Classifications of Contracts and Analysis of Contract Law Cases - Essay Example

Contracts Introduction Contracts are the basis of many of our daily activities. They provide the means for individuals and businesses to sell and otherwise transfer property, services, and other rights. Without enforceable contracts, commerce would collapse. Definition of a Contract A contract is an agreement that is enforceable by a court of law or equity. If one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other remedy. Agreement Agreement - the manifestation by two or more persons of the substance of a contract. It requires an offer and an acceptance Parties to a Contract Offeror - The party who makes an offer to enter into a contract Offeree - The party to whom an offer to enter into a contract is made Elements of a Contract Classifications of Contracts - Formation 1. Bilateral contract - a promise for a promise 2. Unilateral contract - A promise for an act 3. Express contract - A contract expressed in oral or written words 4. Implied-in-fact contract - A contract inferred from the conduct of the parties 5. Quasi-contract - A contract implied by law to prevent unjust enrichment 6. Formal contract - A contract that requires a special form or method of creation 7. Informal contract - A contract that requires no special form or mode of creation Acceptance A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts [Section 50 of the Restatement (Second) of Contracts]. The mirror image rule - The offeree's acceptance must be unequivocal Mailbox Rule (Acceptance-Upon-Dispatch Rule) - An acceptance is effective when it is dispatched Proper Dispatch - An acceptance must be properly addressed, packaged, and posted to fall within the mailbox rule Express Authorization - A stipulation in the offer that says the acceptance must be by a specified means of communication, e.g., registered mail, telegram Offer and Acceptance - summary Communication by Offeror Effective When Offer Received by offeree Revocation of offer Received by offeree Communication by Offeree Effective When Rejection of offer Received by offeror Counteroffer Received by offeror Acceptance of offer Sent by offeree I. Carlill v. Carbolic Smoke Ball Company 1. From Wikipedia, the free encyclopedia Jump to: navigation, search Carbolic Smoke Ball advertisement Carlill v. Carbolic Smoke Ball Company [1893] 1 QB 256 is one of the most famous leading cases in English law that helped establish the requirements for the formation of a contract. B. Contents 1 Background 2 Ruling 3 Later influence 4 External links 5 See also C. Background The Carbolic Smoke Ball Company made a product called a smoke ball that it claimed could protect the user from contracting influenza. The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (phenol). The tube was then inserted into the user's nose. It was squeezed at the bottom to release the vapours into the nose of the user. This would cause the nose to run, and hopefully flush out the cold. In fact the inflammation caused by the device would have probably increased susceptibility to catching influenza. The Company published advertisements claiming that it would pay 100 to anyone who got sick with influenza after using its product according to the instructions set out in the advertisement. Specifically, they stated: 100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied each ball. 1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter. Mrs Carlill, relying on the promises made in the advertisement, bought one of the balls and used it in the manner specified, yet still managed to contract influenza. D. Ruling The Carbolic Company claimed that there was no enforceable contract between it and the user of the smoke ball on the grounds that there was no acceptance of its offer, because Mrs Carlill had never notified the Company that she accepted its offer, or consideration, since the Company did not receive any benefit from a purchaser's use of the product once the sale had been completed. The court rejected both arguments, ruling that the advertisement was an offer of a unilateral contract between the Carbolic Smoke Ball Company and anyone who satisfies the conditions set out in the advertisement. Once Mrs Carlill had satisfied the conditions she was entitled to enforcement of the contract; the notification of performance of the conditions formed part of the acceptance. Furthermore, weight was placed on the 1000 bank deposit that claimed to 'show their sincerity in the matter' in showing that the advertisement was not just a puff. As to consideration, it was held that the act itself was a certain effort required from the promisee and this effort qualified as consideration for the promise to pay her the reward. E. Later influence The case was quoted extensively in the famous "Pepsi Points case", Leonard v. Pepsico, Inc., 88 F.Supp.2d 116 (1996), wherein presiding Judge Kimba Wood wrote: Long a staple of law school curricula, Carbolic Smoke Ball owes its fame not merely to "the comic and slightly mysterious object involved"... but also to its role in developing the law of unilateral offers. II. Smith v. Hughes 1. From Wikipedia, the free encyclopedia Jump to: navigation, search Smith v. Hughes, (1871) LR 6 QB 597 (Queen's Bench Division) is an English case dealing with contract law. It has influenced the law throughout the common law world. B. Facts Concerns the Street Offences Act 1959, and when it was made illegal for prostitutes to "loiter or solicit in a street or public place". In the case, it was found that the prostitutes were attracting customers from balconies, therefore judges used the mischief rule as remedy. C. Decision The court ordered the contract be performed because it appeared that the words "old oats" were never used at the moment of "meeting of minds." "There is no legal obligation on the vendor to inform the purchaser that he is under a mistake, not induced by the act of the vendor." A unilateral mistake does not prevent the acceptance of an offer unless 1. the mistake is as to the terms of the contract (as opposed to motivation) and 2. the mistake is known to the offeree at the time of purported acceptance. Some members of the court were also impressed with the fact that the defendant had been given a sample of the oats which he held in his possession for two days. Mistaken assumptions are immaterial to a contract. "If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into a 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." III. Felthouse v. Bindley 1. From Wikipedia, the free encyclopedia Jump to: navigation, search Felthouse v. Bindley (1862), 11 Cb (NS) 869, is the leading English case in contract law where the long-standing maxim that "silence does not amount to acceptance" was first expressed. Mr. Felthouse wanted to buy one of his nephew's horses. Felthouse wrote to his nephew who wanted to sell the horse to him, stating that "If I hear no more about him, I consider the horse mine..." Subsequently, there was no notice from his nephew and Felthouse considered the horse his own. The horse was not delivered to uncle Felthouse and later there was an auction at the nephew's property for the other livestock. The nephew told the auctioneer, Mr. Bindley, not to sell the horse at the auction. By accident Bindley sold it anyway. Felthouse sued the auctioneer in the tort of conversion however the action could only succeed if it could be shown that Felthouse actually owned the horse. The court ruled that Felthouse did not have ownership of the horse as there was no acceptance of the contract. Acceptance must be communicated clearly and cannot be imposed due to silence of one of the parties. The uncle had no right to impose a sale through silence whereby the contract would only fail by repudiation. Though the nephew expressed interest in completing the sale there was no communication of that intention. IV. Balfour v. Balfour 1. From Wikipedia, the free encyclopedia Jump to: navigation, search Balfour v. Balfour [1919] 2 KB 571 is a famous English contract law case that held that there is a rebuttable presumption against an intention to create a legally enforceable agreement when the agreement is domestic in nature. Using contract-like terms, Mr. Balfour had agreed to give his wife 30 a month as maintenance for while he was off living in Ceylon. Once he had left, they separated and Mr. Balfour stopped payments. Mrs. Balfour brought an action to enforce the payments. At the Court of Appeal, the Court held that there was no enforceable agreement as there was not enough evidence to suggest that they were intending to be legally bound by the promise. The case is often cited in conjunction with Merritt v. Merritt [1970] 2 All ER 760; [1970] 1 WLR 1211; CA. Here the court distinguished the case from Balfour v. Balfour on the fact that Mr and Mrs Merritt, although still married, were estranged at the time the agreement was made and therefore any agreement between them was made with the intention to create legal relations. Both cases are often quoted examples of the principle of precedent. V. Rose and Frank v. J.R. Crompton and Brothers Ltd. 1. From Wikipedia, the free encyclopedia Jump to: navigation, search Rose and Frank Co. v J.R. Crompton & Bros Ltd [1923] 2 KB 261; [1925] AC 445 is a leading decision on English contract law. B. Background Two business men signed an agreement regarding the production and sale of carbon paper. The agreement included the clause: This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement ... but it is only a definite expression and record of the purpose and intention of the ... parties concerned to which they each honourably pledge themselves with the fullest confidence, based upon past business with each other, that it will be carried through by each of the ... parties with mutual loyalty and friendly co-operation. The relationship between the two parties broke down and one of the parties broke the agreement. Rose and Frank Co. sued on enforcement of the agreement. C. Decision of the Court of Appeal The Court held that there was no legal contract. The clause had the effect of negating any other objective evidence of intention to create legal relations. Justice Vaisey, writing for the Court, reasoned that it was a gentlemen's agreement, "which is not an agreement entered into between two persons, neither of whom is a gentleman, with each expecting the other to be strictly bound, while he himself has no intention of being bound at all." He further stated that parties are capable of forming an agreement that does not give rise to legal relations. "The reason of this is that the parties do not intend that their agreement shall give rise to legal relations. This intention may be implied from the subject matter of the agreement, but it may also be expressed by the parties. In social and family relations such an intention is readily implied, while in business matters the opposite result would ordinarily follow." Read More