Sample Law PowerPoint Presentation
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The intention of parties is judged objectively. The test is whether a reasonable person would have believed that by his words or conduct the person making the offer (the offeror) implied that he intended to be legally bound. What matters is how the offeror's statement looked to a reasonable person rather than what they actually intended. For example, in Moran v University of Salford a University mistakenly offered the claimant a place on a course. It was held that they were bound by this offer.
The objective test focuses on what a reasonable person would have believed and ignores the knowledge and belief of the actual parties.
Why is the objective test used? The problem with a subjective approach is that it is impossible to prove what the parties were actually thinking at the time the contract was entered into and this would allow them to change their minds whenever it was expedient. The objective test protects the party to whom a statement is made by allowing him to assume that the other person means what they say. So, the courts use this approach to create certainty by ignoring the parties' actual intentions.
Invitation to Treat
An Invitation to Treat (ITT) is a statement that invites offers. It does not indicate an intention to be legally bound in itself. An example is a 'trader's puff' i.e. an exaggerated statement that is not seriously meant. For instance 'Red Bull gives you wings' is not a serious offer to give you wings if you drink Red Bull. However, a specific promise to match any price if you find somebody selling an item for less could be an offer, as this could be seriously meant when judged objectively.
Advertisements are generally only ITTs. Therefore, someone advertising wild birds for sale was not making an offer and so they could not be convicted under the Protection of Birds Act 1954 for 'offering for sale' wild birds. In Fisher v Bell a shopkeeper displaying a flick knife in a shop window could not be prosecuted under the Offensive Weapons Act 1959 as this prohibited offering for sale such knives and the display was only an ITT. In the Boots case it was held that in a self-service shop an offer is only made when the customer offers to buy goods at the counter. The shop is not bound to sell the goods and can reject the offer.
An offer is legally binding. An advertisement is normally only an ITT as in Partridge v Crittenden. However, in Carlil v Carbolic Smoke Ball Co, the company placed an advert in a newspaper that anyone using their smoke ball who caught flu would be given £100. The claimant tried to claim the money when they contracted flu after using the ball. The court held the advert was an offer to the world at large. This was a unilateral contract, i.e. a contract where one party promises to do something if the other party does (or forbears to do) a specified act, even if the other party does not promise to do (or forbear from doing) this. In this case, the promisor is still bound to honour their promise.
With other types of transaction, mere statements of price are only invitations to treat. Auctions without a reserve are offers to sell goods to the highest bidder, which the highest bidder automatically accepts. In auctions with a reserve each bid is an offer, with acceptance occurring when the auctioneer's hammer falls. An automated machine, such as a vending machine, is itself is an offer, with acceptance occurring when the customer can no longer get their money back.
The terms of an acceptance must mirror exactly the terms of the offer. This is called the mirror rule. If a party seeks to vary the terms of an offer, this is a counter-offer which terminates the original offer. The original offer can then no longer be accepted.
Acceptance must be communicated to the offeror to be valid. The person accepting must take reasonable steps to do this.
Silence is not usually acceptance. However, if the offeree has agreed that he does not need to communicate acceptance then his silence can amount to acceptance. For instance, when you renew insurance policies you do not need to tell your insurer, even though this creates a new contract.
Sometimes businesspeople try to insert their own terms into agreements at the last moment, hoping the other party will accept them. This is called 'the battle of the forms'. In the 'last shot' approach each communication is considered to be a counter offer that terminates the previous offer so the contract is based on the terms of the last offer. However, this means that sometimes there is no contract. Nevertheless, courts will generally find that if work has already begun a contract has been formed. The idea is that if the battling parties have created a working relationship any 'cracks in the mirror can be smoothed away.
An offer is accepted when the acceptance is posted even if it is never actually received by the offeror. However, the offeror may exclude the rule by demanding actual communication 'in writing'.
Also, the postal rule does not apply to instantaneous forms of communication. These are treated as though the parties are face-to-face. This is because the other party instantly knows if the communication was unsuccessful, such as in a telephone conversation. Faxes are also instantaneous, as the person sending it immediately knows if the transmission failed.
However, if a telex is sent out of hours acceptance only occurs when the business re-opens. Similarly, if a message is left on an answerphone, acceptance probably only occurs when it is reasonable for the other person to check their messages. E-mails can be instantaneous as the sender knows if the e-mail failed. However, critics suggest the postal rule will still apply if the failure occurs due to the offeror's fault (such as by spilling coffee on their computer). Nevertheless, acceptance may still only occur when it was reasonable for the offeror to check their e-mails. Therefore, the rule can cause problems with modern technology.
Intent to Create Legal Relations (ICLR)
This must be present for a contract to be legally enforceable. This requirement has been criticized as undermining certainty. However, it is based on public policy so that courts will not be overwhelmed by disputes over agreements that were never meant to be legally binding. Some types of contract are presumed not to be legally binding. These include domestic agreements, such as those between husband and wives or parent and child. However, courts will presume there was an ICLR in commercial agreements unless there is strong evidence to the contrary. Therefore, the presumption can be rebutted. For instance, an agreement that expressly said it was 'not subject to legal jurisdiction' was not binding. Similarly, agreements that are expressly said to be 'subject to contract' may not have an ICLR. Recently, the Supreme Court has ruled that pre-nuptial agreements are enforceable provided they are entered into freely and it is 'fair' in the circumstances to hold the parties to it. However, Lady Hale dissented (it was held by an 8:1 majority) as she criticized this for undermining statutory protection for divorcing couples. Therefore, this requirement has sometimes been criticized by academics and judges.