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IS THERE A BINDING CONTRACT?

INTENTION TO CREATE LEGAL RELATIONS Objective test: Would a reasonable person find that the parties intended to be bound by their agreement, considering: Terms of the agreement Context (family, social, commercial) Conduct Consequences if promise under agreement broken OFFER Rule 1: Offer is not an invitation to treat Rule 2: Offer can be made to more than one person Rule 3: Offer must be communicated to the intended offeree(s) Rule 4: Offer may be terminated at any time prior to its acceptance ACCEPTANCE Rule 1: Acceptance must be communicated to the offeror, unless an exception exists Rule 2: Offeree or their authorised agent can communicate acceptance to the offeror Rule 3: Acceptance must be made in reliance on the offer. Rule 4: Acceptance must be absolute and unconditional Rule 5: Acceptance must be according to the terms of the offer

Intention + Offer + Acceptance + Consideration = A contract, subject to: Capacity of the parties Genuine Consent Legality of purpose Compliance with contract form (if any)

Intention to create legal relations


Agreement
Intention Test: A common intention of the parties to enter into legal obligations, mutually communicated, expressly or impliedly.

Domestic/Social
Presumption: No legal intention Balfour v Balfour Easily Rebutted: Legal intention Riches v Hogben; Merrit v Merrit Macgregor v Macgregor

Commercial

Presumption is binding: Requires more formality

Depends on Seriousness of conduct Relative Expense of conduct Nature of agreement Subject matter of agreement

Hard to rebut

Strong presumption of legal intention

Is it in a business context? Esso Petroleum v Commissioners of Customs and Excise

Termination of Offer
Withdrawal by Offeror Can be withdrawn at any time before acceptance There needs to be actual communication to offeree. e.g. Dickinson v Dodds
Rejection by Offeree Rejection = termination Stevenson Jacques & Co v McLean Must be communicated to offeror If offeree responds with new terms = counter offer Hyde v Wrench

Death

Death of offeror Offer cannot be accepted after death There are some exceptions

Death of Offeree If offeree dies, no offer.

Lapse of Time Once time limit expires, offer unable to be accepted When not stated, time is set to reasonable
Failure of condition If offeree fails to comply with condition of conditional offer, it is terminated.

Rules of Acceptance
Agreements is formed once an offer is accepted Requirements Offeree must intend to accept terms of offer Intention must be communicated to the offeror

Acceptance in Unilateral Contract

Acceptance must correspond to offer Offeree must have knowledge and act in reliance on offer

Notification of Acceptance Method of acceptance Method of acceptance stipulated by offeror Offeror can stipulate how communication is affected Instantaneous Communication Contract will be formed when acceptance of the offer is communicated to the offeror. The contract is formed when and where the offeror receives that communication. Entores L D v Miles Far East Corporation If takes longer than usual to reach, risk is upon offeror Postal Acceptance Rule if the offer is accepted by post, the contract comes into existence at the moment that the acceptance was posted (Adams v Linsell) (1818) 106 ER 250).

Acceptance must be unqualified Masters v Cameron

Exceptions Counter offer is not acceptance Hyde v Wrench

Request for alternate mode of acceptance not prevent contract formation

Displacement of Rule Can be displaced by offeror stipulating in contract that acceptance is not affected until actual receipt

Mere inquiry or request for information is not acceptance Stevenson Jacques & Co v McLean

Revocation prior to acceptance Contract is formed even if offer is notified of rejection before receipt of acceptance
Multiple technologies A offeree can use multiple technologies to accept an offer