Agreement Consideration and Intention to Create Relations

5266 words (21 pages) Essay in Contract Law

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Last modified: 02/02/18 Author: Law student

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The relevant area of law here is contract law. In order to advise Lisa it needs to be established that there is a contract between herself and Harold. For there to be a contract the following elements need to be present: 1. agreement (offer and acceptance), 2. consideration and 3. intention to create legal relations. In addition, there should not be any vitiating factors such as duress, undue influence, mistake and illegality. This coursework will now discuss the key elements with only anecdotal references to the vitiating factors.

A. Agreement

in order for there to be a contract there has to be first and foremost a legally binding agreement between the parties. This agreement takes the form of offer an acceptance where one party makes an offer (offeror) and the other accepts the said offer (offeree).

Offer: Professor Treitel defined offer as ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed’ [1] . The word ‘intention’ used in the definition does not refer to the actual intention by the offeror as the court takes an objective approach to intention. In Smith v Hughes (1871) LR6 QB 597, Blackburn J said, “If a man’s intentions may be, he so conducts himself that a reasonable man would believe he was assenting to the terms proposed, by the other party, and that other party upon that believe enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms” [2] . From this definition it is possible that a party would be deemed to have made an offer when they have not.

Offer needs to be differentiated from Invitation to Treat which is an invitation to interested parties to make offers as was the case in Fisher v Bell [1967] 1 QB 394. [3]

Communication of offer: In order for an offer to be valid it must be communicated to the offeree by the offeror Taylor v Laird (1856) 25 LJ Ex 329. This means that a party cannot be bound by an offer if they were unaware of it.

In the scenario we are told that ‘Harold offers to sell 100 womens’ dresses to Lisa for 」35,000. He makes this offer to Lisa in a telephone conversation on 2nd April’. Will a reasonable person concludes that Harold intended this to binding once accepted by Lisa? The answer is in the affirmative. There is no issue with communication as, again, according to the scenario, ‘Harold makes this offer to Lisa in a telephone conversation’. It appears as if the issue of offer and the condition of communication are satisfied.

Before ending the discussion of offer the issue of revocation needs to be discussed. The general rule is an offer can be revoked at any time prior to acceptance (italics mine) Routledge v Grant (1828) 4 Bing 653. [4] This means if A promises to sell his car to B for Y amount, he (A) has the right to withdraw his offer before (B) accepts it.

A vitally importnt condition of revocation is that it must be communicated to the offeree Bryne v Van Tienhoven (1880 5 CPD 344. [5] By implication if A above fails to communicate his revocation to B then B can still accept.

The question is did Harold communicate his revocation to Lisa? There is no evidence of this in the scenario. However, it is important to note that ‘Harold advises that he will hold the offer open for 7 day. On the authority of Routledge v Grant he can withdraw before the expiration of this period. But this will be subject to rule of communication.

2. Acceptance. Professor Treitel defines accepatnce as ‘a final and unqualified expression of assent to the terms of an offer’ (The Law of Contract, 12edn, p18). [6] This definition decrees that the acceptance must be a mirror image of the thing that is offered. If the offeree makes a significant addition or subtraction such as alternative price this will be deemed as a new term and therefore a counter offer Hyde v Wrench (1840) 3 Beav 334. [7] In this case the position of the parties changes and the original offeror has to accept the new terms for there to be a contract.

Communication of acceptance. Acceptance must be communicated to the offeror for it to be valid, Lord Denning Entores v Miles Far East Corporation [1955] 2 QB 327 CA. This is crucial because an offeror may be exposed to possible litigation and potential damages if, for example, they sold goods to someone else when an offer has been accepted by another party for the same goods.

Method of acceptance: There are different methods of acceptance such as verbal, telephone, email, by post and many more. More often than not the offeror will stipulate their choice of method of acceptance. In the absence of that the general rules will apply. The discussion of method of acceptance will be in this coursework will be limited to the postal rule.

The postal rule: It needs to be stated from the outset that the postal rule is an exception to the general rule that acceptance must come to the attention of the offeror for it to be considered valid. It is also worth noting that the postal rule applies only to acceptance. In Adams v Lindsell (1818) 1 B & A 681 the court held that the acceptance was made at the time the letter containing the offer was posted. [8] There are certain conditions that relate to this rule:

it must have been requested by the offeror or acceptance by post must be a normal, reasonable or anticipated means of acceptance Henthorn v Fraser (1892)

The letter of acceptance must be properly stamped and addressed (Re London & Northern Bank, exparte Jones (1990)

The letter must be posted (Brinkibon v Stahag Stahl (1983)

The postal rule must not have been expressly excluded in the offer (Holwell Securities v Hughes (1974)

Use of postal rule must not create manifest inconvenience or absurdity (Holwell Securities v Hughes (1974)

Applying these rules to the given scenario, it seems that rules 1 and 4 are relevant. In relation to rule 1, can it be said that acceptance by post is a normal, reasonable or anticipated form of acceptance? From the facts it can be said at least that acceptance by post is reasonable. It should be noted that ‘Harold advises that he will hold the offer open for 7 seven days’. This cannot be said to have impliedly excluded the postal rule. He did not use words like: I need to know whether or not you accept by the end of the week. Or telephone me by the end of the week if you wish to accept.

It is not clear whether the letter was properly addressed and stamped. However, it is said that Royal Mil lost a mail sack containing the law. This is evidence that the letter was posted and it can reasonably be assumed that it was properly stamped and addressed.

According to the facts the letter was never delivered. This is not a problem for Lisa because acceptance is still valid even if the letter containing it is lost Household Fire Insurance Co v Grant (1879) 4 Ex D 216 CA.

Intention to create legal relations: If the agreement is not domestic it will be regarded as commercial. In a commercial relationship, the presumption is that there is intention to create legal relations except there are expressed words to the contrary Edwards v Skyways [1964] 1 WLR 349. On the facts there is nothing to suggest that the relationship between Lisa and Harold is domestic.

Consideration: This is actually indisputable on the facts, but it is worth mentioning. In Dunlop v Selfridge [1915] AC 847 the court set out the following definition: ‘An act of forbearance or the promise thereof is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. On the facts Harold offered to sell 100 women’s dresses to Lisa for ?35,000.

Remedies: If the postal rule applies, tnis means Harold is in breach. Therefore, Lisa would be due damages as a matter of right. The normal aim of the court in assessing damages was stated in the judgment of Parke B in Robinson v Harman (1848) 1 Ex 850: ‘the rule at common law is that where a party sustains loss by reason of a breach of contract, he is so far as money can do, to be placed in the same situation with respect to damages as if the contract had been performed’ [9] This is referred to as expectation loss basis.

Applying this law to the facts Lisa can buy the same dresses at the going market price. If this they cost more than ?35,000, Harold has to pay the difference. Harold will also have to pay Lisa’s legal cost, if any.

Conclusion: As discussed above, if the strict rule of acceptance in terms of communication applies, then there is no contract and that ends the story. However, if the postal rule applies, which is very likely, then Harold is in breach of contract and is liable for any additional cost Lisa may incur in getting the same addresses with legal cost.


Generally an agreement does not have to be in writing for it to be enforceable. However, there are some agreements that need to be in writing because as a matter of law they need to be signed. The following paragraphs attempt to analyze these situations.

In many cases it is enough for the person to whom the offer is made to simply say ‘yes, I agree. Support for this statement can be gleaned from the following statement by Blackburn J in Smith v Huges (1871) LR6 QB 597: If, whatever a man’s real intentions may be, he so conducts himself that a reasonable man would believe he is assenting to the terms proposed by the other party, and that other party upon that believe enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to the other party’s terms” [10] This statement does not mention the need for terms be to be in writing. It can be discerned from the learned judge’s statement that it is enough for one party to make a promise and for the other to act on that promise.

Another case supporting the view that some agreements do not have to be in writing for them to be enforceable is Entores v Miles Far East Corporation (1955) where Lord Denning said the following in explaining the principle of communication of acceptance: Let me first consider a case where two people make a contract by word of mouth in the presence of one another. Suppose, for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply….There is no contract…He must shout back his acceptance. Not until I have his answer I am bound [11] This statement , though not a ration, supports that the fact that an agreement does not have to be in writing.

Another example in support of the fact that an agreement does not have to be in writing is the case of unilateral contract where an offer is sometimes made to the whole world and acceptance which completes agreement is by conduct. An example of this is Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 CA. here there was no agreement in writing between Mrs Carlill and Carbolic Smoke Ball Co stating that if Mrs Carlill catches influenza after using the smoke ball she would be given ?100. All Mrs Carlill did was to use the smoke ball as directed. She did and she catches influenza. The court enforced the contract that was completed by Mrs Carlill taking the smoke ball.

Another example is auction. It should be noted that an auction is a request for bids and that an advertisement that an auction will be held amount only to an invitation to treat Harris v Nickerson 1073 LR8 QB 286. [12] Therefore, a bid is an offer and acceptance occurs with the fall of the auctioneer’s hammer (SGA 1979, s. 57(2). if the auction is without reserve this constitutes an offer and the auctioneer is obliged to sell to the highest bidder. The thing to note here is in an auction there is no written contract. The auctioneer simply invites bids orally and sometimes bidders make bids by show of hands.

Also, in our daily activities we enter in so many agreements that are not in writing such as buying goods, eating in a restaurant, taking a bus or a train, taking a car for repairs and many more. For example, in Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 CA [13] , the court held that contract was formed at the counter when the shopper paid for the goods at the till. The thing to note here is that there was no written agreement safe for a receipt.

However, there are some agreements that have to be in writing. A good example is a deed. Law of Property (Miscellaneous) Provisions Act 1989 s. 1 (3) states that 殿n instrument is validly executed as a deed by an individual, and only if, (a) it is signed – (I ) by him in the presence of a witness who attests the signature; or (ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and b(b) it is delivered as a deed by him or a person authorised to do so on his behalf. [14] This provision is self-explanatory. By providing that the deed be signed presupposes that it should be written because only a written agreement is capable of being signed.

Another example is contract for the sale of land. Law of Property (Miscellaneous) Provisions Act 1989 s. 2 (I) states: A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document, or where contracts are exchanged, in each. [15] Again this is self-explanatory. The use of the phrase ‘only in writing’ is instructive. It renders all agreements, that do not conform to this condition, unenforceable.


The above discussion has shows that in principle it is possible for a multi-million pounds agreement not to be written but still enforceable in court. All the courts will try to identify is a valid agreement (offer and acceptance). Providing all other elements are present the agreement is enforceable. However, there are a few agreements that must be in writin

g otherwise they are void. Also, for practical purposes such as issues to do with the actual terms of the agreements, it is vitally important that agreements are put in writing.


There are a number of similarities and differences between the general tortuous liability and contractual liability. This piece of academic exercise will describe the general tortuous liability and examine the similarities and differences between it and contractual liabilities.

The law of tort is the body of civil law which governs what happens when one person sues another person because of what that other person has done. It is based on an wrongdoing and therefore largely fault-based. In other words one can commit a tort and go Scot-free either because he owes the victim no duty or he has a valid defence.

There are different types of torts such as trespass, assault, nuisance, defamation, economic loss, psychiatric harm, negligence and special liability regimes such as Employer’s Liability, Occupier’s Liability and Liability for Defective Products. There are some general principles which apply to all torts, but each also has its own set of rules which must be satisfied for any claim to succeed.

a. Differences between tort liability and contractual liability.

Firstly, in contract, the parties’ obligations are fixed by the terms of the contract. In some cases though, terms may be implied into the contract by law as provided for in s. 2 of the Sales of Goods Act 1979 [16] and Supply of Goods and Services Act 198 [17] Some of these provisions the parties can agree to limit but for some they cannot limit..

in tort, on the other hand, liability does not depend on any consenus between the parties; it is determined by rules, largely judge-made, which dictates whether the defendant’s wrongdoing constitutes a tort. However, a defendant can exclude liability by availing himself of the defence of volenti Non Fit Injuria – Woodley Metropolitan District Railway Co (1877) 2 Ex D 384 [18]

in contract, there has to be a contractual relationship between a claimant and a defendant before a claim for breach of contract can arise. This draws on the principles of privity of contract which stipulates that only parties to a contract can sue. However, with the passing of the Law of Contract (Miscellaneous) Provisions Act 1999, third parties can sue as long as certain requirements are met.

In tort however, the potential scope of liability is much wider. As obligations in law are imposed by law, they are owed to the world as a whole and are not dependent on the parties. For example, in the landmark case of Donoghue v Stevenson [1932] AC 562, the judge said the following…. [19]

In contract, the general rule is that liability is strict. This means contractual obligation must be completely and precisely performed. For example, if a seller fails to deliver the goods to the buyer on the contractual date set for delivery to occur, it will not be for the seller to argue his failure to deliver was due to a disappointment by his suppliers. [20] If a matter is brought for breach all the complainant needs to prove is that the defendant failed to perform their part of the contract.

Jill Poole, (Contract Law) states: The obligations as to description, fitness for purpose, satisfactory quality, and correspondence with sample in a sales of goods contract (SGA 1979, ss. 13-15) are strict contractual obligations [21] This simply means that any failure of performance to comply with the exact contractual promise constitutes a breach, subject only to the de minimis rule.

Liability in tort, on the other hand, is subject to the reasonableness test (The Wagon Mount 2) [22] . The claimant has to prove that the defendant acted unreasonably.

Measure of loss recoverable. It is true that compensation in the form of damages is what is sought by the claimant in both contract and tort claims. However, in contract the aim is to put the claimant in the position he should have been if the breach did not happen Robinson v Harman (1848) 1 EX 850 [23] . This is otherwise referred to as the expectation loss. In other words, contract is forward looking.

In the case of tort, the aim is to put the claimant in the same position he would have been in if the tort had not been committed. For example, if the defendant’s negligence caused damage to the claimant’s car, he would have to compensate the claimant by either paying for repairs or replacement.

Another diefference between contract liability and general tortuous liability is that in the former there has to be proof of damage. In the latter some torts, such as nuisance, are actionable per se, Hunter v Canary Wharf [1997] AC 677 [24] . This means that the claimant does not have to prove loss. This difference is important in terms of bringing an action in the sense that if a claimant wins a tort claim he will hardly be out of pocket.

Another difference between tortuous liability and contractual liability is remoteness of damage. In both cases damages may not be recovered if they are too remote. However, the test of remoteness is stricter in contract, which is reasonable contemplation of the parties- Hadley v Baxendale ( 1854) 9 Ex 341 [25] , and tort is reasonable foreseeability of damage Heron 1 [1969] 1 AC 350 [26]

Similarities. Some of the similarities have already been mentioned above, but there are some more that merit special mention.

First both are civil claims which may be brought either in the county court or the High Court; in the case of contract, depending on the complexity of the case or the amount of money involved.

Secondly, as mentioned above, fundamental to both tortuous liability and contractual liability is to compensate the claimant for the loss suffered consequent on the defendant’s wrongdoing. This sets the two areas of law from crime where the aim is to punish the defendant.

Thirdly, in both contract and tort, the claimant will seek damages as remedy for the loss suffered.

Conclusion. The above discussion has set out the nature of tortuous liability and contrasted and compared it with contractual liability. From the above discussion, there are many differences between the two liabilities and some similarities too. Sometimes the same set of facts can attract both tortuous and contractual liabilities.


The tort of negligence is considered to be the biggest area in the law of tort. It has been argued by some legal commentators that there is an element of negligence in all tort claims. Negligence is defines as “carelessness amounting to a culpable breach of duty; failure to do or recognise something that a reasonable person would do or recognize, or doing something a reasonable would not do.” [27] For a claimant to succeed in a claim he has to establish a number of elements that make up the tort.

Duty: the first element a claimant has to establish is that the defendant owes him a duty. There are established duty situations such as doctor and patient, teacher and student, driver and passenger, lawyer and client, parent and child and many more. However, there are certain situations that do not fall within these established heads. These are called novel situations. The landmark case is Donoghue v Stevenson which establishes the ‘neighbour principle’ that is used to determine whether or not a defendant owes a duty of care in any novel situation.

The most important passage from Lord Atkinson’s judgment is the one that sets out the neighbour principle: ‘you must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour’. [28]

He went further to define your neighbour: ‘…persons who are who are so closely and directly affected by my act that I ought reasonably to have them in my contemplation as being so affected when I am directing my mind to the acts or omissions which are called into question’ [29]

according to the learned judge the vital point is close relationship or proximity. It should be noted that proximity is used in the physical sense but the legal sense. Whoever your actions and omissions are likely to cause harm or injury has a relationship of proximity and therefore your neighbour.

The court of Appeal in Caparo Industries Plc v Dickman and others [1990] 1 All ER 568 re-stated the neighbour principle as a three stage test:

a) reasonable foreseeability of harm to the claimant

b) sufficient proximity of relationship between the claimant and the defendant

c) that it is fair, just and reasonable to impose a duty. [30]

Among the three three Caparo test the fair, just and reasonable is the most difficult test for claimants. It is this limb that insulates public bodies against a negligent claim. Because of this limb public bodies do not owe a duty to any individual but to the public at large as was stated in Hill v Chief Constable of West Yorkshire [1989] [31]

However, the above case must be contrasted with Kirkham v Chief Constable of Greater Manchester [1990] 2 QB 283 where it was stated that where the police assume responsibility , for example the defendant being in their custody, they will owe the defendant a duty. This case is based on the limb of proximity. Being in their custody the there is a sufficient relationship of proximity between the claimant and the police.

Breach: if a claimant succeeds in establishing a duty he then has to prove that the defendant breach that duty by acting unreasonably. In Blyth v Birmingham Waterworks (1856) II Exch 781, Alderson B stated that the defendant must meet the standard of the reasonable man. [32] From this principle it can be discerned that the test here is an objective one.

This position gained judicial support from Lord MacMillan in Glasgow Cop v Muir [1943] AC 448. He said that the issue to be be decided is not ‘what this defendant foresee?’ but ‘what a reasonable person have foreseen in the particular circumstances?’ [33] In other wors, it is not a case of whether or not the defendant did his best, but whether he measures up to the standard of the reasonable man.

If the defendant fails this test then he will be deemed to have breached the duty he owes the claimant.

Causation of damage: next stop for the claimant is to prove that the defendant’s breach caused his injury. The court will consider both causation in fact and causation in law

a. causation in fact: this is otherwise known as the ‘ for test’. The question the court will ask is but for the defendant’s breach, would the harm to the claimant have occurred? If the answer is yes then the claimant has failed to establish causation in fact. On the other hand, if the answer is no, then the claimant has proved causation in fact and the claim must succeed if all other elements are satisfied. The authority for this is Hotson v East Berkshire Area Health Authority [1987] 2 All ER 909 [34]

b) Causation in law: this considers the possibility of a break a causation by an intervening act. This is sometimes expressed in the latin phrase ‘actus novus interveniens’. In considering the intervening act which is by a third party, the court will consider 1) whether the third party’s action was instinctive or 2) negligent. If the third party’s action is instinctive this is unlikely to break the chain of causation Scott v Shepherd (1773) 2 Wm Bl 892. [35] On the other hand if the intervention of the third is negligent this is likely to break the chain of causation as was the case in Knightley v Johns [1982] 1 WLR 349. [36]

Remoteness of damage: having successfully proved causation of damage, the claimant needs to now prove that the damage was not too remote. In the Wagon Mount (1) the court said that the question that needs to be asked is: ‘is the damage of such a kind that the reasonable person would have foreseen it? If a reasonable person would not have foreseen the damage then the claimant cannot recover. [37]

Defences: the claimant may still not succeed if the defendant successfully avails himself of one of the recognized absolute defences. Some of these defences are: voluntary assumption of duty, consent, illegality and excluding liability. There is also the partial defence of contributory negligence. Unfortunately, I cannot discuss these defences due to constraints of word limit. But suffice it to say that all these defences have their rules which the defendant has to successfully plead to prevent the claimant from succeeding..

Conclusion: as discussed above in order for a claimant to succeed in a negligence claim he needs to establish that the defendant owes him a duty, that duty has been breached, the breach has to cause the damage, the damage should be too remote and the defendant must not successfully plead a defence.

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