The Concept of Agreement

An agreement can be defined as aspect that arises when an offer made by one party is accepted by the other, According to the Law an agreement is defined as A meeting of minds with the understanding and acceptance of reciprocal legal rights and duties as to particular actions or obligations, which the parties intend to exchange. Agreements are of different kinds such as; binding agreements – The term binding agreement denotes an agreement that is legally binding and cannot be broken or violated by either party. Breaking a binding agreement is prosecutable in a court of law.

Collective bargaining agreements – collective bargaining agreements are agreements made between the employees to get together in order to request rights from the employer.

Partnership agreements – partnership agreement is a voluntary contract between two or among more than two persons to place their capital, labour, and skills, and corporation in business with the understanding that there will be a sharing of the profits and losses between/among partners.

Employment agreements – An agreement between an employer and employee that specifies the rights and obligations of each party to the agreement

An agreement is formed when the offeree accepts the offer made by the offeror, it is not essential that offeree should accept the exact offer made by the offeror to form an agreement, because agreement could be formed after negotiating and bargaining as well.

Offer + Acceptance = Agreements

Offer

According to the law an offer is defined as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”. In other words offer is a proposal that is made by offeror to offeree to sell or purchase good or service.

B

A

Offeree

Offeror

Law has introduced several rules that needs to be fulfilled for an offer to take place, those are

Meer supply of information cannot be considered as an offer. For example how much is X?

Three ways exist for an offer to be made, which are;

Offer made to an individual

Offer made to group of persons

Offer made to world at large

An offer is not the same as an invitation to treat. Examples of invitation to treat are advertisements in papers, chronicles and magazines. Advertisement with reward is not an invitation to treat but a unilateral offer, in other words offer made to world at large)

According to the case of CARLILL V CARBOLIC SMOKE BALL CO (1893) when the plaintiff (Mrs. Carlill) claimed the reward which was offered by the defendant (Carbolic smoke ball co) for anyone who used its smoke ball which is a medical inhaler and got caught to influenza will be given £100, the defendant however refused to pay the plaintiff and they said that this so called offer was mere marketing path and not intended to have any basis in law of contract, plaintiff argued it was an offer which she has accepted by buying and using the smoke ball in accordance with the instructions. The court held that it was an offer that could be taken seriously and not just an advertising path because it is an offer made to the world at large so anyone hearing the offer could accept the offer so the court ordered company to pay the particular amount that plaintiff deserves.

An offer needs to be communicated to the offeree.

As in the case of TAYOR v LAIRD (1856) Taylor (P) gave up the captaincy of a ship and then worked his passage back to Britain as a crew member. His claim for wages failed due to the fact that the ship owner had received no communication of Taylor’s offer to work in that capacity.

According to the case of HARVEY v FACEY(1893) the plaintiff inquires whether defendant is willing to sell the Bumper Hall pen and the lowest price that he expects for the pen, but in this case the defendant has only replied the second question, so even though if the plaintiff was prepared to buy the products since defendant has not accepted to sell the product the court has decided that an agreement does not exist between both parties due to the fact that there has been no acceptance to the offer made by the offeror.

Cross offers occurs when two parties forward offers to one another at the same time and in the same or substantially the same turns.

According to the case of HYDE v WRENCH (1840) Wrench (D) offered to sell his estate to Hyde for 1200 pounds and Hyde (P) declined. Wrench then made a final offer to sell the farm for 1000 pounds. Hyde in turn offered to purchase the property for 950 pounds and Wrench replied that he would consider the offer and give an answer within approximately two weeks.Wrench ultimately rejected the offer and the plaintiff immediately replied that he accepted Wrench’s earlier offer to sell the real estate for 1000 pounds. Wrench refused and Hyde sued for breach of contract and sought specific performance, contending that Wench’s offer had not been withdrawn prior to acceptance. According to the law A counteroffer negates the original offer so therefore court held that when hyde made a counteroffer the original offer will not be considered as a valid offer.

If an offeror makes an offer to offeree and if offeree tells to wait for a month, offeror can still sell the product to another person unless there is an advance payment.

According to the case of DICKINSON v DODDS (1876) Dodds agreed to sell a specific piece of land for £800 with the offer open until Friday morning. Dickinson decided to accept Dodds offer on Thursday but didn’t communicate his acceptance because he thoutht that the offer is open until Friday. On Thursday afternoon Dickinson got to know that Dodds offered and agreed to sell the property to a third party. Dickinson wrote a note accepting the offer and delivered it to his home, leaving it with his mother-in-law who neglected to give the note to Dodds. On Friday morning before the original deadline to accept the offer, both Dickinson and his agent gave Dodds a written acceptance of the offer. Dodds stated that he had already sold the land to another party the previous day. Dickinson sued Dodds for specific performance. The court held that since Dickinson knew that Dodds’ offer had been implicitly withdrawn when he learned that he had sold the property to someone else, there was no meeting of the minds at the time acceptance was made and therefore a binding contract was not formed.

An offer can be revoked at any time before the offer is accepted. Revocation refers to the withdrawal of an offer.

Revocation of an offer needs to be communicated to the offeree or a reliable third party

According to the case of BYRNE v VAN TIENHOVEN (1880) Defendants mailed offer to sell tin plates to Plaintiffs on October 1. Offer was received by Plaintiffs on October 11 and immediately accepted via telegram on the same day; acceptance was subsequently confirmed by Plaintiffs by letter on October 15. Defendant mailed a revocation of offer on October 8, which was received by Plaintiffs on October 20, after Plaintiffs had already made assurances to sell the tin plates to another party. Plaintiffs brought action against Defendant for breach of contract and failure to deliver. Since no authority was given in fact to the defendants by the plaintiffs to notify of withdrawal of offer by post, the revocation sent by Defendants of 8th October is not to be considered as communicated to Plaintiffs before the date of receipt by Plaintiffs, 20th October. The withdrawal has no effect, and therefore a binding contract was entered into on 11th October when Plaintiffs accepted the offer therefore the court ordered that defendant should sell the tin plates to the plaintiff.

an offer may be rejected by a counter offer.

An offer may be terminated upon the death of the parties the death of the offeror will terminate the offer, however death of the offeree will not terminate the offer if offeree has accepted the offer prior to his death.

Acceptance

Acceptance can be defined as the willingness to enter into agreement or contract by agreeing to the offeror terms, Acceptance is always performed by the offeree. An agreement or a contract cannot be formed without the acceptance.

As similar to offer, acceptance also has several rules laid down by the law, the rules are as follows;

A valid acceptance is an intention to be bound by the terms of the offer, which should;

Be unequivocal and unconditional

Match exactly with the terms of the offer.

If the offeree attempts to change the terms of the offer it is considered as a counter offer and a counter offer cannot symbolize the acceptance because it rejects the original offer which will no longer be open to acceptance.

Similar scenario took place in the case of HYDE V WRENCH (1840) which is mentioned above. Also according to the case of Livingstone v. Evans (1925) where two persons were haggling over the price of property. The offer was for $1,800.The buyer counter-offered “Will give $1,600 cash.”Vendor replied “Cannot reduce price” after which the buyer accepted to buy the property at the original price. The court stated that a counter-offer normally terminates the original offer, which is no longer subject to acceptance. But in this case, the judge thought that the “cannot reduce price” message “was a renewal of the original offer that (the vendor) was standing by it and, therefore, still open” to acceptance.

Acceptance cannot be made unless and until the offeree has received the offer.

The offer must be in the mind of the offeree at the time of accepting the offer.

Acceptance can be made by the offeree or his authorized agent.

Acceptance can be performed in two ways, such as;

Acceptance by post

Acceptance by/through instantaneous modes of communication. For example telephone, Fax, telex, e-mail etc.

Communication of acceptance

Acceptance is not effective until communicated to and received by the offeror. Thus if an acceptance is not received because of interenece on a telephone line, or because the offeree’s words are too indistinct to the heard by the offeror, there is no contract.

Acceptance must be communicated by the offeree or by someone with his authority.

In POWELL v LEE (1908) Plaintiff applied for the post of headmaster of a school. He was called for an interview and the managers ( Defendant being one) passed the resolution appointing him, but they did not make any arrangements for notifying him. However one of the managers, without authority, informed plaintiff that he had been appointed. The managers subsequently re-opened the matter and appointed another candidate. It was held that plaintiff failed in his action for breach of contract since acceptance had not been properly communicated to him.

The offeror may expressly or impliedly prescribe the method of communicating acceptance, although there will be valid acceptance if the offeree adopts and equally expeditious method, unless the offeror has made it clear that no method other than the prescribed method will be adequate.

A condition that silence shall constitute acceptance cannot be imposed by the offeror without the offeree’s consent.

In FELTHOUSE v BINDLEY (1863) plaintiff engaged in negotiation to purchase nephew’s horse. There was some confusion as to the price so plaintiff wrote to his nephew saying; “if I hear no more about him I consider the horse is mine at £30 15s.” the horse was at the time in the possession of defendant, an auctioneer. The nephew, wishin to sell at £30 15s therefore told defendant not to sell the horse, but defendant sold the horse by mistake. Plaintiff therefore sued defendant in conversion . defendant’s defence was that the horse did not belong to plaintiff, since there was no valid contract between plaintiff and his nephew because of the rule of acceptance clearly states that the silence cannot be considered as acceptance, therefore court held that the defendant was innocent.

Acceptance is not effective if communicated in ignorance of the offer. However, if a person knows of the offer, the fact that he has a motive for his acceptance, other than that contemplated by the offeror, does not prevent the formation of a contract.

There is no contract if two offers, identical in terms, cross in the post. For example, A offers to sell his car to B for £500 and B offers to buy A’s car for £500. There is no contract because although there are ‘consenting minds’ there is no acceptance.

Postal rule

Postal rule is where the parties contemplate acceptance by post; acceptance is complete when the letter is posted, even if the letter is lost in the post.

In HOUSEHOLD FIRE INSUARANCE CO v GRANT (1879) defendant applied for shares in the company, A letter of allotment (the acceptance)was posted to him. But It never arrived. The company later went into liquidation and defendant was called upon to pay the amount outstanding on his shares. It was held that he had to do so. There was a contract between the company and himself which was completed when the letter of allotment was posted, regardless of the fact that it was lost in the post.

If the letter is lost or delayed in the post because the offeree has addressed it incorrectly the ‘post rule’ will not apply.

‘Posted’ means put into the control of the post office in the usual manner, and not for example, by handing it to a postman.

The post rule applies to telegrams, but where communication is instantaneous, ie telephone, fax and telex the general rule applies.

The parties may decide to exclude the operation of the post rule by contrary agreement. This may be wise in international sales, where the possibility of delayed communication is much greater. The post rule will also be excluded if it is clearly inconsistent with the nature of the transaction and/or the words used by the parties.

In HOLWLL SECURITIES v HUGHES (1974) defendant granted plaintiff an option to purchase land to be exercised ‘by notice in writing’. A letter exercising the option was lost in the post. It was held that the words ‘notice in writing’ meant that the notice must actually be received by the vendor.

So therefore it can be concluded that in order for an agreement to exist between two parties the offer needs to be clearly understood and accepted by both parties.

Legal presumptions arise in domestic/social contract

Generally social/ domestic contracts are contracts made among the people who already have a relationship with each other for example members of the family, husband and wife and among friends, therefore a legal presumption arises that there is no intention to create legal relations between the parties because in general people who makes a social and domestic contract will not sue each other for not performing their duties so usually these types of contracts are not governed by the contract law. However if the if the parties clearly states that no matter what their relationship is they wish to sue the other party if they do not perform according to the contract, then it becomes a social/ domestic contract that has intention to create legal relationship because the presumption that there is no intention to create legal relation will be rebutted. According to the Law it is always recommended to rebut the legal presumption no matter what kind of relationship is there with the other party.

According to the case of Balfour v Balfour (1919) Mr Balfour’s appeal got approved due to the fact that the contract has been made between the husband (defendant) and wife (plaintiff) so there is no intention to create legal relation in their contract because it is a social/ domestic contract which is not governed by the contract law. Also since it is an oral agreement there was no evidence to support the fact that the legal presumption of no intention to create legal relations is rebutted in their social/ domestic contract.

According to the case of TODD v NICOL [1957] Todd’s (plaintiff) managed to win the case against Nicole (defendant) because in the letter that Nicole sent to Todd’s to invite them to come and stay in Nicole’s place clearly mentioned that the letter intends to create legal relations. So even if Nicole does not like Todd’s to stay in her place after the argument between them, she can’t tell them to leave the house due to the fact that although this contract is categorized under social/ domestic contract since the legal presumption is rebutted it will be governed by the contract law.

Legal presumptions arise in Commercial contract

Commercial contracts are contract between two or more unknown parties with the intention to create legal relations because these types of contracts are made with intention to make profits, these contracts will be govern by contract law. However if both parties agree not to sue eachother if one party violate its obligation so in such situation the presumption that commercial contracts has an intention to create legal relations will be rebutted and it will become a commercial contract where there is no intention to create legal relations.

In JONES v VERNON’S POOL (1938) Jones (plaintiff) claimed that he had sent Vernon Pool (defendant) a football coupon on which the draws he had predicted entitles him to a dividend but Vernon Pool refused to give him dividends saying that they never received his coupons. When court held this case Vernon pool showed the courts what is written in the back of coupons which states that the contract between Vernon Pool and other parties does not intend to create legal relations. Therefore since the court held that the clause in the coupon was sufficient to rebut the presumption it was decided that the contract is not governed by contract law.

Comfort letter

Comfort letter is a letter that is written to the lender encouraging an offer of credit when one perdon has an interest in allowing credit to another person. Depending in its wording comfort letter may amount to;

A binding guarantee of the loan

A legally binding agreement short of a guarantee

No agreement at all

According to the case of KLEINWORT BENSON v MALAYSIA MINING CORPORATION BERHAD (1989) the company refused to guarantee a new loan by a bank to one of its subsidiaries the holding company wrote a letter to the bank stating “ it is our policy to ensure that the business is at all times in a position to meet its liabilities”. The subsidiary company later became insolvent and was unable to repay the bank. It was held that, since the holding company had refused to give a guarantee, the comfort letter did not amount to a contract, but was only a statement of holding company’s policy.

Capacity to contract

A contract to be valid both parties must have legal ability to enter into a contract. The ability to enter into a contract is restricted from the following groups.

Minors

A minor is a person, who has not yet reached his 18th birthday and is thought to be unable to understand the gravity and consequences of the contract they are entering into, therefore according the law governing minors contracts seeks to protect such person by preventing them from entering into dangerous contracts. however there are two exception to this rule as follows;

Contracts which are for necessaries

Contracts which are beneficial to minors

Contracts for necessaries

In this exception minors are allowed to enter into new contracts for necessaries such as food, clothing, and shelter. According to the Sale of Goods Act 1979, it says that a minor must pay a reasonable price for necessaries sold and delivered. This Act also defines necessaries for minors as ‘Goods suitable to the condition in life of such minor and to his actual requirement at the time of sale or delivery’. The burden of proving that the goods are necessaries lies on the seller, the goods should be capable of being necessaries which are items of mere luxury. For example in the case of PETERS v FLEMING (1840) the court held that a luxurious item of utility such as gold watch may be a necessary. This broad definition of necessaries was clearly not adopted for the benefit of the minor, but to give protection to suppliers who gave credit to young men from wealthy families.

Seller must also show that the goods are in fact necessary for the particular minor in question. For example In  NASH v INMAN (1908), an undergraduate at Cambridge, already well-supplied with clothes, bought 11 fancy waistcoats on credit from a Saville Row tailor. It was held that the goods were not necessaries, so the tailor was unable to enforce the contract.

Beneficial contracts

A beneficial contract is contracts which are for the benefit of the minor, a contract for trading or apprenticeship can be regarded as beneficial contract. The minor may bound to the contract even if some of the clauses of the contract do not turn out to be to his advantage.

In CLEMENTS v LAND NEW RAILWAY (1894) a young porter agreed to join an insurance scheme to which his employers contributed, and to give up any claim for personal injury he might have under the employer’s liability act 1880. The scheme covered wide range of injuries than the Act but the scale of compensation was lower. When the minor was injured in such a way that would have entitled him to compensation under the act, insurance scheme was more beneficial to him than the Act.

If the beneficial contract is harsh or oppressive, a minor will not be bound.

In the case of DE FRANCESCO v BARNUM (1890) when a girl was apprenticed for stage dancing by a contract which provided that she could be entirely at the disposal of her master. The contract included that;

She would only be paid if the master actually employed her

She could not marry during the apprenticeship,

Master could end the contract if the girl is found to be unsuitable

She cannot accept any professional engagement without the master’s consent

And when the girl accepted a professional engagement with another person, master could not sue the other person in the tort of inducing a breach of contract as the contract was unreasonably harsh so it was accepted as an invalid contract.

Person of unsound mind

Person of unsound mind is a person who has been diagnosed by a doctor to have a mental disaorder. Person of unsound mind is not fit enough to enter into a contract due to the fact that he is unable to understand the consequences that a contract will be posing on him. Also the other party could take advantage of his disability therefore the law decides that persons of unsound mind do not have the capacity to enter into a contract.

Persons who are intoxicated

A person is intoxicated when he/she is voluntarily or involuntary consumed liquor and as a result is unable to understand what he/she is doing. An intoxicated person can be identified by the power of reasoning, if the power of reasoning is affected by alcohol that would be a situation where a person is intoxicated.

However if a person is temporarily incapable of understanding what he is doing because of mental illness, drunkenness, or drugs the contract will be valid unless he can prove that he did not understand the nature of the contract or the other party knew or ought to have known of this disability

Task two

Representation

A representation is defined as an account or statement of facts, allegations, or arguments. Representations present everything from its past to its current status. In particular, Black’s Law Dictionary defines a representation as “A presentation of fact — either by words or by conduct — made to induce someone to act, especially to enter into a contract.” an example of representation is seller telling the buyer that his car is full option mint condition brand new car. Representations are not part of the contract and if a representation is found out to be false it will not become a breach of contract it will become a misrepresentation.

According to the case of BISSET v WILKINSON [1927] the plaintiff purchased from the defendant two blocks of land for the purpose of sheep farming. During negotiations the defendant said that if the place was worked properly, it would carry 2,000 sheep. The plaintiff bought the place believing that it would carry 2,000 sheep. Both parties were aware that the defendant had not carried on sheep-farming on the land. The plaintiff sued the defenedent for misrepresentation as the land could not carry 2,000 sheep. But the court held that this is not misrepresentation because defendant has made anything more than an expression of his opinion on the subject and not a statement of fact because both parties are aware that owner of the land had not carried sheep farming on the land.

Terms

Terms are a definite part of the contract. Terms are expressed in write or orally at the time of contracting. According to the law a term of a contract is defined as a period of time. Term can be of different types;

Terms

Conditions

Innominate terms

Warranties

Conditions

Condition is defined as a term or requirement stated in a contract, which must be met for the other party to have the duty to fulfil his/her, obligations. Conditions are the most fundamentals of a contract that states what other party must fulfil in order to get into a contract.

Innominate terms

Innominate terms are terms which can be broken with either important or trivial consequences, depending on the nature of the breach. These terms are neither a condition nor a warrantee. If the Innominate terms are serious it is considered as a condition and if it is not serious it is considered as a warrantee.

Warrantee

A written statement of good quality of merchandise, clear title to real estate or that a fact stated in a contract is true. An “express warrantee” is a definite written statement and “implied warrantee” is based on the circumstances surrounding the sale or the creation of the contract. Warrantee is not a major term and it is considered as a secondary term.

Meaningless or uncertain terms

Meaningless term is a term where a term has no bearing on the contract the term may be “severed” for being meaningless.

Uncertain terms are terms where the court cannot determine the meaning of a term or how it may be applied it may be declared “void” for uncertainty.

Identification of representation and terms

To identify whether the statement made was a representation or a term courts use four factors to establish the intention behind the statement. Those four factors are as follows;

Special knowledge or skills

Importance of the truth of the statement

Timing

Reduction of terms to writing

Consequence of the breach of contract, warrantee and Innominate terms

Condition – since condition is considered as most fundamental term in a contract, major breach of condition is going to the root of the matter and as a result of the breach the non breaching party may;

Repudiate the contract (cancelling the contract and suing for damages)

Elect to continue

Sue for damages

According to the case of POUSSARD v SPIERS (1876) Poussard was engaged to appear in an operetta from the start of its London run for three months. The plaintiff fell ill and the producers were forced to engage a substitute. A week later Poussard recovered and offered to take her place, but the defendants refused to take her back. The court held that the defendant’s refusal was justified and that they were not liable in damages. What chiefly influenced the court was that Poussard’s illness was a serious one of uncertain duration and the defendants could not put off the opening night until she recovered. The obligation to perform from the first night was a condition of the contract. Failure to carry out this term entitled the producers to repudiate Poussard’s contract.

Warrantee – breach of a warrantee may not go into the root of the matter because it is considered as a major term in the warrantee. Non breaching party may;

Sue for contractual damages

Not elect to terminate the contact

Bettini v Gye (1876) Bettini, an opera singer, was engaged by Gye to appear in a season of concerts. He undertook to be in London at least six days before the first concert for the purpose of rehearsals. He arrived three days late because of a temporary illness. He gave no advance notice and Gye refused to accept his services. It was held that the plaintiff had been engaged to perform for a 15-week season and the failure to attend rehearsals could only affect a small part of this period. The promise to appear for rehearsals was a less important term of the contract. The defendant could claim compensation for a breach of warranty but he could not repudiate Bettini’s contract.

Innominate term – major breach of the Innominate term may lead to terminate the contract and a minor breach of the Innominate term will result in the payment of compensation.

In L SCHULER AG v WICKMAN MACHINE TOOL SALE (1974) Schuler a machine tool manufacturer entered into a contract with Wickman in which Wickman would have the sole right to distribute one of S’s products in the UK. The contract had a term `it shall be a condition of this agreement that’ W visit six specified dealers one a weekly basis to promote S’s product. On a few occasions W failed to do this. S repudiated the contract, claiming that W had breached a condition. The House of Lords held that stating that something was a condition was evidence that it was, but not irrefutable. In this case, they reasoned that the parties could never have intended a breach of this nature to result in the destruction of the contract when they first entered into it.

Task three

Occupiers’ liability

Occupiers liability can be defined as the duty of care by the owner of the property to all those who visit (with or without permission) his or her premises to ensure that they will be safe within the premises by providing protection from danger or risks. Occupier’s liability was first introduced in 1957 and it covered only liability to visitors, and 1984 occupier’s liability governs liability to non-visitors.

Occupier’s liability to lawful visitors

The duty of occupiers’ of premises towards lawful visitors is governed by the OCCUPIERS’ LIABILITY ACT 1957.

Occupier

According to the law an occupier is a person who has some degree of control over the premises. It is not necessary that he should be the owner of the premises. It is also possible for there to be more than one occupier.

Premises

Premises include land buildings, fixed or movable such as ships in dry dock, vehicles, lifts, aircraft, and even a ladder.

Visitors

Visitors are people lawfully on the premises, such as customers in the shops and factory inspectors. A trespasser can also consider as a lawful visitor for the purposes of the act if the occupier has granted permission him implied permission. This duty is merely an enactment of the comman law duty of act as a reasonable man. The act states that all the circumstances of the case are relevant in determining the duty owed. The occupier therefore;

May expect a person who is doing his job to guard against the ordinary risks of his job.

In ROLES v NATHAN (1963) the plaintiffs, who were chimneysweeps, were employed by defendant to block up holes in the flues of a coke fired heating system. Despite a warning from defendant they attempt to do this while the coke fire was lit, and they were both killed by the carbon