carlill. Perst LJ - notice was providing information about a scheme, not intended as an offer Information put up about a scheme, but not intending on standing by it. If no such scheme, notice is incorrect. Shows we must distinguish between communications that are offers (have legal effect) and fall short of being an offer. Boulder Consolidated Ltd v Tangaere  CA T sought to buy lot 168 from B, by agreement replaced this with lot 203. Then B made T aware that 203 was unavailable, offered to refund or pick a new lot. Sent a compliments slip containing available sections in stage 7, March 1977. 15 June, B asked what action T would take, suggested a stage 8 lot. 21 June T 'accepted' lot 138 (one of the lots in the compliment slip). Trial judge considered this acceptance of an offer. Cooke J: Conventional approach is when looking at documents to consider whether ther is a contractual offer and an acceptance.
Contract Page 1
'accepted' lot 138 (one of the lots in the compliment slip). Trial judge considered this acceptance of an offer. Cooke J: Conventional approach is when looking at documents to consider whether ther is a contractual offer and an acceptance. Holistic, general approach: "A mechanical analysis in terms of offer and acceptance may be less rewarding than the test whether, viewed as a whole and objectively, the correspondence shows a concluded agreement" Where the meaning of a communication is doubtful, it is legitimate to look at the party's later communications to ascertain whether an offer is continuing or revoked. Here the communication is too amorphous for the court reasonably to find a contract within it. Objective theory holds true for both conventional and global approaches. Compliments slip shouldn't be treated as an offer because: The slip showed what was immediately available, but it is unreasonable to assume the offer would remain live for 3 months (March - June), and that B would keep these off the market for that long. McMullin J: Rules of conventional approach:
1. The existence of an agreement requires one party making a full offer, and the other accepting it.
2. An offer to treat is not made with an intention to become binding as soon as assent is communicated, so cannot be bindingly accepted.
3. The courts must apply an objective test to establish agreement (an apparent meeting of minds is sufficient)
4. There must be a contractual offer available for acceptance before there can be a contract. B's compliments slip + suggestion were merely offers to treat, so couldn't be accepted. Gibson v Man City Council 
# Council lease tenants houses. Council gave tenants a brochure asking them to buy the houses. Gibson filled in a form, indicating interest.Tenants claimed the documents were an offer, obliging the council to sell the house on acceptance.
# Council sent back a letter, indicating the price, mortgage of house. Critically, letter said 'if you would like to make a formal application to buy, please complete the enclosed form', 'council may be prepared to sell the house'.
# It was found there was no contractual offer, so Gibson's acceptance did not bring about a binding contract.
# Conventional approach used, correspondence between parties seen as a time to use conventional approach not holistic.
When offer and acceptance are not required:
* Correspondence which does not finish with a final, written, signed contract.
# McCreanor Estate at 33
* Communications continued for several months over the sale of land
* Wilde J - if the evidence shows the real intention of the parties is to contract, then it is the court's function to give effect to this (not to obstruct through technical rules bargains that have been made).
* Where conduct indicates an agreement without any formal contract
* In some shops, where no communication goes about handing over money.
* If there is a written contract signed by the parties, one need not rely on constructions of offer and acceptance
* Bouma v Busst (1997) 8 TCLR 168 at 173
* Two neighbouring farmers, one wanted to buy a section of the other 's farmers, so wrote out a contract with no legal advice. No explicit offer or acceptance.
* But there was an agreement, so they did intend to contract.
* Go behind the document, don't need so technical an approach to offer and acceptance.
* Farmers are not going to speak like lawyers. Language might not conform to how a lawyer would create an agreement, but as long as the courts can see their intent, they would give effect to it. Meates v Attorney General  Cooke P: - Holistic. Question is whether you can apply a contract through acts and statements of the party. "I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field... the acid test ... Is whether, viewed as a whole, the dealings show a concluded bargaining." Objective approach to agreement
* A signature is the external manifestation of an intention.
* Doesn't matter if you have your fingers behind your back, cannot escape liability, as all depends on what the reasonable party would assume in the circumstances.
* Instils certainty into law, we want to protect those who make it clear what they mean, not those with fingers behind their back
* Yoshimoto v Canterbury Golf International Ltd, 2000, Court of Appeal
* For reasons of commercial convenience the law insists on an objective theory of contract
* Generally we do not care about subjective expectations, the idea is to give an effective and fair framework.
Smith v Hughes 1870s, Blackburn J Whatever a man's real intention may be, if he conducts himself so that a reasonable person would an offeree's communication is assent, and the offeror enters the contract in that belief, then the offeree's real intentions are ignored and the contract is binding. Origin of the objective principle Qualification, Thomas J in Bobux Marketing v Raynor Marketing  1 NZLR 506 at -
The objective principle of the reasonable person does have a subjective element. There must be a belief that the other party is assenting. Appreciation that an offeree is not accepting an offer is independently fatal to the existence of a contract. Fisher J in Transpower NZ v Meridian Energy  3 NZLR 700 at 
e.g. If communication is meant as a joke Fact that a reasonable person would have believed acceptance doesn't matter. Shogun Finance at ,  and 
Imposter buys a car, pretends to be someone else (with a good credit record). Seller wants to bring in evidence that the person who signed was not who he said he was. Contract Page 2
who he said he was. Lord Hophouse - other evidence cannot be introduced to contradict the provisions of a contract in a written document. Fundamental to mercantile law. If agreement is ambiguous, might allow for extrinsic aids. Why the objective approach?
Subjective intentions are unknowable - cannot establish what was or wasn't in someone's mind Commercial convenience and certainty Importance of written, signed contracts - signature assures everything Traditionally a court will refuse to hear evidence of matters outside a contract if they see two signatures assigned. Parole evidence rule - won't hear evidence outside of written agreement - Connor, May give more judicial discretion - the court adopts the rule of the reasonable man, it voices 'reasonable' assumptions.
When will we abandon the objective approach?
If parties are: Children (which is why we have the Minors Contract Act) Mentally unwell In cases of mistake, misrepresentation or duress
Three types of statements that aren't offers
* Purely informative statements (by convention)
* 'Puff', self-congratulatory statements about products
* Won't be held up in court as part of the offer. "This is the best car in the world", reasonable person wouldn't believe it.
* A statement containing so little fact, being so extravagant that people won't believe it.
* Invitations to treat,
* i.e. Statement/conduct to solicit offers, to start negotiations, to draw people in.
* Offers need to manifest a kind of willingness to perform. Otherwise will be an invitation to treat
* Carlill - not like cases where you say you have books to sell or houses to let. These are offers to receive offers. Offers to chaffer (haggle, bargain). Requests for information Harvey v Facey  AC 552 Telegram sent, "will you sell xxx pen, telegraph lowest price". Reply: "900 pounds". Reply: Agree to buy bumperball pen, 900 pound. Please send title". Court held not to be a contract, as the second telegraph was a provision of information, not an offer to sell. Gibson, council said how much property would cost if Gibson applied to buy it. Letter is not an offer, was seeking an offer. Boulder - price list wasn't an offer, as if it was the developer would have been stuck. Once offer is made, as soon as there is acceptance, there is a binding contract. They wouldn't have been held to not be able to sell any other until Tangaere accepted one of them. Hence it was information, not an offer. If the seller sent out a catalogue and prices changed or they ran out of stock, then they would be stuck. The reasonable person would understand these issues, so not hold there to be an offer. Shop displays When goods are put on display in a shop, as with catalogues, the principle = display of goods in a shop is not an offer to sell goods at that price, but an invitation for people to make an offer on those things.
* Pharmaceutical Society of Great Britain v Boots Cash Chemists  QB
? Boots had all products on display, had to be taken up to check out, where the transaction would be performed by a pharmacist
? Boots was being prosecuted for sale of pharmeceutical products not under pharmacists supervision.
? Argument: sale was being made when goods were taken off the shelves, put into baskets
# But then you couldn't change your mind after putting goods into your basket
# If something broke in your basket (through no negligence), you wouldn't have to buy it.
? If placing of goods on the shelf was an offer, any one could force a sale by 'accepting' through putting the goods into their basket.
* Fisher v Bell 
? Display of knives in shop windows, with price tags. Criminal law against selling knives in particular ways.
? Goods on display in a shop are just invitations for offers.
? Acceptance is on the shops behalf, when they take payment.
Advertisements Partridge v Crittenden 
Selling birds, some restrictions on selling birds. Displaying birds through a catalogue DNE offer, but statement of fact, provision of information: we have these birds for sale. Parker CJ, easier to say just an invitation to treat than in fisher v bell. The catalogue goes out to hundreds of recipients, but there are only so many birds. Wouldn't be practical to allow everybody to accept an offer to buy a bird. Treating displaying the birds as offers would lead to an unrealistic situation of a seller having more contracts than they have goods to fulfil them with. Grainger v Gough  AC 325 at 334 Winemake sent ad in form of catalogue to England. English tax authority claimed it was an offer - as acceptance was given in England, contract formed in England, so tax --> English tax authority. But if the price list was an offer, there would be thousands of potential contracts formed just by acceptance - the reasonable person would see this is absurd, as there may be more contracts than available wine.
Roback v UBC (2007) 277 DLR (4th) 601 Contract Page 3
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