The Difference between an Offer and an Invitation to Treat in Contract Law - Essay Example

? Law Essay Question Explain the meaning and the difference between an offer and an invitation to treat in contract law Issue The meaning and difference between an offer and an invitation to treat in contract law. Rule A party who makes an offer makes itself legally liable to another party. An objective test is employed by the courts to determine, whether a statement constitutes an offer. This test requires that the conduct of the alleged offeror should be capable to cause reasonable belief that this person is making an offer. In addition, the alleged offeree should believe that the offeror is making a genuine offer. Similarly, an advertisement or brochure does not constitute an offer, but only an attempt to obtain an offer. However, the display of goods in a shop is an invitation to treat. Application In Harvey v Facey [1893] AC 552, it was held that it was insufficient to just provide a statement regarding the price. In this case the plaintiff had asked the defendant, by means of a telegram, whether he would sell the Bumper Hall Pen and to quote the lowest cash price. The reply was to be given by telegram to the plaintiff. To this the defendant replied that the lowest price would be ? 900. In reply the plaintiff conveyed his consent and stated that he would purchase it for that price and asked the defendant to send the title deeds of that piece of land. The court held that there was no contract between these parties, as the mere statement of price did not constitute an offer and was nothing more than the provision of information. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6, the Appellate Court deemed the shop sign to be an invitation to treat. In this case, the issue considered was when a sale was completed in a self service shop. The court held that the sale was completed when the medicine had been selected and taken to the shop assistant, who then accepted it and completed the contract. The display of goods on the shelves of the shop was not an offer but merely an invitation to treat. This was reiterated by the court in Fisher v Bell [1961] 1 QB 394, in which Lord Chief Justice Parker held that the mere display of a knife with a price tag in a shop window did not constitute an offer for sale. In this case, the shop had displayed a prohibited type of knife in a shop window. The legislation in force had prohibited the offer of such items for sale. This was deemed to be an invitation to treat and not an offer by the learned chief justice. Conclusion Offer can become a contract after its acceptance. An Invitation to Treat is not an offer, which can be accepted, and is merely an invitation for offers. Question 2 Explain the standard of care owed by one person to another in the tort of negligence Issue The standard of care owed by one person to another in the tort of negligence. Rule The standard of care owed by one person to another in torts, is based on the notions of reasonableness and foreseeability. Contributory negligence in the context of personal injury and death relates to the failure of a person, usually the plaintiff, to adopt reasonable measure to promote safety, which contributes to the injury suffered by that person. Damages awarded by the Australian courts are reduced to the extent of the contributory negligence of the plaintiff. Application There is a clear distinction between the notions of reasonableness and foreseeability. Thus in Bolton v Stone [1951] AC 850, their Lordships ruled that although it was foreseeable for injury to occur due to being hit by a cricket ball that had been struck over the boundary fence, it was very much unlikely to happen, and that this was sufficient justification for the respondents to ignore the risk. In general, it is unreasonable to undertake a risk that is foreseeable. However, when the chances of the risk taking place are very meagre, a reasonable person will undertake the risk. Another major consideration relates to the seriousness of the injury caused. Thus, in Paris v Stepney Borough Council [1951] AC 367, the House of Lords held that by not providing goggles to an individual, in order to protect his sole eye from flying sparks, the employer had displayed unpardonable negligence. In this specific instance, the one eyed man was injured due to a flying spark and rendered totally blind. As this worker had possessed a solitary eye, it was clearly of much greater significance for the employer to reasonably prevent any danger to that eye. However, when the defendant acts in a particular manner, with the intention of saving a life or coming to the assistance of some person, then it may be unreasonable to infer that the defendant had breached the duty of care. Thus, an ambulance driver who takes a wrong turn while driving in an emergency would not have breached the duty of care. This is termed the utility factor, and explains why certain injuries caused in sports are not actionable. In Mansfield v Weetabix [1998] 1 WLR 1263, the defendant, who way hyperglycaemic, without his knowledge at the time of driving the lorry, crashed his vehicle into a shop front. The court held that the defendant had been reasonably unaware of the fact that he had been driving in a disabled condition. Moreover, the age of the defendant is also significant in such situations. For instance, in Mullin v Richards [1998] 1WLR 1304, two girls had been fighting in jest and the court only expected of them the norm that was applicable to girls of their age. Conclusion Standard of care owed by one person to another in torts of negligence will be assessed by foreseeability and reasonableness. Question 3 Outline the elements of frustration under contract law and provide 2 examples Issue The elements of frustration under contract law. Rule A contract is rescinded on grounds of frustration. Several elements have to be established, if a contract is to be cancelled by a court due to frustration. For instance, a contract is terminated due to frustration, if the nature the contract has changed on account of the unanticipated and that which is beyond the control of the parties to the contract. Moreover, a contract stands cancelled due to frustration that can result from factors that make it impossible to perform the contract. For instance, the subject matter of the contract could have been destroyed or the applicable law could have changed to the extent that the contract cannot be performed. Furthermore, an event on whose occurrence the contract was dependant, might have become impossible. Application In Krell v Henry (1903) 2 KB 740, the defendant entered into a contract with the plaintiff to utilise the latter’s flat located in London, in order to view King Edward VII’s coronation procession. He agreed to pay ? 75 pounds, for using the flat for two days. However, this contract failed to specify the purpose for which the defendant had entered into this agreement with the plaintiff. The King fell ill and the coronation procession was deferred. The chagrined defendant refused to pay the plaintiff. The lower court ruled in favour of the defendant, holding that the coronation procession was an implied contractual condition. The plaintiff appealed against this decision, and the issue considered was under what circumstances a party to a contract would be exempted from fulfilling contractual conditions, in the event of the occurrence of an unforeseen supervening event. The appellate court held that performance would not be required, when a contract was frustrated by an unforeseeable supervening event. Moreover, purpose was to be such that it could have been anticipated by both the parties to the contract at the time of its formation. As such, the intent of a contract can be ascertained from the the surrounding circumstances. Certain contracts are such that the parties will be cognisant of the fact that the contract cannot be completed in the absence of a particular thing’s continued existence. In such cases, the parties must have clearly understood that the basis of the performance of the contract was the continued existence of that thing. If there is no warranty regarding the existence of that thing, then the contract is governed by the implied condition that the performance can be avoided if that particular thing is no longer in existence. In such instances, neither party can be stated to be at fault. Moreover, this principle applies in situations, wherein there has to be continued existence of a condition that is indispensable for the performance of the contract. In the above cited case, the plaintiff was to be provided the use of the flat. Furthermore, there is no necessity to explicitly stipulate such condition; and it is sufficient if, on the basis of extrinsic evidence it can be assumed that the parties had intended this condition to be the basis of the contract. The defendant had charged a much higher rent for the flat for those two days, and in the absence of the coronation there was no purpose to the contract. In Codelfa Construction Proprietry Ltd v State Rail Authority of New South Wales [1982] 149 CLR 337, Codelfa entered into a contract with the other defendant to undertake excavation work for an underground railway. A fixed time period had also been agreed upon, within which the project was to be completed. It had been presumed by these parties that the work could be undertaken in three shifts per day. The local residents procured an injunction against this system of working, and Codelfa claimed the contract price and another amount from the defendant. This was to defray the additional expenditure and to make good the profit lost due to the changed working pattern. The court considered whether there was an implied contractual term, whereby Codelfa was to be indemnified by the defendant, if it was not permitted to work in three shifts. In addition, the court was also required to ascertain whether the contract between these two parties had been frustrated on account of the court injunction. After a careful scrutiny, the court held that no such implied term was inherent in the contract. Consequently, the defendant was not required to extend the time of the contract or indemnify the plaintiff against loss resulting from the injunction. Moreover, as the very nature of the contract had changed drastically, with regard to the performance anticipated by the parties, the contract was deemed to have been frustrated by the court injunction. In Davis Contractors Ltd v Fareham Urban District Council [1956] UKHL 3, construction costs were significantly increased due to shortage of labour. It was contended by the plaintiffs that the contract was frustrated as higher remuneration would be required for completing the contract. In the opinion of the court, this was not justified, as the delay in completing the work, had not effected any basic change. Moreover, the court held that the delay in completing the contract was of a nature that could have been anticipated commercially. Conclusion For establishing frustration, it is essential to deduce from the contract and the surrounding circumstances, whether there it is impossible to perform the contract. Question 4 Outline the defences available in negligence Issue Defences available in negligence. Rule Whenever there is a failure to exercise the standard of care necessary to circumvent harm, which has been stipulated by law, negligence is said to transpire. Such standard of care is described with reference to what a reasonable person would do. Application Contributory negligence can be construed as a situation, wherein the plaintiff had failed to exercise sufficient caution, while attending to his own safety or property, thereby causing in part the damage. A defendant, who attempts to rely on the defence of contributory negligence, has to establish that the plaintiff had failed to take reasonable care, and that this had contributed to the damage undergone. Contributory negligence on being proved, in general,results in the award of damages that have been apportioned. In Butterfield v Forrester (1809) 11 East 60, the rash riding of the plaintiff caused his horse to collide with a pole that had been negligently placed on the road by the defendant. The court held that if the plaintiff had not been rash in his riding, the accident would have been averted. In this manner, contributory negligence was attributed to the plaintiff, and he was unable to recover any amount whatsoever. Deeming this rule to be stringent in the extreme, exceptions to it were developed by the courts. Thus, in Davies v Mann (1842) 10 M&W 546, a donkey had been negligently fastened on the highway. The defendant’s wagon, on account of his negligent driving, collided with this donkey and killed it. The court held the defendant liable, as the death could have been avoided if the defendant had driven with greater caution. Whenever there is concurrent liability and the claim in contract conjoins with an independent claim in tort, then recourse can be had to a defence of contributory negligence. This was held in Barclays Bank plc v Fairclough Building Ltd [1995] 1 All ER 289. The defence of volenti non fit injuria, provides a complete defence with regard to an action for negligence. It is provided to a plaintiff who voluntarily accepts the risk of damage at his own expense. Such voluntary acceptance of risk takes place if the plaintiff had complete knowledge regarding the risk; had an adequate appreciation of the dangers involved; and there had been a voluntary acceptance of the risk by the plaintiff. For instance, in Morris v Murray [1991] 2 WLR 195, the defendant and plaintiff had engaged in a protracted drinking bout, prior to the piloting of a plane by the defendant, in which the plaintiff was a passenger. The defendant crashed the plane causing death to himself and serious injury to the plaintiff. Conclusion The defences available with regard to negligence in torts are; contributory negligence and volenti non-fit Injuria. Question 5 What are the main features of a partnership? Issue The main features of a partnership. Rule A partnership includes the following features. It consists of a valid agreement that could be implied, informal or formal in nature. It relates to every occupation, profession or trade that possesses some degree of continuity. Such business should be carried on in common, and should be aimed at making a profit. The last requirement serves to exclude clubs, societies and other non – profit making organisations from being classified as partnerships. Application In Walker and others v European Electronics Pty Ltd (1990) 23 NSWLR 1, it was held by the court that in a partnership firm, the agreement between the partners served to determine the firm’s normal course of business. As a result, any litigation concerning such firms had to consider the nature and scope of business of these firms. In Walker v Hirsch (1884) 27 Ch D 460, the plaintiff had been working as a clerk in the defendant firm. During the tenure of that employment, Walker had entered into an agreement with the defendant, whereby he was to be paid a fixed salary. Moreover, he was empowered to participate to the extent of an eighth in the profits and losses. Moreover, Walker consented to invest ?1500 in the business, for the duration of the agreement, and was to receive an annual interest of 5%. However, neither the name of the firm changed, nor did his name find a place in the bills and circulars of the firm. In addition, he was not introduced as a partner to customers. As such, he did not sign on behalf of the firm. In the year 1884, the defendant excluded Walker from the office by serving a notice upon him. Walker sought the appointment of a manager and receiver, as he was desirous of winding up the business. In addition, he sought an injunction from the court that would restrain dealings with the assets of the business. The trial court pin pointed the absence of ability on the part of Walker to control the management of the business by the defendant. As such, the court deemed Walker to be a servant and not a partner with equal powers or control. On the basis of these conclusions, the court refused the grant of an injunction. In Re Griffin, Griffin purchased land, with the express intent of construction cottages on it and thereafter selling them. At the time of undertaking this venture, Griffin was not having the required amount of money. In addition, he had entered into contracts for making roads. Griffin did not have money to defray the cost of labour and materials. The court was required to assess whether Griffin had entered into the business as a builder, and after examining the facts concluded that there was no evidence that this was the first among a sequence of transactions. Moreover, in Ballantyne v Raphael (1889) 15 VLR 538, more than 20 individuals had come together with the intention of acquiring a large tract of land. It was the objective of these individuals to demarcate this land into smaller segments and sell them at a profit. As this act was not repetitive, the court held that there was no association, company or partnership involved. Conclusion In itself the co – ownership of property does not give rise to a partnership. Moreover, the mere sharing of gross returns does not create a partnership. Although, the sharing of net profit, prima facie, indicates a partnership, it is inconclusive. A partnership is an agreement for doing common business that is aimed at making profits. Question 6 What damages are available for breach of contract? Issue Damages available for breach of contract. Rule Damages constitute the chief remedy for a breach of contract. It is also possible, under certain conditions, to be granted specific performance or an injunction by the court; however, this is comparatively less frequent. An individual who forms a contract and then fails to fulfil it has to either complete the contract or pay damages to the other party. Application As illustrated by the ruling in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, there are a number of remedies available to the injured party, when the other party breaches the contract. The formation of a contract gives rise to certain promises or obligations. These have to be carried out by the concerned parties, and are termed the primary obligations. In addition, a secondary obligation, namely the requirement to pay damages for breach of primary obligations is also imposed upon each of the parties to the contract. As demonstrated in Foran v Wright (1989) 168 CLR 385, during a claim for damages the plaintiff has to show that the contract had been breached by the defendant. In addition, the plaintiffs have to demonstrate their willingness to fulfil their contractual obligations, prior to the establishment of a right to damages. It is only when the plaintiff undergoes loss on account of breach of contract by the defendant that the plaintiff can claim damages. Thereafter, the sole obligation of the plaintiff is to establish the loss. This was the ruling in Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64. If the plaintiff is unable to prove his loss, this does not bring about the failure of his action. In such cases, the compensatory nature of damages is confirmed, as shown in the ruling in Robinson v Harman (1848) 154 ER 363. From this rule it follows that a plaintiff cannot be provided with a superior position, by the award of damages for breach of contract, to what he would have enjoyed on the performance of the contract. Moreover, as demonstrated in Butler v Fairclough (1917) 23 CLR 28, there can be no award of exemplary or punitive damages as a component of the damages provided for breach of contract. Thus, a one time payment of damages is provided to the plaintiff. This payment encompasses past and future losses. As such, there can be no award of damages that have to be paid on a periodical basis. The justifications provided for this rule are that litigation is finalised with the award of damages. Moreover, it would be inequitable to subject a defendant to a sequence of claims for the same breach of contract. Conclusion In order to succeed in a claim for damages, the injured party has to establish that he has undergone financial loss due to the breach of contract. Bibliography Case Law Ballantyne v Raphael (1889) 15 VLR 538. Barclays Bank plc v Fairclough Building Ltd [1995] 1 All ER 289. Bolton v Stone [1951] AC 850. Butler v Fairclough (1917) 23 CLR 28. Butterfield v Forrester (1809) 11 East 60. Codelfa Construction Proprietry Ltd v State Rail Authority of New South Wales [1982] 149 CLR 337. Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64. Davis Contractors Ltd v Fareham Urban District Council [1956] UKHL 3. Davies v Mann (1842) 10 M&W 546. Fisher v Bell [1961] 1 QB 394. Foran v Wright (1989) 168 CLR 385. Harvey v Facey [1893] AC 552. Krell v Henry (1903) 2 KB 740. Mansfield v Weetabix [1998] 1 WLR 1263. Morris v Murray [1991] 2 WLR 195. Mullin v Richards [1998] 1WLR 1304. Paris v Stepney Borough Council [1951] AC 367. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6. Photo Production Ltd v Securicor Transport Ltd [1980] AC 827. Robinson v Harman (1848) 154 ER 363. Walker and others v European Electronics Pty Ltd (1990) 23 NSWLR 1. Walker v Hirsch (1884) 27 Ch D 460. Read More