Contract Law Cases

kazzasingh's version from 2017-03-28 22:23


Question Answer
Carlill v Carbolic Smoke Ball Company [1892]A Newspaper advert placed by the defendant stated:- £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball... £1000 is deposited with the Alliance Bank, shewing our sincerity in the matter." Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought to claim the stated £100 reward. The defendant raised the following arguments to demonstrate the advertisement was a mere invitation to treat rather than an offer: 1. The advert was a sales puff and lacked intent to be an offer. 2. It is not possible to make an offer to the world. 3. There was no notification of acceptance. 4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu. 5. There was no consideration provided since the 'offer' did not specify that the user of the balls must have purchased them. Held: The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected all the arguments put forward by the defendants for the following reasons: 1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff. 2. It is quite possible to make an offer to the world. 3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance. 4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls. 5. The defendants would have value in people using the balls even if they had not been purchased by them directly.
Harvela Investments v Royal Trust of Canada [1985]The claimants submitted a fixed price bid for shares in the defendant’s company. Another party made a referential bid; of a fixed amount more than any other offers. Reasoning: As the defendants were bound to accept the highest bid, the referential bid did not have a fixed ammount attached to it and as such could not be accepted or even submitted.
Butler Machine Tool Co Ltd v Ex-Cell-O Corp Ltd [1977]The 'battle of the forms' - There was a series of offers and counter offers which passed between the two parties, each containing the standard contracting terms of the relevant party. The seller’s terms (claimant) had a price variation clause, the buyer’s terms did not. The buyers took a while before they took delivery, and therefore the price variation clause was invoked by the sellers. The buyers fired the ‘last-shot’, they sent the final offer which the sellers accepted. As such, the contract was made on the buyer’s terms, without a price variation clause Lord Denning said that the documents should be ‘construed as a whole’, though this appears to me to be somewhat irrelevant
Entores Ltd v Miles Far East Corporation [1955] The moment of acceptance of a contract over telex - Denning LJ found that the regular postal rule did not apply for instantaneous means of communications such as a telex. Instead, acceptance occurs where the message of acceptance is read. the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.
Brinkibon Ltd v Stahag Stahl GmbH [1983]Brinkibon sent their acceptance to a Stahag offer by Telex to Vienna. Brinkibon later wanted to issue a writ against Stahag and applied to serve an out of jurisdiction party. They would only be able to do so if the contract had been formed in England. The question at issue was where the contract was formed. The Judges decided that the contract was formed in Vienna. They accepted the principle in Entores v Miles Far East Co where in the case of instantaneous communication, which included telex, the formation generally occurs in the place where the acceptance is received.
Thomas v BPE Solicitors [2010]An email had been sent between solicitors acting for the respective parties at 18:00 hrs on a Friday evening before a bank holiday weekend. The defendant solicitors submitted that the email was not effective from the moment it was received because it was sent after working hours, and it could not have been effective until it came to the recipient’s eye on the Tuesday morning. The claimant, however, submitted that the email was effective from 18:00 hrs Friday evening by analogy with the postal rule (ie effective at the moment of dispatch).The court held that the postal rule did not apply to an email, as it had been established by authority that it did not apply to other instantaneous forms of communication, like telexes (Entores [1955] 2 Q.B. 327 and Brinkibon [1983] 2 A.C. 34). In this case, the parties were in the final throes (they thought) of negotiating a substantial share purchase agreement, and the deal was expected to close that day, even after hours. Thus the court held that the sender could reasonably have expected that the addressee would still be at his office at that hour, and the email was delivered then. (As it happened, the addressee had left on vacation. However, the court’s ruling that the email did not constitute a legally binding acceptance saved the vacationer from a finding of professional negligence for the loss of the deal.)
Chwee Kin Keong v Pte Ltd [2004]“placing an advertisement on the Internet is essentially advertising or holding out to the world at large". Context: This Case deals with the issue of unilateral mistake. This is one of the first prominent case that deals with the issue of web based contract. In this case, Defendant was selling IT products over internet in Singapore. The HP laser printer was advertised on the Defendant’s website and on the website of HP for $3,854. Due to the mistake on part of one of the employee of a related company, the price of printer was altered to $66 on the website, which was not noticed by any of the employee. The Appellants (there were six appellants) discovered this price and ordered more than 100 printers each. The Company on discovering the mistake rectified it and sent an e-mail stating that it will not complete this order. The Court held that (also considering the background of the appellants) that they had a constructive knowledge about the mistake in the pricing of the product. Due to this mistake related to the fundamental terms of the contract, the contract was held void under the common law. Three important judicial inference can be drawn from the judgement of the Court: 1. The goods displayed on the e-commerce websites are an invitation to treat, just like the advertisement placed on any billboard or in any shop, this is different from offer. Further, this difference between invitation to treat and offer will be subject to the language used on the website of the company selling the product. 2. The element of consensus ad idem cannot be claimed by the party(who is aware of such mistake) against the other party (who has committed such a mistake). This is an exception to the general rule which states that a party is bound to the contract even though a mistake may have been committed by it while entering into the contract.

Termination of the Offer (rules for bilateral contracts)

Question Answer
REJECTION - Hyde v Wrench [1840]Rejection must be communicated. Any counter-offer cancels the original offer. Wrench offered to sell his farm in Luddenham to Hyde for £1200, an offer which Hyde declined. On 6 June 1840 Wrench wrote to Hyde's agent offering to sell the farm for £1000, stating that it was the final offer and that he would not alter from it.[1] Hyde offered £950 in his letter by 8 June, and after examining the offer Wrench refused to accept, and informed Hyde of this on 27 June.[2] On the 29th Hyde agreed to buy the farm for £1000 without any additional agreement from Wrench, and after Wrench refused to sell the farm to him he sued for breach of contract. Lord Langdale's judgment read. Under the circumstances stated in this bill, I think there exists no valid binding contract between the parties for the purchase of this property. The defendant offered to sell it for £1000, and if that had been at once unconditionally there would undoubtedly have been a perfect binding contract; instead of that, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby rejected the offer previously made by the defendant. I think that it was not afterwards competent for him to revive the proposal of the defendant, by tendering an acceptance of it; and that, therefore, there exists no obligation of any sort between the parties.[
REVOCATION - Payne v Cave (1789)an auctioneer's request for bids is not an offer but an invitation to treat. The bidders make the offers which can be accepted by the auctioneer.
REVOCATION - Routledge v Grant (1828)defendant (D) offered to buy plaintiff's (P) house for a specific price with a definite answer to be given within six weeks. General rule --> an offer may be withdrawn any time prior to acceptance but once it has been accepted it becomes irrevocable. Held: D was not bound to keep the offer open for 6 weeks.
REVOCATION - Byrne v Van Tienhoven (1880)an offer is only revoked by direct communication with the offeree, and that the postal rule does not apply in revocation; while simply posting a letter counts as a valid acceptance, it does not count as valid revocation. Revocation of an offer must be received and understood by the offeree before it comes into effect. An acceptance by the offeree before they receive notice of the revocation will be considered valid.
REVOCATION - The Brimnes [1975]communication of withdrawal of an offer by telex is effective when it could be read, rather than when it is in fact read.Brandon J held here that the notice of withdrawal was sent during ordinary business hours, and that he was driven to the conclusion either that the charterers' staff had left the office on April 2 "well before the end of ordinary business hours" or that, if they were indeed there, they "neglected to pay attention to the Telex machine in the way which they claimed it was their ordinary practice to do". The withdrawal Telex must be regarded as having been "received," as required by Empresa Cubana de Fletes v Lagonisi Shipping Co Ltd [1971] 1 QB 488 , at 17.45 hours BST on April 2 and that the withdrawal was effected at that time. I propose to say no more than that I respectfully agree with that conclusion, particularly as the case for the charterers throughout was that Mrs. Sayce, the member of their staff specially charged with attending to Telex messages, did not leave the office until after 18.30 hours and they advanced no reason why a Telex message received on their machine at 17.45 hours should not have been noted by her before she left the office, as she insisted, not less than 45 minutes later.
LAPSE OF TIME - Ramsgate Victoria Hotel v Montefiore (1866)The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract. Held: The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessful.


Question Answer
Williams v Roffey Bros [1990]The defendants were building contractors who entered an agreement with Shepherds Bush Housing Association to refurbish a block of 27 flats. This contract was subject to a liquidated damages clause if they did not complete the contract on time. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was concerned about completing the contract on time. The defendant agreed to pay the claimant an additional £575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional £500. He then ran out of money and refused to continue unless payment was made. The defendant engaged another carpenter to complete the contract and refused to pay the claimant the further sums promised arguing that the claimant had not provided any consideration as he was already under an existing contractual duty to complete the work. Held: Consideration was provided by the claimant conferring a benefit on the defendant by helping them to avoid the penalty clause. Therefore the defendant was liable to make the extra payments promised.
Edmonds v Lawson [2000]Pupil barristers are not included as either "apprentices" (as was held at first instance) or "workers" for the purposes of the Act but do provide adequate consideration and intention to found a contract with their chambers.

When must consideration be given?

Question Answer
RELEVANT TIME Eastwood v Kenyon [1840]Eastwood paid for Kenyon’s education. After Kenyon’s education had ceased, Kenyon promised to pay Eastwood back, but sibsequently failed to do so. Did Eastwood have a valid claim, she had suffered a detriment, so had provided consideration. No claim as PAST CONSIDERATION IS NO CONSIDERATION. As the payments had occurred in the past, the consideration was also in the past
RELEVANT TIME Roscorla v Thomas (1842)An agreement for the purchase of a horse had been completed between buyer and seller. Following the completion of the contract, the seller made a warranty that the horse was "free from vice". Upon delivery, it was discovered by the buyer that the horse was vicious in behaviour. The buyer consequently sued. Past conduct is not sufficient consideration to support a contract.
PAST CONSIDERATION Re McArdle [1951]A wife and her three grown-up children lived together in a house. The wife of one of the children did some decorating and later the children promised to pay her £488 and they signed a document to this effect. It was held that the promise was unenforceable as all the work had been done before the promise was made and was therefore past consideration.