Chapter 2 Guidance on answering the questions in the book

Agreement

1. Ada makes Bob a written offer to sell her house to Bob for £20,000. Ada in fact intended to sell for £200,000. Bob accepts immediately; can he enforce the agreement? What further facts would you need to know?

This is a question about the application of the objective test.  In particular, when does a reasonable observer have reason to know that the other party has made a mistake such that her offer or acceptance cannot be taken at face value?  You should reason by analogy from Smith v Hughes, Scriven v Hindley, Hartog v Shields.  What standard of behaviour does objectivity require?

Ada may want to:

  1. get out of the alleged contract – how can she do that?  For example,
    • mistake as to terms known to the other party (2.1.3.1) - what further facts are necessary for this?
    • non est factum (6.1.3 Unilateral mistake about the nature of the document: non est factum) - what further facts are necessary for this?
    • one of the vitiating factors, such as unconscionable bargain - what further facts are necessary for this?
  2. change the contract to £200,000- can she plead rectification (see 6.1.2)? What further facts are necessary for this?

2. 'The distinction between an offer and an invitation to treat is based on the intention of the party making the communication.' To what extent is this true?

See 2.2.1 Offers and invitations to treat

First, 'intention' must be qualified by objectivity.  Explain what this means.

Second, the importance of objective intention to be bound by an acceptance (the general test of an offer) can be illustrated by contrasting the outcomes of the Gibson case and the Storer case. 

However, and third, this is further qualified, eg by:

  • Rules of convention in different contexts such as displays, advertisements and auctions.  How can these be justified?
  • Judicial manipulation of the rules to reach results perceived to be fair (eg in Boots, Chapelton and Carlill).  Give examples and explain.

3. How does, and how should, the law deal with problems arising from the 'battle of forms'?

See 2.3.1.3 Battle of forms.

What is the 'battle of forms' problem? 

How does the law currently deal with the problem? 

What are the pros and cons of the current approach?

What alternatives have been, or may be, suggested (eg Lord Denning in Butler or from the European Draft Common Frame of Reference)?  

Which approach do you prefer and why?

4. Should the postal acceptance rule apply to modern methods of communication such as email?

See 2.3.4 Communication of acceptance.

First, describe the law on when the postal acceptance rule applies.  Remember that it does not always apply when the post is used. 

Second, address the normative question, when should the postal acceptance rule apply? 

  • What can be said in support of the rule?  Assess the justifications; are they convincing?
  • What problems attach to the rule?
  • How does the rule apply to new developments in methods of communication such asemail and sms messaging?
  • State your conclusion on the appropriate role of the postal acceptance rule in modern contract law.  What would you advise if asked by the Law Commission?

5. 'The requirement of "intention to create legal relations" is a misnomer.' Discuss.

See 2.7 Intention to create legal relations.

What presumptions operate (in commercial agreements?  In social or domestic agreements?) and how may they be rebutted? 

To what extent is the requirement of “intention to create legal relations” aimed at identifying and giving effect to the parties' intentions, even if objectively ascertained? 

To what extent is it aimed at giving effect to other policies (eg protection of the private sphere from judicial involvement)?  Relate your answers to the quote. 

How does this requirement relate to the test of an offer and an acceptance (both of which require the offeror and the offeree to intend to be legally bound)?

It would also add another dimension to relate the issue to that of the test for enforceability (chapter 3); in particular, the suitability of replacing consideration with a test of intention.

6. 'While the rules on contract formation purport to be an elaboration of the requirements of establishing consensus between the parties, an analysis of the rules themselves and their application suggests that other facts also play a role'. Discuss.

See 2.5 Assessment of the mirror image approach, especially 2.5.2 The policy considerations.

The overarching question is the extent to which the rules of contract formation relate solely to identifying and giving effect to the parties' intention, and the extent to which they give effect to other factors. 

The sub-questions you should address are:

  • What are the rules of contract formation? Go beyond the obvious ones relating to offer and acceptance (eg two-contract analysis, battle of forms, objectivity, certainty, intention).
  • To what extent does each of these rules, as applied, seek to give effect to the parties' actual intention?  To what extent does each relate to other (identify them) policies (eg certainty, fair dealing, protection of weaker parties, avoidance of unfair terms).

7.  Conan offers to sell his computer for £300: 'first come, first served, email me or fax me'. Dan sends the first response by e-mail. Eve faxes her response a few hours later saying 'would you accept £250?' Conan sees the fax first and then reads his e-mails but fails to see Dan's e-mail because of a fault. Conan faxes back to Eve 'Yours for £280 unless I hear otherwise within 24 hours'. Two days later he checks his e-mail to find Dan's message. Advise Conan.

What does Conan want?  Assuming both Dan and Eve allege an enforceable contract, Conan cannot fulfil both and would seek to argue that there was no contract with either Dan or Eve.

Is Conan's first communication an offer or merely an invitation to treat?  Explain your answer.

Re Dan: Conan does not know of Dan's purported acceptance until two days after it is sent.  When does Dan's communication of acceptance take effect?  When it is sent, when Conan actually receives it or some other time?  The answer depends on:

  • the applicability of the postal acceptance rule, on which there are arguments both ways.  What are these arguments? What do you think is the likely outcome?
  • who should bear the risk for the miscommunication which is the fault of neither party.  What can each side argue?

What is your conclusion on whether Conan is liable to Dan?

Re Eve: Whether there is a contract with Eve depends on whether Eve can accept Conan's counter-offer by silence.  What are the arguments for and against acceptance by silence?  Which do you think is the better argument?  What is your conclusion on whether Conan is liable to Eve? What further facts might it be useful to know?

Note that it is possible for Conan to be liable to both Dan and Eve.  Conan cannot specifically perform both but he can certainly be liable in damages.