Essay: Contact formation (draft)

Traditionally, a contract is formed after the Offeror (the party making the offer) makes an offer for the Offeree (the party receiving the offer) to accept, unequivocally.
This approach requires two key steps in the process of identification; firstly, the identification of the offeror making the ‘offer’, requiring an understanding of what an ‘offer’ is. This is before questioning whether the offeree accepted that offer, requiring an understanding of what constitutes forms of acceptance. Secondly, questioning whether the correspondence between the two parties is effective and when does it take place? This determination is necessary as, until it has been communicated effectively, the contract cannot take effect. This can be highlighted in the postal rules and the approach the courts take in regards to whether or not an acceptance of an offer has occurred when an immediate understanding of the response cannot occur.
The identification of the ‘offer’ itself in entirely down to the distinction made from an ‘invitation to treat’, as seen in the case of Fisher v Bell. An offer itself, as defined by Lord Denning in the case of Storer v Manchester City Council, is “is formed when there is, to all outward appearances, a contract.” However, in contrast to this decision, in the case of Gibson v Manchester City Council, where the council stated that the “may be willing to buy” the Gibson’s house, the word “may” created ambiguity and made it clear that an offer must be unequivocal and identifiable as offers. The language used in the formation of a contract is clearly a serious aspect to consider. As further seen in the case of Harvey v Facey, where the claimant questioned whether or not the recipient would sell them a pen, the lack of a direct answer to the question was therefore merely responding to a request for information, not an offer.
An Invitation to treat on the other hand is commonly used when describing “any negotiating statement falling short of an offer that furthers the bargaining process” CITATION NEEDED. This is seen in the case of the aforementioned Fisher v Bell, where the defendant displayed a flick knife in his shop window with a price tag. Under section 1 of the Restriction of Offensive Weapons Act 1959, offering for sale this weapon was against the law, however, merely displaying such an item only constituted to an ‘invitation to treat’ as the offer was made by the customer. This also applies to advertisements as seen in the case of Partridge v Crittenden, where Partridge advertised Bramblefinch cocks for sale for 25 Shillings, contrary to the Protection of Birds Act 1954. This, similarly to Fisher v Bell amounted to a ‘invitation to treat’ and not a legitimate offer. Furthermore, it should be mentioned that an exception to this is in Unilateral contracts, where the one party, the promisor, binds itself to perform such a promise where the promisee has given no commitment to perform the condition CITATION NEEDED. The key case here in that of Carlill v Carbolic Smoke Ball Co., where Carbolic Smoke Ball Co. had advertised its smoke ball promising £100 if it did not work to prevent influenza. Carlill caught influenza after using the smoke ball correctly. It was held that the advert was an offer as it requested performance as the acceptance. A more contemporary encounter to the rules of offer and acceptance, on the other hand, can be seen in how we interact with websites when creating contractual agreements, that being through online shopping and purchasing or the advertisements themselves that we see when browsing the internet. It would seem that, practically, websites are the ‘electronic equivalent of displays, advertisements, or catalogues” CITATION NEEDED.
Issues that have arose from the more traditional standards of formation of a contract has led to the Principle of Consideration. Consideration is, as defined by Sir Fredrick Pollock, is “an act or forebearance of one party, or the promise thereof, is the price for which the promise is bought, and the promise thus given for value is enforceable” CITATION NEED. There are three types of consideration: executory, executed and past. Executory consideration is a promise made in return for a counter promise, while Executed consideration is a promise made in return for the performance of some act. The more complicated aspect of consideration, however, is in regards to past consideration which is a promise given after an act has been performed, and is regarded in law as no consideration, and therefore not enforceable. This was seen in in the case of Roscorla v Thomas, where the seller of a horse incorrectly stated that the horse was “sound and free from vice”. It was held that no consideration had occurred as promise came after the agreement. This has been argued as a harsh rule, with exceptions arising in certain cases, such as Pao On V Lau Yiu Long , where, upon appeal, it was held by Lord Scarman that “an act done before the giving of a promise to make a payment…can sometimes be consideration for the promise, the act must have been done at the promisors request; the parties must have understood that the act was to be remunerated by a payment…and the payment must have been legally enforceable had it been promised in advance” CITATION NEED. It should also be notes that consideration does not have to be adequate, merely sufficient to be enforced. A key case that shows this is that of Thomas v Thomas, where Thomas, on his deathbed has requested his wife keep the house after his death. This was not written in the will but his executors granted the promise to his wife on the grounds she pay £1 rent per year. It was held by the court that this was enforceable consideration, the ratio being as this was considered a value that the parties freely set upon entering the bargain.
Moreover, an issue that needs considering is whether pre-existing obligations, be that by law or by contractual duty, be amount to sufficient consideration. In regards to obligations imposed by law, the case of Collins v Godefroy, where the claimant was given a subpoena, the extra offer of 6 guineas was not consideration as by law he was already duty-bound. In regards to contractual duty, on the other hand has been seen to differ depending on the content of the case. In the case of Stilk v Myrick, where on a voyage to the Baltic, two seamen deserted. The master offered to divide the wages of the two deserters amongst the rest in order to sail home, however refused to pay. It was held that payment was not enforceable as the seamen were already under a contractual obligation to do that. In contrast, the case of Hartley v Ponsonby, where, similarly the master of a ship promised to pay the last 5/6 able seamen after 17 members of a crew of 36 deserted. The danger to work on the ship was considered enough to amount to enforceable, sufficient consideration. However, the seminal decision in William v Roffey Brothers created a leading case on this particular topic. The case involves the Roffey Brothers, who were contract to refurbish 27 flats during which they subcontracted work to Williams for £20,000. When Williams ran into financial trouble, Roffey offered more money as they would have been liable for a late completion penalty, however did not pay. The court held that the promise was enforceable as Roffey benefited from the lack of the penalty. This was in clear contrast to the established view that pre-existing contractual obligations is not sufficient consideration.
Another, more contemporary requirement to needed to show the existence of a contractual agreement is that if the intention to create legal relations. In most commercial cases such intention is presumed however, it should be noted that this can be rebutted. Such presumption seen in the case of Edwards v Skyways, where an airline pilot (Edwards) was made redundant by his employer (Skyways). The company promised an “ex gratia” payment equivalent to the claimants pension fund, then went back on this promise. It was held that due to the agreement being made in a business context, the payment was enforceable. In social and domestic cases, alternatively, it is presumed that there is no ICLR, but this presumption can similarly be rebutted. This presumption can be seen in the case of Balfour v Balfour, where a wife sued her husband in regards to the halt in agreed payments after their relationship went sour. It was held that there was likely no intention to create legal relations as they likely did not consider the failure in their relationship when they entered the agreement.