Contract Law Contract forms part of the law of obligations.
Contract and delict are part of the civil law.
What is a contract?
A contract is an agreement between parties having the capacity to make it, in the form demanded by the law to perform, on one side or both, acts which are not trifling, indeterminate, impossible or illegal, creating an obligation enforceable in a court of law.
(Professor A D Gibb)
Examples of every day contracts
Buying a newspaper.
Travelling on a bus or train.
Not all contracts are required to be in writing.
A contract may be defined as
An agreement which creates or is intended to create a legal obligation between the parties to it.
Agreement There must be an agreement or Consensus In Idem that is agreement with regard to the same thing eg price, subject matter etc.
Basically the offer and acceptance must match. These must be agreement on all material aspects of the contract.
Legal Obligation Social obligation does not create a legal obligation eg agreeing to meet friends at a cinema. A legal obligation is one which the courts will regard as enforceable. Some patrimonial interest must be involved if the obligation is to be a legal obligation and its terms must not be too vague.
Parties There must always be at least two parties to a contract.
Distinguish gratuitous and onerous contracts.
A contract is bilateral or mutual (2 or more parties). If only one party is under an obligation and the other is required to do nothing. That is known as a gratuitous contract.
If both parties are subject to an obligation eg, work for payment that is known as an onerous contract.
A gratuitous contract is binding in Scots law.
Mortons Trustees v Aged Christian Friend Society of Scotland (1899) 2 F 82.
Mr Morton wrote to the charity offering to make ten annual instalments of £100. His offer was accepted. Morton then paid the first eight instalments but died before the final two instalments could be paid. The charity was entitled to enforce payment against the executors.
All contracts are bilateral consisting of both offer and acceptance which may be in writing, spoken or inferred from actions like in a supermarket checkout situation.
The offer must be distinguished from an invitation to treat ie an indication of a willingness to consider offers.
The distinction is important. If an offer is accepted there is a contract. If there is only an invitation to treat there can be no acceptance.
Invitation to treat
Placing goods in a shop window
Goods displayed in a catalogue.
Goods displayed on shelves.
In these situations the customer must offer to buy.
Pharmaceutical Society of Great Britain V Boots (1952) 2 QB 795.
When Boots became a self service pharmacy problems arose because of the need for certain drugs to be sold under a pharmacists supervision. If customers were serving themselves the question arose was the sale of goods unsupervised? The court had to decide at what stage the contract was formed. The court held that goods placed on shop shelves constituted an invitation to treat. The customer was offering to buy the medicine at the checkout at which point the assistant would accept the customers offer. There was always a pharmacist at the checkout.
To be effective the acceptance must meet or match the offer. There must be consensus in idem.
If the acceptance contains additional or contradictory conditions there is no contract. The purported acceptance is regarded as a counter offer. The counter offer kills off the original offer.
Wolf & Wolf V Forfar Potato Co (1984)
Forfar sent a telex to Wolf & Wolf offering to sell potatoes. The offer was open until 5pm the next day. Wolf & Wolf telexed back what purported to be an acceptance but contained extra conditions. Forfar advised Wolf & Wolf by phone to say the extra conditions are not acceptable. Wolf & Wolf sent another telex in which they attempted to accept the original offer. There was no contract and the court found the counter offer killed off the original offer.
Express offer is not always necessary.
Carhill V Carbolic Smoke Ball Co. (1893) 1 QB 256
Mrs Carhill saw a newspaper ad stating that the manufacturers of a smoke ball would pay £100 to anybody who bought the smoke ball, used it correctly and still got flu. Mrs Carhill bought a smoke ball, used it correctly and still got flu. Mrs Carhill wanted to claim the £100. The company refused to pay claiming the advert was not an offer. The court held the wording of the advert did amount to an offer and by buying and using the smoke ball Mrs Carhill had accepted that offer.
The general rule. The contract is completed at the time when the acceptance is dispatched, not when it is received. Therefore if an offer states that acceptance must be made within a certain time the contract is binding provided the contract is posted within the required time. To prevent uncertainty it is safer for the offerer to state that the acceptance must reach him before a certain time.
Time of acceptance.
If the offerer states that his offer will remain open for four days he must keep his promise and cannot revoke the offer within that time. If an acceptance is made within the four days the binding contract is formed. If the offer does not state a time within which acceptance must be made, it remains open for a reasonable time unless recalled.
What is reasonable time?
It will depend on the facts of the case. Trade practice may be relevant. If the goods are perishable or have a fluctuating value, acceptance should be immediate otherwise the offer will be presumed to have lapsed.
Recall the offer.
The offerer promises to keep the offer open for a definite period that promise binds him. He cannot recall the offer within that time.
If the offerer states that acceptance must be made within a specified time and acceptance is not made within that time the offer is automatically recalled.
No time limit stated for acceptance, the offer remains open for a reasonable time. If not accepted within a reasonable time the offer is automatically recalled.
If no promise to keep the offer open is made, the offer can be recalled at any time before acceptance.
Locus poenitentiae room for repentance exists.
Note that the acceptance is effective as soon as it is posted and revocation of offer is only effective when it reaches the offerer.
Formalities required for contract.
General rule- Scots Law does not require any special formality in the making of a contract. A contract may be entered into orally, in writing, or inferred from the actions of the parties.
However under The Requirements of Writing (Scotland)Act 1995 a written document is required for
The constitution of
o A contract or unilateral obligation for the creation, violation or extinction of an interest in land (except a lease for less than one year).
o A gratuitous unilateral obligation except an obligation undertaken in the course of business.
o A trust by which a person declares himself sole trustee of his own property.
The making of a will or codicil.
To formally constitute the above contracts each grantor should subscribe the document.
A probative document proves itself, subscription of granter is valid.
Under the 1995 Act there are two ways in which a document may become probative.
By being attested (witnessed)
By a court certificate.
The 1995 Act provides that where a document bears to have been subscribed by a granter and by a person as a witness of that granters subscription and has a testing clause,(identifying the witness, narrating the witnessing, stating the name and address of the witness) the document is presumed to have been subscribed by that granter.
Most documents require subscription on the last page only but a will must be signed on every page.
Rules for Witnessing
Witness must know the granter.
Witness must be over 16 years old.
Witness must be mentally capable of acting as a witness.
Witness need not see the granter subscribe as long as granter acknowledges his subscription to him.
Subscription of granter and signature of witness must be one continuous process.
Witness can witness the subscriptions of all granters of deed.
Where there has been no witness, an application can be made to the Sheriff Court which if satisfied by evidence given by affidavit (signed statement) that the document was subscribed by the granter, causes the document to be endorsed with a certificate to that effect. This gives rise to the assumption that the document has been subscribed by the granter.
Where there is not a validly executed written document the 1995 Act provides for a statutory form of Rei Interventus (subsequent actings).
This means that the second person is not entitled to withdraw from the contract and the contract is not treated as invalid despite its not being in a properly executed written document.
The first person must be able to show that :
He has acted in reliance on the contract with the knowledge and acquiescence of the second person.
As a result he has been affected to a material extent.
He would be adversely affected to a material extent if the second person were to be allowed to withdraw.
Procedure available where granter of document is blind or unable to write.
The document is read out to the granter by:
Solicitor holding a practising certificates.
A Justice of the Peace or lay magistrate.
A Sheriff- Clerk
The granter may declare that he does not want the document read out. The document is subscribed by the solicitor in the presence of the granter. If it is a will it must be signed on every page. If the document confers a benefit on the solicitor or family it is invalid to that extent. To be probative there must be a witness present throughout or a court certificate endorsed to the document.