Formalities of the Contract

“a written or spoken agreement, that is intended to be

enforceable by law”

Oxford Dictionary (2019)

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Formalities of a valid contract:

1. Offer
2. Acceptance
3. Consideration
4. Legal Capacity
5. Intention to Create Legal Relations
 1. Offer
• Defined as a statement of willingness to contract on specified terms made
with the intention that, if accepted, it shall become a binding contract.

The offer maybe:

• Oral,
• Written or,
• Implied by conduct and,
• Be specific between two parties or it may be general to anyone.

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Invitation to Treat???

• What is it?

• How does it differ from an offer?

Carlill v Carbolic Smoke Ball
Company (1893)
• Influenza medicine offered £100.
• Court held that offer had been made to the world.
• Contract made with those whom performed the
condition on the faith of the advertisement.
• Courts evaluate whether a contract has been made by
determining whether one party has made an offer and
another party has accepted.
• Care must be taken when a seller of goods advertises
his goods i.e. he may not be able to enter into a
contract with everyone.
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 Gibson v Manchester City
Council (1979)
• Invitation to treat.
• City Council policy of selling homes.
• Gibson argued that a contract had been formed.
• The wording of the letter from the City Council read:
“MAY be prepared to sell”.
• Court held that no contract was concluded.
• Auctions are similar i.e. the bid is the offer and until
the hammer falls the offer can be withdrawn

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 Pharmaceutical Society of
Great Britain v Boots Cash
Chemists Ltd
• Self service shopping.
• Point in question, at what stage was the sale made?
• Claimant/Plaintiff argued when medicine was placed
in basket
• Defendant argued it was an invitation to treat and at
any time they could accept or reject.

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• The court accepted the defendant’s reasoning stating:
• “the mere fact that a customer picks up a bottle
medicine from the shelves does not amount to an offer
to sell. It is an offer by the customer to buy, and there
is no sale affected until the buyer’s offer is accepted
by the acceptance of price”
• Main principles are:
• Shops are not bound to sell goods at the price
indicated.
• Customers cannot demand to buy particular items
on display

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 Harvey v Facey (1893)

• Claimant/Plaintiff offered to purchase Bumper Hall

Pen for £900.
• Claimant/Plaintiff said if he didn’t hear from the Owner
that he would consider the deals done.
• Court held that silence cannot amount to acceptance.

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2. Acceptance
• Acceptance must be unconditional
• Acceptance “subject to contract”
• Acceptance must be communicated
• Method of acceptance
• Acceptance by post

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Brogden v Metropolitan Rly Co
(1877)
• Brogden supplied the defendant with coal for many
years.
• The eventually decided to formalize the agreement.
• The draft had a space for an Arbitrator which was left
blank however Brogden did not approve the draft and
returned it.
• A dispute arose and Brogden contended that a
contract did not exist.
• The court held that a contract came into existence
when the defendant ordered its first load of coal and
Brogden supplied it
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 Counter-Offers &
Revocation of the Offer
• Acceptance must be unqualified.
• Problems occur when an acceptance imposes new
terms i.e. counter-offer.
• Termination/revocation can be made at any time up
until acceptance.
• Revocation must be communicated to the offeree
unless they are able to accept.

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3. Consideration
• Courts will not enforce a simple contract unless
supported by valuable consideration. - £1
• Currie v Misa (1875) “a valuable consideration may
consist either in some right, interest, profit or benefit
accruing to one party or some forbearance, detriment,
loss or responsibility given suffered or undertaken by
the other”
• Executory – A promises goods and B promises to pay
on delivery
• Executed – A offers to reward anyone who provides
certain information.

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4. Legal Capacity

• Contracts between two contracting parties,

and no other party can acquire rights and/or
obligations under it.

• Doctrine of privity of Contract

• Minors and non compos mentis (not of sound

mind)
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Privity Example
• i.e. A in Contract with B.

• B is to pay A for A to perform something for C. If A fails

to perform then C cannot sue A.

• Liabilities between the parties if A and B are in

Contract. Then C has no liabilities.

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Capacity
• As a general rule, a contract with a person suffering
from mental disability or drunkenness is valid, unless
the person is at the time of the contract, incapable of
understanding the nature of the transaction and the
other party is aware of this; Moulton v Camroux
(1849).
• In such circumstances, the contract is voidable at the
insane or drunken person’s option.

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5. Intention to create legal
relations
• Situations which usually fall outside the above include:
• Domestic agreements (between husband, wife,
partners, and children)
• Commercial agreements i.e outlandish advertisement
or “STC”
• “Consensus ad idem”

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Contents of a Contract
Contents of a Contract
• Expressed terms
• Contractual terms
• Condition
• Warranty

• Implied terms

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What is the purpose of a Terms and
Conditions document?
• To provide full details of what may have been agreed.
• To make the customer aware of all the inflexible
terms under which you will accept business.
• To define the parameters of the contract.
• To define the procedures by which you will accept business.
• To fully protect your business and your rights.
• To limit your liability under the contract.
• To provide any other important provisions such as payment and
cancellation procedures.
Typical Contractual Provisions:
• Definition:
• The product that you are selling must be clearly described within the terms
and conditions document or alternatively by referencing another document.
• Pricing – Fixed Price, Price Increases and Changes.
• It is not always prudent to put the price of products into the terms and
conditions document as often prices can be subject to change which will
result in constant updating of the terms and conditions.
• Payment Provisions:
• A complete terms and conditions document should include fully detailed
payment provisions.
• Insurance Policy:
• This may vary between business to business but it is essential to provide full
details of this in your terms and conditions.
• Termination or Cancellation Provisions:
• Many contracts are terminated instantaneously when for example payment
has been received in cash or where it has been made online by a credit card
but in certain cases where there is an on-going provision of services effective
cancellation or termination provisions will have to be provided for.
• Limitation of Liability:
• All terms and conditions will contain a limitation of the liability in relation to
the fulfilment of the contract and in some cases in relation to defective
products.
• Dispute Resolution
• It is often preferable to fully detail how a dispute between the two parties will
be handled and also in which jurisdiction it will be handled.
Limiting and excluding Terms
• A clause may be inserted into a contract which
purports to exclude (or financially limit) one party’s
liability for breach of contract, misrepresentation or
negligence:

A. Excluding liability for types of damage.

B. Limiting damages for breach of contract (liquated
damages).
C. Exclusion of risks in an insurance contract.
D. Provision of disputes to be submitted to arbitration.

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Interpreting Exclusion Clauses
• Parker v South East Railway Co (1877)
• Railway luggage ticket
• the court held that an individual cannot escape a
contractual term by failing to read the contract but
that a party wanting to rely on an exclusion clause
must take reasonable steps to bring it to the
attention of the customer

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Thornton v Shoe Lane Parking
(1971)
• A clause cannot be incorporated after a contract has
been concluded, without reasonable notice before.
Also, it was held that an automatic ticket machine was
an offer, rather than an invitation to treat.
• Although the case is important for these two
propositions, today any exclusion of negligence
liability for personal injury by businesses is prohibited
by the Unfair Contract Terms Act 1977

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 Olley v Marlborough Court (1949)
• Hotel exclusions clauses

• The case stood for the proposition that a representation made by one party
cannot become a term of a contract if made after the agreement was
made. The representation can only be binding where it was made at the
time the contract was formed.

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The Unfair Contract Terms Act
1977
• Act of Parliament of the United Kingdom which
regulates Contracts by restricting the operation and
legality of some contract terms.
• It extends to nearly all forms of contract and one of its
most important functions is limiting the applicability of
disclaimers of liability.
• The terms extend to both actual contractual terms and
notice that are seen to constitute a contractual
obligation.

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Contra Proferentem

• Contractual interpretation which provides that

an ambiguous term will be construed against
the party that imposed its inclusion in the
contract – or, more accurately, against (the
interests of) the party who imposed it.

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