Ratio Decidendi An advertisement with element of reward is a public offer.

Case Carlill v Carbolic Smoke Ball Co [1893]

Facts An advert placed for 'smoke balls' to prevent influenza. Offered to pay 100 if anyone contracted influenza after using the ball. Deposited 1,000 with the Alliance Bank to show their sincerity in the matter. The plaintiff bought one of the balls but contracted influenza

Acceptance of offer has to be communicated.

R v Clarke [1927]

Revocation has to be communicated.

Byrne V Leon Van Tienhoven

Revocation can be communicated by a reliable source.

Dickinson v Dodds [1876]

The Government offered a reward for information leading to the arrest of certain murderers and a pardon to an accomplice who gave the information. Clarke saw the proclamation. He gave information which led to the conviction of the murderers. He admitted that his only object in doing so was to clear himself of a charge of murder and that he had no intention of claiming the reward at that time. He sued the Crown for the reward An offer made on 1st October (In Cardiff). Claimant (in New York) received it on 11th & send acceptance at once. In the main time the defendant change his mind and sent a letter of revocation on 8th Oct. Revocation letter reached on 15th Oct. Dodds offered to sell his house to Dickinson, the offer being open until 9am Friday. On Thursday, Dodds sold the house to Allan. Dickinson was told of the sale by Berry, the estate agent, and he delivered an acceptance before 9am Friday.

Held She was entitled to recover as (a) The deposit of money showed an intention to be bound, therefore the advert was an offer; (b) It was possible to make an offer to the world at large, which is accepted by anyone who buys a smokeball; (c) The offer of protection would cover the period of use; and (d) The buying and using of the smoke-ball amounted to acceptance. The court dismissed the case. There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or forgetting it after hearing."

The revocation was not complete until it had been communicated to the offeree. This was on 15th October. In the main time, however the offer had been accepted. As a result the revocation was ineffective & the contract did exist. The defendant was therefore liable under the contract. As the Claimant knew that the defendant was no longer in a position to sell the property to him the defendant had drawn his offer validly. It was impossible, therefore, to say there was ever that existence of the same mind between the two parties which is essential in point of law to the making of an agreement.

Offer does not laps with death of offeree and remains valid if consideration is being made.

Errington v Errington [1952]

A counter offer revokes the original offer.

Hyde v Wrench [1840]

A father bought a house on mortgage for his son and daughter-in-law and promised them that if they paid off the mortgage, they could have the house. They began to do this but before they had finished paying, the father died. His widow claimed the house. 6 June W offered to sell his estate to H for 1000; H offered 950 27 June W rejected H's offer 29 June H offered 1000. W refused to sell and H sued for breach of contract.

The father's promise was a unilateral contract -a promise of the house in return for their act of paying the installments. It could not be revoked by him once the couple entered on performance of the act. The couple was entitled to continue paying the installments and claim the house when the mortgage has been fully paid off. Held that if the defendant's offer to sell for 1,000 had been unconditionally accepted, there would have been a binding contract; instead the plaintiff made an offer of his own of 950, and thereby rejected the offer previously made by the defendant. It was not afterwards competent for the plaintiff to revive the proposal of the defendant, by tendering an acceptance of it; and that, therefore, there existed no obligation of any sort between the parties. The knife had not, in law, been 'offered for sale. According to the law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract.

Products on display are only an treat and not an offer. An Offer must be distinguished from a mere supply of information.

Fisher v Bell [1960]

A shopkeeper displayed a flick knife with a price tag in the window. The Restriction of Offensive Weapons Act 1959 made it an offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in the magistrates' court

Harvey V Facey

The plaintiff sent a telegram to the defendant to It was held that the defendants telegram was not an sell property. Telegraph lowest cash price. The offer but simply an indication of minimum price the defendant reply was lowest cash price is 900. defendant would want. The plaintiff telegraphed we agree to buy .. for 900 asked by you. Auction of sale of furniture was advertised in a newspaper London broker saw the advertisement and travel to London to attend the sale the items had been withdrawn from the sale before he arrived he claimed that his action of attending the auction amounted to an acceptance of an offer as result he claimed that contract has been breeched and sued for damages. It was not an offer as it was not clear definite or unequivocal from the advertisement that the auctioneer wanted to sell the items of furniture to the broker the auctioneer had no intention to be bound to this broker it was a mere statement of intention.

An advertisement is only an invitation to an offer.

Harris v Nickerson [1873]

Acceptance is valid if sent in time by any more unless exclusively specified. Silence does not amount acceptance.

Yates buildings v R J Pulleyn & Sons

Offeror asked for the offer to be accepted by registered post the offeree accepted the by an ordinary letter which arrived promptly

The offeror had suffered no disadvantage in a way that the offer had been accepted as the offeror did not put a condition specifying that the acceptance could only be made by registered post the acceptance was valid. It was held that there was no contract the uncle had no right to impose upon the nephew to sell his horse. The nephew had not given any written proof. There was no contract as there had been no authorized communication of intention to contract on the part of the body, that is, the managers, alleged to be a party to the contract.

Felthouse v Bindley

Acceptance must be communicated through authorized person.

Powell v Lee

Postal Rule:

Adams v Lindsell

F wrote to his nephew offering to buy the nephews horse for 30.15 and adding if I hear no more about him, I will consider the horse mine. The nephew never replied. The plaintiff applied for a job as headmaster & the school managers decided to appoint him. One of them, acting without authority, told the plaintiff he had been accepted. Later the managers appointed someone else. The plaintiff sued alleging that by breach of a contract to employ him 2 Sept. The defendant wrote to the plaintiff offering to sell goods asking for a reply "in the course of post" 5 Sept. The plaintiff received the letter and sent a letter of acceptance. 9 Sept. The defendant received the plaintiff's acceptance but on 8 Sept had sold the goods to a third party.

A binding contract was made when the plaintiff posted the letter of acceptance on 5 Sept, so the defendant was in breach of contract. The Postal Rule If acceptance by post has been requested or where it is an appropriate and reasonable means of communication between parties, acceptance is complete as soon as the acceptance is posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror.

Consideration: Price paid by each party to the contract for the other partys Promise. Consideratio n need not be adequate (satisfactory) but must be valuable (beneficial).

Currie v Misa

Thomas v Thomas

A promise to convey a house to a widow on her promise to pay 1.00 rent p.a. and keep the house in repair was binding

Performance of existing legal obligation does not amount to consideration. Performance of existing duty doest not amount to consideration. Contract holds if work is done in time and both parties take practical benefit from it.

Collins v Godefory A witness legally required to attend the court was He had not provided consideration as he was legally promised payment if he would attend the court obliged to attend under the summon (Written command and give evidence. He attended court and sued for to a person to appear in court.) the promise Stilk v Myrick Two out of eleven sailors deserted a ship. The captain promised to pay the remaining crew extra money if they sailed the ship back, but later refused to pay. Roffey had a contract to refurbish a block of flats -sub-contracted the work to Williams -work begun -Williams realized the fact that he underestimated the cost of the work and was in financial difficulties. Roffey (to avoid foul of a penalty clause in his main contract with the owner), agreed to pay Williams an extra payment per flat. William did not receive full payment Work stopped Roffey argued that Williams was only doing what he was contractually bound to do and so had not provided consideration. A high number of desertions from a merchant ship rendered the vessel unseeworthy, undermanned since extra pay was offer to the crew if they remain loyal A wife and her three grown-up children lived together in a house. The wife of one of the children did some decorating and later the children promised to pay her 488 and they signed a document to this effect. The claimants father and father-in-law agreed with each other to pay the claimant 100 and 200 in consideration of his then intended marriage and after the marriage had taken place they confirm their agreement in writing. 200 was not paid and the claimant sued his father-inlaw As the sailors were already bound by their contract to sail back and to meet such emergencies of the voyage, promising to sail back was not valid consideration. Thus the captain did not have to pay the extra money. Held that where a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or avoid a disadvantage.

Williams v Roffey

Performance beyond existing duty amounts to consideration. Past consideration is no consideration

Hartley v Ponsonby

The promise of extra money was recoverable by seaman who remained loyal since they were now working in a dangerous situation (they were doing more than required in there original contract) It was held that the promise was unenforceable as all the work had been done before the promise was made and was therefore past consideration

Re McArdle

Privity of contract: Tweddle v Only parties to the Atkinson contract can sue each other.

Son-in-law could not sue because he had not provided consideration.

Performance of an existing contractual obligation is sufficient consideratio n to support a promise from a third party. Pinnels Case: A lesser sum is not a good consideration for a higher sum.

Shadwell v Shadwell

C promised his nephew, A, an allowance if he would marry his fiance, B (In those days an agreement to marry was legally binding).

The promise was binding, even though A was already obliged to marry B. A had provided consideration for the uncles promise as he was initially under a duty to fiance not to uncle, but by entering into the agreement with the uncle he had put himself under an obligation to him too. The interest was recoverable. Payment & satisfaction of a smaller sum was not consideration for the promise to accept this amount in satisfaction of a debt, interest and cost a greater sum. Dr., Foakes had not provided any consideration.

Foakes v Beer

Payment by cheque gives no benefit over and above payment in cash ( a lesser sum is not a good consideration for a higher sum.

D & C Buildings v Rees

Doctrine of promissory is estoppel: You cannot exploit the situation by going back against your own words.

Central London Property Trust Ltd. v High Trees House Ltd

Mrs Beer had obtained judgment for a debt of 2090/against Dr Foakes with interest, who subsequently asked for time to pay. She agreed that she claimant sued his father-in-law would take no further action in the matter provided that Foakes paid 500 immediately and the rest by half-yearly installments of 150. After receiving 2090/she sued for 360/interest on the judgment debt which the defendant refused to pay. The Ps, a small building company, had completed some work for Mr. Rees for which he owed the company 482. For months the company, which was in severe financial difficulties, pressed for payment. Eventually, Mrs. Rees, who had become aware of the company's problems, contacted the company and offered 300 in full settlement. She added that if the company refused this offer they would get nothing. The company reluctantly accepted a cheque for 300 "in completion of the account" and later sued for the balance. In 1937 the Ps granted a 99 year lease on a block of flats in London to the Ds at an annual rent of 2500. Because of the outbreak of war in 1939, the Ds could not get enough tenants and in 1940 the Ps agreed in company's problems, writing to reduce the rent to 1250. After the war in 1945 all the flats were occupied and the Ps sued to recover the arrears of rent as fixed by the 1937 agreement for the last two quarters of 1945.

It was held that the company was entitled to succeed. The judge was of the view that it was not unfair for the creditors to go back on their word and claim the balance as the debtor had acted unjustly by exerting improper pressure.

It was held that they were entitled to recover this money as their promise to accept only half was intended to apply during war conditions. Ps were estopped from going back on their promise and could not claim the full rent for 1940-45. * Ps Plaintiff , Ds Defendant

The doctrine of promissory estoppel does not create a new cause of action where non existed before.

Combe v Combe

A husband entered into a contract promising his wife to pay 100.00, free of income tax, after their divorce. The wife did not apply to the court for a maintenance order, but when the husband failed to implement his promise she sued to enforce the agreement relying on his promise and the doctrine of promissory estoppel. A husband separated from his wife wrote and signed a document stating that in consideration of the wife paying off the outstanding mortgage debt of 180 on their matrimonial home he would transfer the house into her sole ownership. The wife implemented her promise but husband did not. He alleged that his promise was a domestic relation not giving rise to a legal relation. A buyer of hops asked by the seller whether sulphur had been used in the treatment and added that if it had he will not buy. The seller assured him that sulphur had not been used. Sulphur had been used. William on selling a car to the claimant company of car dealers asserted that it was a 1948 model. The registration book appeared to confirm this statement but it had been altered by some previous owner and the car was infect a 1939 model A wharf (dock) owner made an agreement to permit a ship owner to unload his ship at the dock the ship was damaged when at low tied it was grounded at the bottom of the river on a hard ridge. A soprano, Madame Poussard agreed to sign a series of opera for Spiers, she failed to appear on the opening night and was refused for her services for her subsequent nights she sued for the breach of contract.

The wife was not a in apposition to enforce the agreement as she lacked consideration on her part. The equitable doctrine did not create a new cause of action where none existed before.

Agreements between Merritt v Merritt spouses about to or already separated are Legally binding.

Husband promise was enforceable the agreement having been made when the parties were not living together courteously. A legal relation is assumed where a husband deserts his wife and an agreement is concluded of the ownership of the matrimonial home occupied by the wife and children.

A statement of quality based upon which a contract is made as far as buyer is concerned, considered a term. An assertion made by person who is a layman for those goods being sold is not considered a term.

Bannerman v white

The court decided that the sulphur was a vital part of the contract. Around which the whole deal revolved it was a term.

Oscar Chess Ltd. v Williams

The statement was in innocent misrepresentation but not a term of the contract. The seller who was not a car dealer with experience knowledge did not intend to be bound contractually by his statement concerning the age of the vehicle. The court implied a term into the agreement that the river bottom would be reasonably safe. Such implied terms are based on the presumed but unexpressed intention of the parties. The obligation to appear on the opening night was a condition and since madame Poussard was in breach of this condition Spiers was entitled to treat the contract has at an end.

The Moorcock case

Contract is termed void on breach of a condition.

Poussard v Spiers

Breach of a warranty Bitteni v Gye does not make the contract void.

A tanner Bitteni who added to sign in a series of concerts and to attend 6 days of rehearsals. Before and failed to appear for the first 4 days of rehearsal Gye in consequence refused Bitteni services for the balance of the rehearsal and performances Bitteni sued for the breach of contract.

The obligation to appear in the rehearsal was a mere warranty and Bitteni breach could not be treated as an end of the contract. Gye was accordingly in the breach of contract when he refused Betteni services for the remainder of the contract.

A non serious breach of an innominate term can only result in claim for damages. An exclusion clause cannot be introduced into contract after it has been made.

Hansa Nord

Olley v Marlborough court

A notice in a hotel room excluded liability for loss or damage to guest property.

This was ineffective because the contract for accommodation had been made at the reception desk.

Only natural losses reasonably foreseeable by a bystander can be claimed for.

Hadley v Baxendale

A carrier was given a mill-shaft to deliver to a plant manufacturer as a model for making a new shaft the carrier delayed in delivery and unknown to him the mill stood idle during the period of delay.

He was not liable for the loss of profit and the rule was formulated as follows: The loss should be such as may fairly and reasonably be considered either arising naturally, from the breach of contract, or as may reasonably be supposed to have been in contemplation of both parties at the time they made the contract. There are two types of loss for which damages may be recovered: General damage -normal loss. Special damages -abnormal loss.

A company is a separate legal entity having its own assets and liabilities.

Salmon v Salmon & company Ltd.

Salmon had been in the boot and leather business for some time together with other family members he sold the old business to his newly formed Ltd. company. Payment was in form of cash shares and debentures when the company was eventually winded up it was agreed that Salmon and the company was the same and he could not be the creditor of his own so his debentures would not have any effect.

House of lord held that since there was no fraud involved his debentures were valid the company was properly constituted and therefore it was a separate legal personality from Salmon.

A company is a separate legal entity.

Lee v Lees Air Farming Ltd

An aerial crops spraying business in which Mr. Lee was a majority shareholder and was the sole working director was killed while piloting the air craft.

A sham company is Jones v Lipman also liable along with the related violator. Court is not free to Adams v Cape this regard the industries principle of Salomon v Salomon unless carefully watched.

Fortnum & Mason Ltd. v Fortnum Ltd

Any contract not authorized by the object clause of a company is termed ultra virus. Failure of substratum may result in winding up of company. The articles in all respect are enforceable by the company against its members.

Ashbury Railways Carriage v Riche German date coffee Co. Hickman v Kent

L agreed to sell some land to J, L than changed his mind and in order to evade specific performance sold the land to a company of which he was a controlling member. Cape, an English registered company was involved in mining asbestos(a form of in south Africa and marketing it world wide to various subsidiaries one of its marketing subsidiaries, CPC, a company incorporated and carrying on business in the U.S had a court judgment against it. The claimant, a well known store in Piccadilly, London bought an action in the tort of passing off, against the defendant. The defendant carried on business as an importer of low price to goods from Hong Kong and China and then exported to Europe. The defendant did not apply its name to the goods themselves The objects clause of the company set out purpose of the company as the making and selling of railway carriages. The company entered into a contract to purchase a concession for constructing a railway. There was a failure to carry out the object of making coffee from dates by means of a German patent (although the company did manufacture it with a Swedish patent). The Co.s articles included a clause to the effect that all disputes between the company & its members were to be referred to arbitration. A member brought court proceedings against the Co.

Although he was majority share holder and the sole working director of the company he and the company separate legal persons and therefore he could also be and employee of it for the purpose of relevant statute with rights against it when killed in an accident in the course of his employment. The company was sham and specific performance extended not only to L but also to the company.

It was unsuccessfully argued that the veil should be lifted between the companies so as to enable the judgment to be enforced against cape.

There was no evidence that any costumer of the claimant store would buy the defendants good thinking they were the claimants therefore the action failed.

The contract was ultra virus and beyond the capacity of the company.

The company would be wound up.

The proceedings were stayed. The Company could enforce the arbitration clause against a member.

An alteration of articles of association can be made in the best interest of the company. An alteration of articles of association to expel a member in the best interest of the company can be made with compensation. Company has the power to alter its AOA with a retrospective effect.

Greenhalgh v Alderne Cinemas

Sidebottom b Kershaw leese & Co.

The issue was the removal from the articles of the members right of first refusal of any shares which a member might wish to transfer; the majority wish to make the change in order to admit an outsider to membership in the interest of the company. The alteration was to expel a member who carried on a business completely with the company.

The benefit to the company as whole held to be a benefit which any individual hypothetical member of the company could enjoy directly or through the company & not merely a benefit to the majority of the members only. The alteration was held valid.

Aleen v Gold Reefs

Z held fully paid & partly paid-up capital in the company. The Co.s articles provided for a lien (a right over anothers property to protect a debt charged on that property.) for all debts & liabilities of any member upon all partly paid shares held by the member. The Co. by special resolution altered its articles so that the lien was available on fully paid-up shares as well. A managing director was appointed under contract with a company for ten years but, after the articles had been changed empowering his removal as director, he was dismissed.

It was held that the Co. had the power to alter its articles by extending the lien to fully paid shares. Alteration to the articles is only subject to the alteration by S9 CA 1985. Rights in the articles are limited as to their duration by the articles which confer them.

Claim can be made on breach of a service agreement due to alteration of the articles.

South Foundries ltd. v Shirlaw

Raising Share Clemens v Capital to dilute a Clemens Bros. ltd shareholder s voting right

P held 45% of the shares, d held 55%. D along with other directors decided to increase the nominal share capital. A general meeting was held for the issue. D favored, P showed deterrence 7 alleged that the purpose of this was to dilute her voting control below to 25% & therefore deprive of her power to vote special resolution.

The court awarded them damages for wrongful dismissal since the alteration of the articles, although effective, constituted a breach of their contract of service; it was contrary to the agreement that he should serve for ten years, which became impossible when he lost their directorship. The fact revealed that the director with majority shareholders were raising share capital not with the intension to favor all but, the reason was to dilute the minority voting control. The directors were miss using their power.

The directors owe no general duty to individual members.

Percival v Wright

Some Shareholders asked Co.s secretary for any party interested to buy their shares Shareholders then sold shares to Chairman. Later it was revealed that at the time of negotiation, directors were engaged with a party for sale of shares at a price which was considered to be high of the current deal. The shareholders wished to return back. Shares of the railway Co. (T) were equally divided on its directors. The company got a contract. Three directors of (T) were not willing the Co. to have the contract. They formed another company (D) just because of getting a new contract. These directors later sold a plant by majority voting to D. Others directors sued. Regal (hasting) ltd. owed a cinema & wished to buy two more cinemas & later sell them all as going concern. But regal was not in financial position to buy the two cinemas. Some directors were not were not agree. Regal with some directors formed another company, real applied for majority shares, managed amount, sold cinemas as going concerns, regal got more profit portion where as co. got less. Colle was a director of IDC. A company wanted to give a contract to Colle not to IDC. Colle because of having interest in the contract, resigned & accepted the contract in his own capacity. Contracted for chair from a claimant partnership. (of which the director was a member). The director was interested at both sides but couldnt bargain for the company.

The director owe a fiduciary duty to company but not to individual shareholders, so under no duty does the director is liable to act for the best interest of an individual. Co. could have sued the director if any would have done.

Directors cannot attain any benefit from there office by breaching their fiduciary duties.

Cook v Deeks

It was held that Directors could not retain benefits of the Co. (T) to themselves. The director could not use their voting control to bring a loss to the minority

Director cannot make profit from there position as directors regardless of their motives or consequence s to the company.

Regal (hasting) ltd. v Gulliver

It was held that Directors used their special knowledge to gain hidden profits. It was a breach of duty. They were accountable for the profit made.

Fiduciary duties survive even after the directors leave the company. A director should not be allowed to contract with his own company.

IDC v Cooley

He was in a breach of fiduciary duty as he preferred to earn profit for his own sake and acted against the best interest of the company. Fiduciary duty exited even after his resign from the company. Company was entitled for avoiding the contract. No question should be raised for fairness / unfairness of the contract.

Aberdeen Co. Railway v Blaikie

A director is made personally liable for debts & liabilities if he has committed wrongful trading. A company secretary within his
authority can make contracts with third party on

Produce Marketing Consortium

Ltd.

Company traded successfully for 9 years, built up an overdraft, had a continuing loss Liabilities exceeded assets (between 1980 87). In Feb. 87, directors recognizing expected liquidation carried on trading. Suffered loss, directors were sued. Co/s Secretary of the ordered a Limousine & stated that it was to be used in business, but used personally. Secretary usually hired cars in the past.

The court required the directors to contribute for 75000/in Co.s assets, because being aware of the going concern problem, trading was carried on. Wrongful attitude observed.

Development v Fidelis
Furnishing

The contract was binding since hiring of cars was usual to the office of companys secretary.

End of Cases
Glossary of Legal Terms:

Estoppel: Rule of evidence which prevents a person from relying on facts when, by deed, word or action, he has led another person to act to his detriment on those facts. Estoppel is a defense, not a cause of action. Anyone who wishes to rely on the defense of estoppel to defend an action must request it.

Mens rea: (Latin: guilty mind) Most crimes require proof of guilty intention before a person can be convicted. The prosecution must prove either that the accused knew his action was illegal or that he was reckless or grossly negligent. Some offences (such as drunken driving) are matters of strict liability, which means that the intention or state of mind of the person committing the offence is irrelevant.

Obiter dicta: (Latin: sayings by the way) Observations by a judge on law or facts not specifically before the court or not necessary to decide an issue. Pari passu: (Latin: with equal step) Often used in bankruptcy proceedings where creditors are said to rank pari passu, which means the assets are distributed without preference between them.

Plaintiff: Person who brings a case to court. (Also called the petitioner or applicant.) The person being sued is generally called the defendant or respondent.