Agreement in the British Contract Law - Article Example

''In the common law...to speak of 'the outcome of consenting minds' or, even more mystically, of consensus ad idem is to mislead by adopting an alienapproach to the problem of agreement. The function of an English Judge is not to seek and satisfy some elusive mental element but to ensure, as far as practical experience permits, that the reasonable expectations of honest men are not disappointed''. Introduction: These statements, which denote how an agreement is to be judged as a contract what are the essential elements to be observed by the judges while deciding existence of contract between the parties. These statements are based on the interpretation of agreements mores specifically the intention of the parties to the agreement by the eminent judges such as Chief Justice Brian in 1478 held 'that the intention of a man cannot be tried, for the Devil himself knows not the intent of a man'1. And nineteenth century judges such as Lord Eldon who in kennedy v Lee said that it was not the task of his 'to see that both parties really meant the same thing, but only that both gave their assent to that proposition which, be it what it may, defacto arises out the terms of their corresondence.2 And Austin said that 'when we speak of the intention of contracting parties, we mean the intention of the promissor or the intention of the promisee' and he also added that 'the sense in which it is to be inferred from the words used or from the transaction or from both that the one party gave and the other received it'3. Before attempting to discuss on the main topic it is important to discuss on the contract and the essential elements of a valid contract. Offer and acceptance, intention and consideration are the basic elements of a valid contract. Offer: Consensus ad idem is the maxim on the offer and acceptance, which means meeting of minds. A contract is made out of an agreement and an agreement is made out of offer and acceptance that means in an agreement one party makes an offer and the other party accepts it. An offer may be an advertisement or a definite offer either to a particular person or to public at large. The law is settled in this respect in Carlill v Carbolic Smoke Ball Co4 in which the company made an offer through an advertisement offering '100 to any person who is affected with influenza after using smoke balls. The plaintiff Carlill has claimed for '100 from the company since she was effected influenza. The company defended that (i) the transaction was only a bet with in the meaning of gaming acts (ii) the advertisement was not intended to create a binding obligation (iii) there was no offer to any particular person (iv) no acceptance is notified by the plaintiff. The court of appeal has rejected the grounds taken by the defendant and allowed in favour of the plaintiff. The court while allowing held that there was an offer to the world at large, an offer can be made to the world at large and it also held that by making an offer to the world a contract is made with a limited parties who perform the conditions. Offer and an invitation to treat: The law of contract makes a distinction between offer and an invitation to treat. An invitation to treat does not make a binding contract. When a person responds to an invitation to treat makes an offer. The courts have made distinction between offer and an invitation to treat in auction sale and advertisements. Harris v Nickerson5 In this case it was held that an advertisement specifying that goods will be sold by auction do not constitute a promise that sale will be held. It is settled law that an advertisement without further qualification is not an offer to sell the goods but it is only an invitation to treat. An advertisement becomes an offer if it added by the words " without reserve". Gibson v Manchester City of Council6 In this case the distinction between the offer and invitation to treat was clearly illustrated. In this case the Treasurer sent a letter to Gibson saying the council might be prepared to sell the house to him at a price of '2,180(freehold) based on this letter Gibson has submitted his application. Gibson claimed that interpreting the letter as an offer entered a contract and his application is an Acceptance. The house of Lords held that the letter of the Treasure is only an invitation to treat but not an offer and the application submitted by him is an offer, it is left to the defendant whether to accept of not, therefore there is no binding contract exists. Acceptance: When one person makes an offer and such offer is accepted then becomes an agreement. Acceptance is an essential element like an offer to form a contract. Acceptance may be in the form of words or documents or may be inferred from the conduct of the party. This is illustrated in Brogden v Metropolitan Rly Co7. In this case the defendant Brogden supplied coal to the plaintiff Metropolitan Rly Co without formal agreement, one part of the agreement that is an offer was signed and the acceptance was not completed. The defendant took the shelter under non-existence of formal agreement between the plaintiff and the defendant. The House of Lords held that the contract has come into existence by virtue of conduct of the defendant. Cheshire, Fifoot & Furmston, (Law of Contract 1996) Counteroffer: The law of contract says acceptance must not contain any conditions and it should be in accordance with terms and conditions proposed in the offer. When an acceptance is followed by any conditions other than those proposed in the offer it becomes a counteroffer. In Hyde v Wench8 the defendant has given an offer to sell an estate for '1000, the plaintiff made an offer for '950, which was refused by the defendant. It was held that no contract exists since the Acceptance was conditional and became a counter offer. Intention: The judges give a critical view on the intention of the parties. Intention of the parties is important in a contract. While making an offer and acceptance it is important to find out what is intention of the parties whether there is an intention to make a legal contract. It is the criterion approach of the common law of contract that requires offer and Acceptance to form a valid contract. Contract is an agreement between two parties after a bargain. On promises to give something in return of other as consideration and the other accepting it. In every contract there are essential elements such (i) Offer (ii) Acceptance (iii) Intention to contract (iv) Consideration etc. out of these essential features of the contract the what is important for the judges in adjudicating the litigation on contract is the existence of offer and acceptance. Though consideration is necessary for a valid contract sufficient consideration is not required and the judges do not look into the sufficiency of the consideration. What is more important for the judges to see is whether both the parties to the contract are clear in their mind about the offer and acceptance they are making in the process of the an agreement to enter into a contract. It is important that both the parties mean same thing about the proposals, which is to say there, must of consensus ad idem, which means meeting of mind. Both the minds should meet then only it is an agreement for a valid contract. Judges while interpreting the consensus ad idem they do not mean as technical they mean it a logical and reasonable. If both the parties think the same but there is no intention to create any contract then it is no use of consideration. There fore this the law requires the judges to be objective rather than a subjective. The common law of Contract is more objective than subjective. Hillas & Co v Arcos Ltd9 The House of Lords in this case held that language used and interpreted in the course of dealing between the parties is the sufficient proof of intention of the party to make a contract. Scammell v Ouston10 The House of Lords in this case held that there is no contract on two grounds. (i) that the language used in the correspondence was obscure and incapable of any definite or precise meaning (ii) that the parties neither in appearance nor in intention reached an agreement. The judges while dealing with the litigations on existence of an offer they may have an objective meaning to offer rather than a mystical. When the intention is judged by the words and other conduct of the person is known as objective test. Subjected test is done by ascertaining a person's real state of mind. Subjective test concentrates on the state of mind of a person where as objective test concentrates on the intention of a person. By applying subjective test Judges may seek and satisfy some elusive mental element but to ensure, that the reasonable expectations of honest men are not disappointed the judges apply objective test. Tamplin v James11 In this case the court held that the parties couldn't take the plea that they mean something than that of the court means and cannot avoid the performance of the contract. Here what the court would like to say is that the parties should have reasonable understanding of the terms and conditions of the agreement the court allows provided that there is substantial ambiguity in the agreement on the face of it and on the reading of ordinary prudent person. The judges said in this case that if a person would not take reasonable care to ascertain what he is contracting he is taking risk and he would face. And he is also prevented from denying what he accepted under the pretext that he do not mean it while making agreement. The principle of 'estoppel applies. Cundy v Lindsay12 In the case the plaintiff believing that rogue' claim as a reputable firm supplied goods to him, rogue in tern rogue had disposed of the goods to the defendant. But the rogue has not paid to the plaintiff the price. The question arises before the court was who could claim ownership of the goods' It was held that the plaintiff had no knowledge of rogue he believed him as a reputed firm and his intention to deal with the a reputed firm but not with rogue therefore there is no consensus ad idem, hence there no contract there by the property in the goods remains with the plaintiff. Here in this case also the judges applied the objective test and gave the judgment on examination of the intention rather than mere mechanical meeting of minds, and also applied the maxim of 'consensus as idem' in a reasonable manner to protect the honest man without disappointing. Bell v Lever Bros13 [1932] In this case the court held that where the parties to the contract are honest and comply essential of the contract and are clear in their mind what they are intends then they are bound to follow and perform the contract the court do not interpret anything extra and the court need not investigate deep in the facts. And the parties at default are estopped from expressing their ignorance. Offer - Intention: Offer and intention are inter related terms in an agreement intention of the party is important to make the offer a valid it is to seen whether there is an intention to create legal relations between the parties to the agreement. Offer imposes responsibility on the person making such offer. To decide the statement whether it is offer or not the court prefers an objective test. The objective test shall disclose that (i) the offeror's conduct must be that which is to be believed by a reasonable person that he is making the offer. (ii) the offeree must believe that the offer made by the offeror is a genuine offer. Harvey v Facey14 (1893) Privy Council in this case the communication between the parties was on telegraphy which stated a mere statements which do not satisfy the objective test as the courts apply while deciding the intention of the parties and the offer. The plaintiff enquired the defendant about his willingness to sell the goods in reply to his enquiries the defendant sent a mere statement of price, then the plaintiff accepted to purchase the goods for the price stated. It was held that there was no contract and statement of price does not constitute the contract it was mere information. Pharmaceutical Society v Boots Chemists15 (1953) In this case the plaintiff contended that the shop keeper has made an offer by displaying the books in the shelves and he accepted by selecting and bringing to the cash counter and there by there is a contract and the book seller is bound to sell the books without refusing. The court held that displaying of the books in the shelves does not constitute an offer but it is solicitation to offer or an invitation to treat. The court has given a reasoning that the suppose if it is treated as an offer as contended by the plaintiff the buyer will not have a right to replace back in the shelf if he notices another book better than it. The buyer once picks up the book will have no choice but to purchase the same. The judges have interpreted the law so reasonably and to do justice to both the parties to the agreement rather than stringently applying the principle of the contract. The law has established that display of goods does not constitute an offer and it is an invitation to treat. It was similarly decided in Fisher v Bell16 (1961) Foot Notes: 1. Cheshire, Fifoot & Furmston, 'Law of Contract', p.29 2. Cheshire, Fifoot & Furmston, 'Law of Contract', p.30 3. Cheshire, Fifoot & Furmston, 'Law of Contract', p.30 4. Carlill v Carbolic Smoke Ball Co(1892) 2 QB 484; affe (1893) 1 QB 256 5. Harris v Nickerson (1873) LR 8 QB 286 6. Gibson v Manchester City of Council (1979)1 All ER 972, (1979) 1 WLR 294 7. Brogden v Metropolitan Rly Co (1877) 2 App Cas 666 8. Hyde v Wench (1840)3 Beav 334 9. Hillas & Co v Arcos Ltd (1932) 38 Com Cas 23 10. Scammell v Ouston (1941)AC 251, (1941) All ER 14 11. Tamplin v James (1880) 15 Ch D 215 12. Cundy v Lindsay (1878) 3 App Cas 459 13. Bell v Lever Bros [1932] AC 161 14. Harvey v Facey(1893) AC 552 15. Pharmaceutical Society v Boots Chemists (1953) 1 QB 401 16. Fisher v Bell16 (1961) 1 QB394 ( Cheshire, Fifoot & Furmston, 'Law of Contract') Bibliography 1.Cheshire, Fifoot & Furmston's, Law of Contract (13th Ed.) 2. J.C.Smith, The Law of Contract (2nd Ed.) 3. netk.net.au/ContractLaw/02Formation.asp - 44k Read More