36 terms

Chapter 2 Contract Formation Cases

Shanklin Pier v Detel Products Ltd (1951)
the plaintiffs contracted to have their pier repainted. On the basis of promises as to its quality, the defendants persuaded the pier company to insist that a particular paint produced by Detel be used. The painters used the paint but it proved unsatisfactory. The plaintiffs sued for breach of the original promise as to the suitability of the paint. The defendants countered that the only contract they had entered into was between them and the painters to whom they had sold the paint, and that as the pier company were not a party to that contract they had no right of action against Detel. The pier company was successful. It was held that, in addition to the contract for the sale of paint, there was a second collateral contract between the plaintiffs and the defendants by which the latter guaranteed the suitability of the paint in return for the pier company specifying that the painters used it.
Scammell v Ouston (1941)
Ouston placed an order for a truck on hire purchase terms, but as there were a number of possible hire purchase agreements it was impossible to determine exactly what terms were offered and accepted. The court ruled that no contract had come into existence.
Re Fickus (1900)
A father informed his prospective son-in-law that his daughter would inherit under his will. When the father bequeathed his property to someone else the son-in-law sued for breach of contract. The Court ruled that the father's statement was simply a statement of present intention, which he could alter as he wished in the future. It was not an offer and the father was not bound by it.
Harvey v Facey (1893)
It was held that the defendant's telegram, in which he stated a minimum price he would accept for property,was simply a statement of information, and was not an offer capable of being accepted by the claimant.
Minister for Industry & Commerce v PIM Brothers Limited (1966)
the Defendant company was prosecuted under the Hire-Purchase Act 1946 which provided that it was an offence to offer for sale goods on credit terms without specifically stating the terms of credit. The company had a display of goods in the window of its shop with the price tag attached, which did not state the credit terms. However, the Court held that displays are not offers and should be only treated as invitations to treat - therefore the Company had not violated the terms of the Hire-Purchase Act 1946.
Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953)
the Pharmaceutical Society brought a case against Boots for offering drugs for sale in the absence of a registered pharmacist (under English law drugs may only be sold by a registered pharmacist). Boots is a self-service pharmacy and they argued that the "offer to contract" took place at the cash desk where a registered pharmacist was always on duty. The Court held that the act of appropriating the goods and taking them to the cash desk constituted an offer by the prospective customer, which is accepted by the cashier. Therefore, the "display of drugs on the shelves only constituted an invitation to treat, and did not constitute an offer in itself".
Fisher v Bell (1961)
a shopkeeper was prosecuted for offering offensive weapons for sale, by having flick-knives on display in his window. At hearing the Court ruled that the shopkeeper was not guilty as the display in the shop window was not an offer for sale but only an invitation to treat.
Partridge v Crittenden (1968)
the plaintiff was charged with "offering" a wild bird for sale contrary to Protection of Birds Act 1954, after he had placed an advert relating to the sale of such birds in a magazine. The Court held that he could not be guilty of offering the bird for sale as the advert amounted to no more than an invitation to treat.
Carlill v Carbolic Smoke Ball Co. (1893)
the manufacturers of carbolic smoke balls were so impressed by their product as a method of preventing flu that they took out a full page advertisement in the national daily newspapers stating that "anyone who took their product as prescribed and still contracted the flu would receive £100.00 compensation". In addition, and as an act of good faith, they lodged £1,000.00 to a specific bank account to meet any claims. The Plaintiff, Mrs. Carlill, used the product as prescribed and still contracted the flu. The Defendant refused him payment arguing that the advertisement did not amount to an offer, and was an invitation to treat. The Court disagreed and said that given the nature of the particular advertisement and the fact that the company had made a good faith lodgement of £1,000.00 that all those reading the advertisement would seriously believe it to be an offer. The Court held that in these circumstances the advertisement was an offer.
Boyers & Co. Ltd. V D & R Duke Limited (1905)
Boyers wrote to the Defendants stating "please give us your lowest quotation for 3,000 yards of canvas ... to the enclosed sample, or near, and your shortest time for delivery. Dukes replied stating "we enclose sample ... nearest we have to match yours ... lowest price is 4 5/8d per yard ... delivery of 3,000 yards in 5/6 weeks". Boyers replied by letter stating "Please get made for us 3,000 yards of canvas ... as per your quotation ... at 4 5/8d per yard ... deliver same as quickly as possible". Dukes then stated that they had underestimated the price and would not make it up for what they had said in the quotation. Boyers sued claiming that the quotation by Dukes was an offer, which had been accepted. Dukes counter-argued that the quotation was merely an invitation to treat. The Court held that the quotation was not an offer and that the first offer was made by Boyers which Dukes were entitled to either accept or reject.
Harvey v Facey (1893)
the Court held that the defendant's telegram, in which he stated a minimum price he would accept for property, was simply a statement of information/invitation to treat, and was not an offer capable of being accepted by the plaintiff.
Tully v the Irish Land Commission (1961)
In this case the Court held that this statement is an offer that he will sell to the highest bidder, and if he fails to do so then he will be liable in damages, though only to the highest bidder and not to all those individuals who bid. But, where the auction literature states that the item in sale can be withdrawn from auction at any time, or contains the proviso "subject to reserve" then this type of auction is nothing more than an invitation to treat.
Walker v Glass (1979)
the defendant signed a form offering to sell his farm to the plaintiff and agreed to keep the offer open until the 13th March. Acceptance was to take place by signing the offer document and returning it to the defendant's solicitor, together with a bank draft for £40,000 before the 13th March. On the 2nd March the defendant's Solicitor told the plaintiff that the offer was withdrawn, but nevertheless the plaintiff signed an acceptance and tendered the cheque for £40,000 on the 12th March. The defendant then refused to complete the contract and the plaintiff sued. The Court held that there was no binding contract as the offer was withdrawn before the plaintiff accepted it.
Dickinson v Dodds (1876)
the defendant offered to sell a house to the plaintiff and in a letter stated "This offer will be left open until 9.00a.m. on Friday". On Thursday the plaintiff heard from a third party that the defendant had sold the house to someone else, but despite this he handed in a letter accepting the offer at 7.00a.m. on Friday. The Court held that there was no contract as the offer had been revoked and the revocation had been communicated (by a third party) before the purported acceptance.
Pavey and Matthews Pty. Ltd v Paul (1987)
In this case a licensed builder performed building work following conversations over a six month period that he would perform the work and be paid a reasonable remuneration for the work. The builder performed the work and the other party accepted the work, however there was no written contract between the parties. On completion of the work, the other party disputed the reasonableness of the amount the builder charged for the work. The Court concluded that as the contract was performed his offer of reasonable payment could not be revoked and therefore he was obliged to pay.
Ramsgate Victoria Company v Montefiore (1866)
the defendant, in June 1864, offered by letter to take shares in the plaintiff company. He heard nothing until November, when he was informed that he had been allotted the shares. He refused to purchase shares and he was sued for breach of contract. The Court held that he was entitled to refuse the shares as a reasonable time had elapsed, and therefore the offer would be deemed terminated by a lapse of time.
Loring v the City of Boston (1844)
a reward advertised for the arrest of an arsonist and claimed four years later - was held to have lapsed by the passage of reasonable time.
Bradbury v Morgan (1862)
the defendant said he would guarantee certain debts of a third party. The defendant died and later the creditors required the guarantee to be honoured as the third party had failed to pay the debts. The Court held that the defendant's estate was liable as the offer to honour the debts had not been withdrawn, and this was not a personal contract and therefore it could be performed independent of the defendant.
Swan v Miller (1921)
the defendant's offered to sell property for £4,750.00. The plaintiff replied that they would pay £4,450. This response by the plaintiff was a counter-offer and as such incapable of producing a binding contract.
Hyde v Wrench (1840)
the defendant offered to sell a farm to the plaintiff for £1,000. The plaintiff said that he would give him £950. The defendant refused and the plaintiff then said that he would give him £1,000. When the defendant then refused to sell the plaintiff sought specific performance based on the original asking price. The Court held that the plaintiff's offer to buy at £950 in response to the initial offer to sell at £1,000 amounted to a refusal and counter-offer, and since the defendant did not accept the counter-offer, there was no contract.
Russell & Baird Ltd v Hoban & Co. Ltd (1922)
the plaintiff said that they would provide the required amount of oatmeal to the defendant; the note confirming this stated that if the note was retained for more than 3 days then the plaintiff would take this to be accepted. The Court decided that this note was an offer so that by definition there had to be positive acceptance of that offer before there could be a contract; therefore a contract could not have existed.
Adams v Lindsell (1818)
the plaintiff wrote to the defendant on the 2nd September offering to sell wool at a price and requesting an answer in the course of the post. The letter was wrongly addressed and it only reached the defendant on the 7th September. On that same day the defendant posted a letter of acceptance and it only reached the plaintiff on the 9th September. At this point the plaintiff had sold the wool on the previous day. The Court held that in the circumstances a contract had come into existence on the 7th September when the letter of acceptance was posted.
Sanderson v Cunningham (1919)
the plaintiff, through a Dublin Insurance Broker, sent in a proposal/application form for an insurance policy to a London-based Insurance Company. This constituted an offer made by him to the Insurance Company. The Insurance Company decided to issue him with the insurance policy and posted it to him. The plaintiff read the policy, agreed with the terms contained therein and signed it. The plaintiff later made a claim against the policy - which the Insurance Company refused to pay out. The plaintiff wished to sue the Insurance Company but could only do so in Ireland if the contract was concluded in Ireland. The Court held that the contract was concluded in Ireland as it was posted from Ireland to London.
Household Fire Insurance Ltd. v Grant (1875)
the defendant offered to purchase shares in the plaintiffs company; the plaintiff in turn posted a letter of allotment of shares but this document apparently never arrived. The plaintiff company demanded payment for the shares allotted to the defendant but he claimed that they had not communicated acceptance of his offer to buy shares. The Court held that the defendant was still liable to pay all sums outstanding.
Billings v Arnotts (1945)
illustrates the concept of acceptance by performance. In this case Arnotts posted an advertisement in their premises offering to pay half of any employees wages who joined the British Defence Forces for the duration of the War (WW2). Billings, an employee of Arnotts, enlisted in the Army without communicating the fact of his enlistment to Arnotts. At the end of the War Billings sought payment of this sum from Arnotts and Arnotts refused him arguing an absence of acceptance. The Court rejected this argument stating that Billings accepted the offer when he performed the action requested. Acceptance by performance also occurs where the parties conduct themselves in such a manner as to indicate that they believed that the contract existed.
Thomas & Gander v BPE Solicitors (2010)
the Court held that the postal rule does not apply to acceptance by email.
Foster v Driscoll (1929)
a contract entered into to import whiskey into the US during prohibition, when it was illegal to sell or import intoxicating spirits, was unenforceable due to illegality.
Thomas v Thomas (1842)
the Court upheld a transaction pursuant to which a woman paid £1 per annum in consideration for the right to occupy a house.
Chappell & Co v Nestle Co (1960)
the defendant sold gramophone records to consumers of their chocolate products for a special price, if they sent in three wrappers. A question arose as to whether the chocolate wrappers formed part of the consideration in the contract. The Court concluded that they were part of the consideration even though Nestle only threw them away. The Court also held that the wrappers would have been sufficient consideration even if they had not been accompanied by a payment.
Roscorla v Thomas (1842)
both parties agreed to the sale (and purchase) of a horse for £30. As they were concluding the transaction the Purchaser stated that he "assumed that the animal was sound and free from vice". The Vendor assured him that it was. Subsequent to money changing hands and the horse being handed over to the Purchaser, the horse bit another horse and the Purchaser sued the Vendor. The Purchaser claimed that the horse had been sold upon the representation that it was free from vice, and as the horse was not free from vice then an essential term of the contract had been broken. However, the Courts rejected this argument stating that the transaction could be broken down into two separate contracts: Contract A: The agreement to sell the horse for £30 was a valid contract with consideration, whose terms and conditions had been agreed before the contract was concluded. Contract B: The warranty/assurance that the "animal was free from vice" was an invalid contract because of the absence of consideration, given that the purchase price of £30 could not be consideration as it was past and therefore not legally enforceable. This situation could have been avoided if the Purchaser had either: (1) enquired as to the health of the horse prior to concluding the contract; or (2) if the Purchaser had requested a guarantee of health and paid a nominal amount for it. However, the question of past consideration should involve an examination of the facts of each case - because in some instances if the promise and the consideration are substantially one transaction or at least dependent upon each other, then the promise will probably be enforceable. For example, guarantee cards with electrical items.
Re McArdle (1951)
the plaintiff lived with her husband and mother-in-law in her husband's family home. Under the terms of her father-in-law's will, all of his children were entitled to the house after their mother's death. The plaintiff made various improvements to the house during her mother-in-law's lifetime and the children agreed to repay her for the improvements out of the estate. When the plaintiff's mother-in-law died however, the children refused to fulfil their promise and the plaintiff sued. The Court dismissed her action on the basis that the agreement was not legally binding. On the evidence, the improvements made by the plaintiff had predated the agreement, and accordingly these could not amount to consideration for the agreement.
Eastwood v Kenyon (1840)
the guardian of a young girl took a loan to pay for her education and maintenance. On her marriage her husband agreed to repay the amount of the loan. However, no repayment was ever made and the guardian sued him. The Court ruled that there was no liability on the part of the husband as the consideration was in the past.
Collins v Godfrey (1831)
the plaintiff had been subpoenaed to give evidence on the Ds behalf in Court. The plaintiff claimed that the defendant had promised to pay him a sum of money to compensate him for time lost in attending Court. The Court held however that there was no consideration for this promise. The plaintiff had been under a statutory duty to attend Court and accordingly, his attendance could not amount to consideration.
Stilk v Myrick (1809)
in the course of a return sea voyage from London to the Baltic, two seamen deserted. The defendant, the ship's captain, was unable to find replacements and instead promised the crew that if they crewed the ship home they could divide the deserters' wages amongst themselves. They crewed the ship home and when refused payment they sued for the wages. The Court held that the promise was unenforceable because there was no consideration, since they had already agreed as part of their contract to do all they could under all emergencies of the voyage. The desertions were held to be an emergency so therefore the remaining seamen were obliged to do their utmost to bring the ship back to London without additional pay.
Hartley v Ponsonby (1857)
17 crewmen deserted the ship, this meant that the ship could not sail without the crewmen doing significantly extra work. Therefore, the promise of additional payment by the captain was viewed as valid consideration.
Williams v Roffey Bros (1991)
expanded this category of consideration. In that case the Court of Appeal held that Roffey Bros had enjoyed practical benefits as a result of their promise to increase Williams' previously agreed payment for work under an existing contract, although Williams did no more than they were contractually bound to do. The benefits enjoyed were that the work would be completed on time, they would not have to pay any penalty; and they would not suffer the bother and expense of getting someone else to complete the work. As a result it would now seem that the performance of an existing contractual duty can amount to consideration for a new promise in circumstances where there is no question of fraud or duress, and where practical benefits accrue to the promisor. According to Lord Justice Glidewell the test for understanding whether a contract could be legitimately varied is as follows:A. If A has a contract with B for work B. Before it is done, A has reason to believe B may not be able to complete C. A promises B more to finish on time D. A 'obtains in practice a benefit, or obviates a disbenefit'from giving the promise E. There is no economic duress or fraud...