CONTRACT LAW IN A NUTSHELL

INTRO
 The course shall focus on;
o The role of contract and contract law
o Theories of the law of contract
o Historical development of the law of contract
o Sources of the law of contract

THE LAW OF CONTRACT AND CONTRACT LAW

 There are several questions that need to be addressed under this head;
o What is a contract?
 This is a legally binding oral or written agreement, undertaking, or
deal that exchanges goods, services, money, property etc.
 This also includes conduct agreements which can be credible as a
contract.
 It is unique in that unless certain exceptions apply, parties are free
to agree to whatever terms they choose, this is known as freedom
to contract.

o What does a contract do?

 It gives rights and obligations that parties are supposed to enforce.
 The parties then are considered to have entered into an agreement
and once those rights and obligations are broken, sanctions are in
order.
 It regulates what parties ought to do when a breakdown of the
terms in the agreement occurs.

o What is its importance?

 A contract also facilitates business transactions by protecting the
interests of the parties in the agreement.
 A contract shows a record of commitment to whatever is agreed to.
 The central role of a contract in our legal and economic systems cannot be
downplayed. Recall the era when there was a fight between capitalism and the
market economy.
 All societies require a vehicle, therefore, through which exchanges can be made.
 Not only do once-off exchanges need a contract, but also long-term exchanges
require contracts.
 There is a matrix of contractual relations against which any particular contract
must be viewed. The contractual tool appears everywhere.
o For example, think of a matrix that materials when a student buys lunch at
the cafeteria.
  The role of the contract as a device is therefore to provide for confident
planning of exchanges
 The role of contract law however is to mold those planned exchanges to the
particular society that the law serves and to devise applicable principles to
regulate the contractual relationship.
 Inevitably, contract law reflects the politico-economic philosophy prevailing in the
country. Contract principles also tend to reflect society’s political context.
 The historical background of Malawi also has a big bearing on where contract
law emanates from as well as the future of the law of contract.
o For example, During Kamuzu’s One Party era, women were not allowed to
enter into contracts and/or perform any economic activities.
 Being a common law jurisdiction, the English contract law is of a major influence
in the country.
See Commercial Contract Law Transatlantic perspectives by Dimatteo, Zhou,
Saintier, Rowley 2013, Chapter 2

THE SIX THEORIES OF A CONTRACT

a. Contract as based upon the promises of the parties which makes it legally
binding.
 One possible definition of a promise is:
o A statement by which one person commits to some future
beneficial performance, or the beneficial withholding of a
performance, in favour of another person (Commercial Contract
Law Transatlantic perspectives)
 Common law systems retain a form of promissory liability ( whether
through the use of the seal or the device of the deed), and the agreements
are often still analyzed as an exchange of promises.
o A contract under this theory thinks of it by saying “I promise to do X
in exchange for your promise to do Y.”
 The restatement (second) of contracts grounds its definition of contract
law in the ideology that a contract is a promise or a set of promises.
Critics of this theory;
o It creates an illegitimate link between the moral worth of promises
and their normative force (Defined as the quality which turns a
standard into a norm and then into a rule): morality is not law, and
vice versa.
 This demands that more explanation must be provided for
why promises ought to be honoured than just our sense that
it is morally right to do so.
  We live in a post-modern age where a shared morality, even
a shared view that promises ought to be honored, is
becoming increasingly a thing of the past.
o Normative power cannot be located within the individual will alone
and cannot be located in a promise which is an act of the will.
o The idea of promise is inherently unilateral, whereas the contract by
contrast is a bilateral agreement.
Responses to the Criticism
o To argue that the form of the promise (a voluntary undertaking by
which the promisor binds him/herself to a beneficial performance in
favour of another) is still a perfectly accurate description of the
elements of a contract albeit that the normative force of such a
contract must be located beyond the mere moral sense or will of
the promisor.
 In other words, we need to get beyond the idea of ‘contract
as promise’ as necessarily implying a promissory theory of
contract which stresses the morally binding nature of
promises.
 A promissory view of a contract might be developed where the contract is
seen as agreed to by parties through the form and means of promising.
o Such parties upon promising subject themselves to obligations
which have their force in the normative power of the legal

Regardless of the three objections posed above, the promissory theory

remains valuable in emphasizing the voluntary acceptance of commitment
which is the essence of contract; as well as

Commercial Contract Law Transatlantic

sovereign.
b. Contract as based upon the agreement of the parties.
 A contract is essentially an agreement between the parties, to do or
abstain from doing something, in which agreement the parties intend to
give rise to obligations on both of them or conceivably on only one of
them.
 An agreement arises through a process of mutual exchange of proposal
called an offer and acceptance, although the change might be referred to
as one of conditional promises.
I. It is however possible to think of agreements as being reached by
other means e.g.,
 Through both parties assenting to a document prepared by a
third party.
 In the Principles of European Contract Law;
I. the requirement for the existence of a contract is that the parties
must reach a sufficient agreement.
 In the DCFR (Draft Common Frame Reference) similarly,
I. A contract is defined as “an agreement which is intended to give
rise to a binding legal relationship or to have some other legal effect
 The utilization of the idea agreement in these influential documents is a
telling sign within current European contract thinking of agreement as the
preferred way of characterizing a contract.
Criticisms of the theory;
I. The theory suggests an internal mental meeting of the minds, an
impractical requirement which has had to be tempered by an
emphasis on objective, external manifestations of agreement.
 This tension extends throughout the whole of contract law,
not just this theory; it paints the rules on the formation of
contract, error, and interpretation etc.
II. The idea of an agreement requires to be supplemented by an
intention to be bound to the agreement – unlike the promise theory
which presupposes in its definition the existence of the intention to
be bound.
 This leads others to conclude that what is crucial is not the
agreement of the parties but any form of conduct (agreement
being one) which demonstrates obligatory intent.
III. The agreement cannot explain the whole content of many
contracts, especially those into which terms are imposed by statute
or the common law.
 Responses to the Criticisms
I. In response to the second criticism, it is possible to define
agreement in such a way that it includes the idea of obligatory
intention or consent within the definition of a contract.
 Stair did so by defining a contract as requiring “the consent
of two or more parties to some things performed by either
party; for it is not a consent in their opinions but their wills, to
force any of them.”
 So, while it is true that a contract must demonstrate an
intention by the parties to be bound, further description can
be added to say that it is an agreement by which parties’
intent to bind themselves.
II. In response to the third criticism; will-based theories, whether
promissory or agreement in nature, need not to explain each term
of the contract. All they must do is:
 Demonstrate that the existence of the contract was the result
of a voluntary exercise, and
 Explain the content of the express terms (clear,
unambiguous and agreed upon terms) of the contract, so far
as these are not struck down or overridden by statute.
III. In many jurisdictions, the idea that an agreement is intended to be
binding on the parties remains the most adopted explanation by
common law.

c. Contract as based upon the reliance of the parties.

 Reliance theories of contract focus on the effect of party conduct and the
equity or fairness of having regard to such actions.
 The reliance theory has proved especially attractive to the common law in
explaining what type of promises, not meeting the requirements of
consideration or proper forms nonetheless give rise to liability.
 The need for such reliance-based explanations of contractual liability is
diminished in systems not requiring mutual consideration for a valid
contract.
o For instance, there is little need for a common law doctrine of
promissory estoppel, if unilateral promises lacking acceptance and
contract variations lacking consideration, can be enforced
 Promissory estoppel is a rule of evidence that prevents the
promisor from denying the truth of a statement that the
promisee had relied on.
 Criticisms of the theory
o Atiyah’s grand benefit and reliance theory simply fails to explain the
nature of such legal systems as they are, and for that reason
cannot be accepted as an adequate general theory of contract.
 At best, reliance can explain some exceptional forms of
liability, as model codes tend to provide, and as the law of
misrepresentation and some aspects of the law of damages
indicate.

d. Contract as based upon the assumption by the parties of legally binding

obligations.
 Re-popularized by Brian Coote, the idea of a contract as a voluntary
assumption by parties of obligations imposed on them by law is not
entirely new.
 As an idea it attempts to blend two elements;
o the voluntary conduct of the parties – that is they must proactively
wish to assume liability; and
o it is the legal sovereign or system which imposes the duties
resulting from the voluntary assumption.
 While avoiding talk of promises or agreements, this theory does not seek
to limit what types of conduct might give rise to such an assumption of
legally binding obligations.
 Parties must move beyond either desiring something and resolving to do
something, to the crucial stage of demonstrating engagement.
 The assumption theory has attractive aspects:
o Recall that will-based theories are best defended when they see
the will merely as the means by which parties may consent
imposition of obligations.
o The assumption theory of contractual liability does not talk very
much about the nature of the duties assumed.
 The idea of assumption of obligation is a broad one as many duties
imposed upon human beings could be described in assumption terms.
e. Contract as based upon the transfer of rights between the parties.
 The transfer theory of contract sees contracts as deriving their force from
the fact that they embody a transfer of rights from A to B.
 Although this fits many contracts, it presupposes that the rights in question
pre-exist the formation of the contract. However, that does not hold.
o For example, if A contacts B to clean his windows, there are no pre-
existing rights being transferred to B.
  The right doesn’t exist until the contract has been concluded;
before that point, merely liberty exists which A has
undertaken to wash the windows thereby binding himself to
the contract.
“The General right to make a contract in relation to business is part of the
 The transfer theory cannot explain the field of contract as a whole,
liberty protected by the 14th Amendment, and this includes the right to
although it is possible to discern rights-transfer language embedded in
purchase and sell labor, except as controlled by the state in the legitimate
other theories of contract.
exercise
f. Contractits
of aspolice
basedpower.”
upon the relationship existing between the parties.
 On this theory, what gives contract its force, and determines its content is
Lochner v New York, 1905
specific cases, is the relationship which exists between parties who
contract.
 The nature of a relationship of exchange is often wider and deeper than
appears merely from the interaction of the parties in a specific instance of
exchange

FREEDOM TO CONTRACT
 The classical view of contract was that the parties are free to enter into an
agreement or bargain as equals and therefore, there should be as little state
regulation or intervention as possible.
 It is not the task of the law to ensure that there is a fair bargain being struck or to
ensure that the parties are meeting as equals.
 This reflected the laissez faire approach which was influential at the time
 Contracts should be made by the parties and not imposed on them by the state

o See Lochner v. New York, 198 U.S. 45 (1905); Supreme Court

Assumptions of Freedom to Contract
 It assumes that there is equality between the parties.
 It assumes the existence of genuine competition.
 It fails to take account of groups vulnerable to exploitation.
 The law of contract must engage in trying to balance the upholding of traditional
market liberalism with the need to protect those who may be exploited.
Freedom to Contract & the 1980’s
 The political emphasis upon freedom of choice, the value of the free market
economy and a less paternalistic role for the state are all associated with the
rest.

Inequality of Bargaining Power

 An important concept in contract law.
 It is this concept that was ignored by the classical theory of Freedom to Contract
 Without genuine economic equality freedom of contract philosophy has been the
emergence of the consumer as a contractual force
 Compare the following… from Malawi
o Consumer Protection Act
o Electronic Transaction Act
o Competition and Fair-Trading Commissions
o Employment Act
 With… from the UK
o Consumer Protection Act
o Unfair Contract Terms Act 1977 (Preventing exclusion clauses)
o Competition and Fair Trade
o Consumer Rights Act 2015

20th Century Approach

 There is an acceptance that the idea of certain contracting parties must be
protected against exploitation and oppression.
 This is seen as legitimate expectations or function of the law
o Welfare or paternalistic function
o Major legislation has gradually helped to prevent exploitation of the tenant
and employees
  It might be questioned why man important principles of the law of contract laid by
the courts under the influence of the classical theory still survive today.
The Key to Understand why they Exist today
 Theory
o Traditional teaching of contract emphasized the importance of common
law and the courts.
o It tends to underemphasize the importance of regulation.
 Practice
o In the courts, judges are more flexible and innovative than they might
appear.
o The Judges have a variety of techniques which they use to avoid arriving
at an unjust result.
o For example, they may imply certain terms into the contract against the
less deserving party.
The Historical Development of Contract – From Lex Mercatoria to Contract.
Historical Law Merchant
 Historical lex Mercatoria was the law merchant of the Middle Ages.
 It is said to have emerged from the customary practices of the traders and
merchants of those days, both in the area of maritime trade and in general
commercial transactions
 The first full-fledged compilation of maritime law principles was the Rhodian Sea
Lex (Lex Rhodia), a body of regulations governing trade and navigation in the
Mediterranean Sea.
o It has shaped maritime law over centuries and its influence is still existent.
 The Lex Rhodia was subsequently adopted by roman jurisprudence and was so
powerful and its impact is so lasting.
 Fleta, a legal treatise published during the reign of King Edward I and in his carta
Mercatoria, a royal charter granted to foreign merchants trading in England. In
the carta, King Edward I ordered his officers to do speedy justice according to the
Law Merchant.
 the underlying motive was to have these cases between merchants decided by
expert assessors or jurors according to the customs of the merchants rather than
accoding to common law
 King Edward I also implemented by tow ordinances a system for he simplified
enforcement od judgments against debtora, due to the frequent difficulties
encountered especially by foreign merchants in obtaining such execution.
Other influences on Lex Mercatoria:
 1. The “nomos Rhodion Nautikos” was a private Byzantine compilation of maritime
customary rules.
2. 1010 the Amalfian Laws.
3. The roles d’Oleron are the oldest and most well-known sea laws in northwestern
Europe
4. The Catalan Book of the Consulate of the Sea which was first printed in 1494 in
Barcelona.
5. The winsbuy Sea Law of the fifteenth century, a compilation of rules and
principles of customary maritime law of different origins. See the case of Luke v
Lyde 1759

SOURCES OF THE LAW OF CONTRACT

 There are four main sources of contract law:
o Constitution
o Legislation/Statute
o Case law
o International sources
 CISG – Convention on Contracts for the International Sale of
Goods (CISG) – An international body of Contract law
 Incoterms – International Commercial Terms
 United Nations Commission on International Trade Law –
plays a key role in developing that framework in pursuit of its
mandate to further the progressive harmonization and
modernization of the law of international trade.
End of Topic 1
TOPIC TWO
FORMATION OF A CONTRACT – the need for an agreement
 There are two different types of contracts:
o Bilateral contracts
 This by far is the most common type of contract.
 Both parties assume an obligation to each other usually by
taking each other a promise to something.
o Unilateral Contracts
 One party makes an offer or proposal in terms which call for
an act to be performed by one or more parties. This does not
involve mutual promises.
 The offer can be open to acceptance by unlimited number of
offerees.
 A unilateral contract is then made when the other party
accepts the offer by performing the act in accordance with
the requirements of the offer.
 For a contract to exist one party ( the offeror) needs to make a clear and
certain offer.
 The other party (the offeree) needs to communicate their acceptance
equally clear and unequivocally.
What constitutes an offer?
 An offer is a promise or undertaking by the offeror to be contractually bound in
the event of an unconditional acceptance being made.
 Upon acceptance the terms of the offer become the terms of the contract made
by that acceptance
 The offer must be clear, complete and final
 Any statement falling short of this is not an offer and cannot result in a contract.

Certainty of the Offer

 An offer must be clear and certain. The issue of certainty and the need for clarity
in making an offer can be illustrated in the following cases:

1. Gibson v Manchester City Council [1979] 1 WLR 294:

 Manchester City Council was being run by the Conservative Party, which was
operating a policy of selling council houses to the occupants. Mr. Gibson applied,
on a form of the council for details of his house price and mortgage terms.
 In February 1971, the Treasurer replied:
 o “The corporation may be prepared to sell the house to at the purchase
price of 2725 less 20% = 2180… this letter should not be regarded as a
firm offer of a mortgage. If you would like to make formal application to
buy your council house, please complete the enclosed application form
and return it to me as soon as possible.”
 In March 1971, Mr. Gibson completed the application form with the exception of
the date in which his lease was to end, and returned it to the council.
o The Labor Party returned to power in Manchester in the May 1971
election, and halted new sales. Mr. Gibson was told that he could not
complete the purchase. He then sued the council, arguing that a binding
contract had already been entered.
 Court of Appeal
o In the COA, Lord Denning MR held that there was a contract, because
one should look at the correspondence.
 The House of Lords
o The House of Lords unanimously upheld the council’s appeal.
o The HOL held that the council’s letter was not an offer but an invitation to
treat.
 The letter only state “the corporation may be prepared to sell the
house to you” and that “if you’d like to make a formal application to
buy your house, please complete the enclosed application form
and return to me…”
 As there was never an offer available to accepted, no contract had
been formed and by extension the council had not been in breach.
 My Lords, I cannot bring myself to accept that a letter which
says that the possible vendor "May be prepared to sell the
house to you" can be regarded as an offer to sell capable of
acceptance so as to constitute a contract. The language
simply does not permit such a construction. Nor can the
statement that the letter should not be regarded as a firm
offer of a mortgage operate to turn into a firm offer to sell
that which quite plainly it was not. – Lord Russell.

2. Storer v Manchester City Council

Facts
 The defendant City Council refused to proceed with the sale of a
council property to the claimant under an arrangement which had
been agreed with its predecessor.
 All of the terms of the contract had been agreed but for the date on
which the lease was to end and the mortgage payments were to
begin, which had been left blank on the form returned to the
defendant by the claimant.
  The claimant alleged that the contract was completely concluded
and sought specific performance of the agreement.

Issue
 The question was whether the contract had been concluded,
despite the fact that the date on which the claimant became a
purchaser rather than a tenant was still to be determined.

Decision/Outcome
 The Court of Appeal held that the contract was complete despite
the absence of this term. In distinguishing between an offer and an
invitation to treat, it is necessary to look not to the subjective
intentions or beliefs of the parties, but rather on what their words
and conduct might reasonably and objectively be understood to
mean. In this case the defendant had made clear by their conduct
and language that they intended to be bound upon the acceptance
of the offer despite the fact that some terms remained to be agreed.
In the words of Lord Denning MR:
o “In contracts, you do not look into the actual intent in a man’s mind.
You look at what he said and did. A contract is formed when there
is, to all outward appearances, a contract” (p. 827).
 an offer is effectively undertaking to be contractually bound by the terms
of the offer in the event of an unconditional acceptance by the offeree.

An invitation to treat;

To perfectly distinguish between an offer and an invitation to treat, consider the following
scenarios.

a. Display of Goods
 An example is the display of goods for sale where price marked goods display in a shop
window are not an offer for sale but an invitation to treat.
 The display of items in a shop is an invitation to treat even if the shop actually expressly
designates that the goods are an offer.
o See the case of Fisher v Bell (1961) 1 QB 349:
 This was a case-stated appeal. Bell displayed in his shop window a flic
knife behind which was a ticket bearing the words “Ejector knife” he was
charged with offering for sale a flick knife contrary to the Restriction of
Offensive Weapons Act 1959
 In the holding, the conviction was overturned because the display of the
flick knife was invitation to treat and not an offer for sale.
 The argument put in this case was that if goods displayed in a shop
window were an offer, the shopkeeper would be compelled to sell those
 goods to any person who accepted his offer. Even the person with who he
had no wish trade.

b. Advertisements
Harris v Nickerson
 An advertisement by an auctioneer that certain goods would be sold at a
specific location on a specific date was held to be an invitation to treat.
 An auctioneer advertised that he would sell certain goods including
furniture, on a specified date and at a specified location.
 Harris attended the sale with the intention of buying some office furniture.
 Nickerson withdrew the office furniture from the sale. Harris claimed
damages for breach of contract, contending that the advertisement was
offer which he had accepted by attending.
 The court held that the advertisement was merely a statement of
intention to hold a sale and as such amounted to an invitation to
treat.

Grainger & Son v Gough

 A orice list was circulated by a wine merchant.

 It was nothing more than a invitation to treat.
 The rationale being that the advertiser may have limited supplies of
the goods in question. If the goods were designated as an offer the
advertiser would potentially be in breach of contract if they had
insufficient supplies
 Lord Herschell contemplated that if the supplier had been a manufacturer,
the decision would have been different.

Exception to the General Rule

Carlill v Carbolic Smokeball Company (1893)

 The carbolic smoke ball Co. made a product called the “smoke ball”
and claimed it would

Invitations to tender

 It is generally accepted that a request for tenders is an invitation to

treat and each tender is an offer.
 The requestor is free to accept or reject any tender.
o See Spencer v Harding (1870) LR 5 CP 561):
  A circular was sent out whereby stock was offered for
sale by tender. The provisions were that it would be
sold in one lot, could be seen up to a certain date and
that all tenders should be submitted by a specified
time. The plaintiff submitted the highest bid but the
defendants did not want to accept.
 The Court held that there was no contract here. The
circular was simply a proclamation of intention and
was thus an invitation to treat. The tenders were offers
which the defendants were free to accept or reject.
 The case of Blackpool & Fylde Aero Club v Blackpool Borough
Council is a exception to the aforementioned general rule.
o The plaintiff club and six other parties were invited by the
council to tender for a concession to operate pleasure flights
from the airport.
o The tenders were to be submitted by 12 noon on a specified
date. The club’s tender was delivered to the designated box
at 11 am…
o There were three reasons for the obligations:
 The tenders had been solicited by the council from
specific parties who were known to the council.
 There was an absolute deadline for submission.
 The council had laid down absolute non-negotiable
conditions for submissions.
o Lord Bingham LJ:
 “There was [a] contractual duty to consider. I think it is
plain that the council’s invitation to tender was to this
limited extent an offer and the club’s submission of a
timely and conforming tender an acceptance.
 The decision in the case demonstrated a deviation from established
principles and leaves open the possibility that, in future, enders may
have to be gauged on an ad hoc basis.
 Against this can be set the view expressed in the case itself that this
was a rare exception to the general rule.
 A displacement of the general principle has been firmly recognized
where the invitation to tender expressly contains an undertaking to
accept the highest or lowest bid.
 o See Harvela Investments Ltd v Royal Trust Co. of Canada
(CI) Ltd [1985] Ch 103:

Auction Sales

 The general position of auction sales was established in the case of Payne v Cave
[1789] 3 Durn & e 148:
o The bidder makes an offer which the auctioneer is then free to accept or
reject. Acceptance of the bidder’s offer will be indicated by the fall of the
auctioneer’s hammer. This is consistent with the rules of revocation of an
offer that the bidder may revoke his offer any time before the hammer
falls.
 This position is also reflected in the Sale of Goods Act Cap 48:01
Laws of Malawi

Communication of the Offer

 An offer may be communicated orally, in writing or an offer may be implied from

conduct. An offer may be partly expressed and partly implied.
 An offer has no validity unless and until it communicated to the offeree so as to
give the offeree the opportunity to accept it or reject it.
o See Taylor v Laird [1856] 25 LJ Ex 329
 An offer may also be communicated to a particular person or a group of persons
or it may be communicated to the whole world.

Termination of an Offer
 An offer can be terminated in three ways:
o Rejection
 A rejection does not take effect until it is actually communicated to
the offeror as only then will the offeror know that they are free from
the offer.
 Take notice of the postal rule.
 An attempt to accept an offer on new terms may be a rejection of
the offer accompanied by a counter offer.
  Where an offeree makes a counter offer, the original offer is
deemed to have been rejected and cannot subsequently be
accepted.
 See Hyde v Wrench [1840] 3 Beav 334:
 Where the counter offer is accepted, its terms and not the terms of
the original offer become the terms of the contract.
 Difficulties occur where an offer is made on the standard
terms of the offeror and the purported acceptance is made
on the standard terms of the offeree.
 If these terms are different in any way the offeree has in fact
made a counter offer.
 In these circumstances it may be difficult to assess when or if any
actual acceptance has been made.
 The process is often referred to as the battle of the forms.
 During such battle of the forms, the last shot wins!
 See Buttler Machine Tool Co v Ex-cell-o Corporation
[1979] 1 WLR 401

o Revocation
 The offeror may withdraw their offer at any time before acceptance.
However, once a valid acceptance has been made, the offeror is
bound by the terms of the offer
 An offer cannot be revoked after acceptance. In other words, no
unilateral withdrawal is possible once the contract is formed.
 Where the offeror gives an undertaking to keep the offer open for a
stipulated period, they are not bound by that undertaking unless
the offeree has given consideration in return for it.
 Where the offeree gives consideration to keep the offer open for a
period, there is a separate binding contract known as an option.
 Consideration refers to the “bargained-for” exchange,
performance, or a promise between parties to a contract.
 It is basically the “price” that each party pays to enter into
the contract.
 It can be anything of value, such as money, property,
services, or a promise to do or refrain from doing something.
 Consideration is in two-fold:
 o Executory consideration – is a promise to do or give
something or refrain from doing something in the
future towards the contract.
o Past consideration – is something that has already
been done or given towards a contract. However past
considerations cannot to the formation of a valid
contract.
 Consideration, to be valid, must be:
o Bargained for
o Sufficient – it must be something that is of real value,
no matter how small it is.
o Legal – the consideration must not be illegal or
against public policy.
o Mutual – it must be exchanged between the parties
to the contract. For example, a contract in which one
party promises to do something but the other party
promises nothing is not enforceable because there is
no mutual consideration.
 Revocation within that period will be in breach.
 Routledge v Grant (1828)
 Dickinson v Dodds (1876)
 Revocation is effective only upon actual notice of it reaching
the offeree. Where the revocation is communicated by post it
takes effect from the moment it is received.
Revocation of Unilateral offers
o Consider the case of Great Northern Railway Company v Witham (1873):
 Brett J said: “I offer you 100 pounds if you will walk to York, I could
revoke my offer at any time before you reach York.”
o Acceptance is perceived as the completed performance of the acts
required by the terms of the unilateral offer.
o It remains possible to revoke the offer at any time before the completion of
the required act.
o Two possible perspectives have been proffered to deal with such an issue
 One exception may occur where the offeree has partly performed
the obligation and is willing and able to complete it.
 In such a case, it would undoubtedly cause hardship to the
offeree to allow the offeror to withdraw the offer
  An alternative view is that the offeror is bound from the time the
offeree has embarked upon his performance of what was required
of him by the offer.
 See Errington v Errington & Woods
o A promise was made by Errington to give his son and
daughter-in-law a house provided they paid off the
building society mortgage loan. The couple made
regular payments to the building society on account of
the mortgage.
o The father died leaving all the property to the widow.
o It was held that the promise led to a unilateral contract
– a promise of the house in return of the act of paying
instalments
o The promise was therefore not able to be revoked
after the couple had started paying the mortgage and
as long as they had continued to do so.
 Also see Daulia v Four Mill Bank Nominees Ltd (178) Ch 231
 In cases like Carlil revocation can be almost impossible but if the
offeror takes reasonable steps to bring it to the attention of all those
who read the offer it may be enough. No authority on this.

o Lapse of an offer
 An offer may lapse and thus become incapable of acceptance due
to:
 Passage of time
o An offer will lapse through the passage of time in the
following circumstances:
 Where acceptance is not made within the
period prescribed by the offeror
 Where no period of time is prescribed and
acceptance is not made within a reasonable
time. What is reasonable will depend on the
circumstances.
 See Ramsgate Victoria Hotel Co. v
Montefiore [1866] LR 1 Ex 109

 Death of a party
o The death of the offeror or offeree may cause the
offer to lapse.
o However, the circumstances in which death will have
the effect are not entirely free from doubt.
o If the offeree knows that the offeror has died then the
offer will lapse. If the offeree is unaware the it possibly
may not.
  See Bradbury v Morgan [1862] 1 H & C 249

 Non-fulfilment of a condition
o Where the offeror makes the offer the subject to the
fulfillment of a condition, failure the condition will
prevent acceptance from taking place.
o Such a condition may be implied from the
circumstances of the case.
o See the case of Financing ltd v Stimson (1962) 1
WLR 1184
 See also the following Malawian Cases for contextualization:
 Chikhwaza vs Chikhwaza & others [1997] 1 MLR 246
 City Motors Ltd v Uniliver S.E.E cc 921 [2005] MWHC 23
 Abeleo v Viola 15 MLR
 See also the following for further reading
 Brogden v Metropolitan Rail Co [1877]
 Rust v Abbey Life Ass Co Ltd [1979] 2 Lloyds Rep 344
 Intense Investments Ltd v Development Ventires Ltd and
another
 For third party acceptance
 See Powell v Lee [1908] 99 LT 284

Exceptions to the Communication Rule:

 There are three exceptions to the communication rule:
o Terms of the offer – unilateral contracts
o Conduct of the offeror
o The postal rule
 The General rule for acceptance by post is that they take effect when they are
posted rather than when they are communicated.
 The main reason for this rule is historical since it dates back to a time when
communication through the post was even slower and less reliable.
 Even now there is some practical purpose for this rule. It is easier to prove that a
letter has been posted rather than it has been received or brought to the attention
of the the offeror.
o See Adams v Lindsell [1818] 1 B & AI

Exceptions to the postal rule:

 Offers requiring communication of acceptance
 Instantaneous communication
o Entores v Miles Far East Corporation [1955] where an acceptance
by this mode is made actual communication is required and the
postal rule does not apply.
 Misdirected acceptance