Law Of Contract

Unilateral contract is a contract that is binding on one party only e.g. offer of a reward.  X issues advertisement promising to pay £50 to the person who finds and returns his lost dog – offer to the world at large – no one is bound to look for the dog.  If, having seen the advertisement, Y finds and returns the animal, he is entitled to the reward – Y has accepted the offer.  X is bound to pay him the reward. Thus the contract is binding only on the offeror. 

In a bilateral contract both parties are bound – e.g. a contract for the sale of goods – the seller is bound to deliver the goods and the buyer is bound to pay the price.  It is a mutual exchange of obligations.

A deed creates an obligation that is binding purely because it is made in a particular form – until 1989 had to be          “signed, sealed and delivered”, now signed, witnessed and delivered.  A contract contained in a deed does not require “consideration” – see later.

All other contracts apart from deeds are “simple contracts” – no particular formalities required. Need not be in writing, could be purely verbal or take place by conduct.   

a) Offer + Acceptance = Agreement

b) Consideration = test of enforceablity 

c) Intention to create legal relations= Binding contract

In assessing this the courts take an objective approach to the issue of intent rather than the actual intent of the offeror.

An objective test = look at the words, conduct of the parties from the perspective of a REASONABLE MAN

This test was determined in Storer v Manchester City Council (1974) where Lord Denning observed; "In contracts you do not look into the actual intent in a man's mind. You look at what he said and did".

Applying this test can cause some difficuties however it does allow the courts to avoid many impractical and often absurd results.

Gibson v Manchester City Council [1979]-The words “may be prepared to sell” displayed no contractual intent

with

Storer v Manchester City Council [1974] -The “Agreement for Sale” has held to be an offer (which the claimant had accepted)

Is an indication that the party is open to negotiation. 

Gibson v Manchester City Council (1979)

Claimant enquired whether he could purchase his council house and received a letter from the Council stating The Council "May prepared to sell the house to you" at a fixed price. The words “may be prepared to sell” displayed no contractual intent.

Therefore this was determined to be an invitation to treat compare this to Storer v Manchester City Council (1974) which was determined to been an offer as in the same situation the claimant's letter was headed with "Agreement for Sale" which the claimant had accepted. 

Presumptions are also used to distinguish between ITT and an offer. 

• Statement of intention to be bound
• On terms which are certain
• Which upon acceptance forms a binding contract

Three key elements of a contract:

a) Offer + Acceptance = Agreement

b) Consideration = test of enforceablity

c)Intention to create legal relations = Binding contract

The claimant must establish the existence of a firm offer made either to a particular person; to a group of persons; or to the world at large;

Carlill v Carbolic Smoke Ball Co(1893)