Analysis of Contract Law Principles with Case Study Applications

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Business Law
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Contents
Introduction...................................................................................................................... 3
Principles of Contract Law............................................................................................... 4
Offer..............................................................................................................................4
Invitation to Offer.......................................................................................................... 4
Unilateral Offer............................................................................................................. 5
Intention to create legal relation...................................................................................6
Acceptance...................................................................................................................6
Legal Position of Joshua..................................................................................................7
With respect to displayed shoes...................................................................................7
With respect to promise for university fees...................................................................7
With respect to Gym membership................................................................................7
Conclusion....................................................................................................................... 8
References.......................................................................................................................9
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Introduction
Contract laws are significant for enforcement of legal rights of parties to agreements.
Under contract laws, the foundations for their validity are established. It provides the
concerned parties with rights of enforcement of promise made in agreement and the
power to obtain compensation as and when any damage is caused by another party.
However, all such rights can be imposed only when the contract is valid and legal. Its
validity can be identified based on the essential requirements. In this report, the
essential requirements for a valid contract are discussed and analysed and based on
the discussion carried out, appropriate recommendations have been made with
reference to the given case scenario.
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Principles of Contract Law
For the purpose of enforceability, it is significant that the contract is valid and legal.
Unless all the elements of a valid contract are fulfilled, a contract cannot be enforced.
With reference to the given case, the following elements of contract law are relevant:
Offer
It can be termed as a proposal made by one party to another with an intention to be
bound by the contract if accepted. Under contract law, ‘Offeror’ is the person making
the offer and ‘Offeree’ is the person to whom the offer is addressed (Dance, 2017). An
offer shall be considered valid only when the following terms are fulfilled:
 It is communicated to the person intended.
 The offer is made with the intention to be bound by its terms.
 The language of the offer made must be clear and certain.
 It must have the capability to become a valid contract i.e. the parties must be
legally capable and there must be a valid consideration promised (O'Gorman,
2013).
Invitation to Offer
It can be termed as the willingness of a party to negotiate with other parties. Unlike
offers, there is no intention to be bound by the invitation made. It is made with an
intention to receive an offer from the public at large to negotiate terms. Any response to
an invitation shall be an offer but not acceptance or contract.
Offer vs Invitation to offer
 When an offer is made, the offeror shall have the intention to be bound by its
terms whereas, in an invitation to offer, the person making invitation shall have
the intention to negotiate and not be bound by any terms (Peel, 2015).
 For an enforceable contract, the offer is essential whereas invitation to offer is
not essential.
 On acceptance, the offer becomes a binding contract and an invitation becomes
an offer.
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 Offer is another term for proposal whereas invitation to offer is an invitation to
make a proposal.
The difference between offer and an invitation to offer can be made more clear with
reference to decided case law. In the case of Carlill v Carbolic Smoke Ball Company
[1892], Carbolic smoke ball company made a smoke ball which can treat influenza. An
advertisement was published by the company claiming that their smoke ball can treat
influenza and even after following the stated instructions, if influenza is not treated,
then, the customer shall be rewarded with £100. Mrs. Carlill purchased the smoke ball
and used it in accordance with the instructions. Her influenza was not treated, following
which she claimed £100 from the company (Fried, 2015). Upon her request, the
company denied the payment stating that it was not an offer but mere invitation and
there was no acceptance of which they were aware.
The court in the given case decided that the advertisement published by the company
was a unilateral offer and it is deemed to be accepted by Mrs. Carlill as she followed the
stipulated instruction and procedures. It was considered a valid offer and the contract
was made enforceable.
With respect to the offer and an invitation to offer, Fisher v Bell [1961]is the best
example. In this case, a flick knife was displayed by a shopkeeper in the window of his
shop along with price tag. The question was raised that whether the price attached
constitute an offer or invitation to offer. Relying on the principles of contract law, it can
be stated that the display of a knife with a price tag is not an offer but an invitation to
offer. It shall become an offer if a customer presents the knife at the counter to be
purchased (Poole, 2016). Through this case, it was established that anything displayed
in a store with a price tag is not an offer but an invitation to offer.
Unilateral Offer
This is a type of offer under which a contract is created when the other party performs
the conditions stated in the offer. Such an offer is accepted by performance and the
party making the offer is bound to reward the party giving acceptance by performance.
Therefore, in the case of Carlill v Carbolic Smoke Ball Company [1892], the offer
made by the company was a unilateral offer (McKendrick, 2014).
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Intention to create legal relation
It is a doctrine under contract law which implies that for a valid contract to be formed,
there must be an intention of all the parties to contract to be bound by its terms and face
legal consequences in case of any breach. In the absence of any such intention, the
contract cannot be enforced (Carter and Courtney, 2017). In case of agreements
between family members, the rebuttable presumption is that the parties have no
intention to be legally bound unless proved otherwise.
In the case of Balfour v Balfour [1919], the wife was promised for per month
maintenance money by her husband. She was relying on her husband for such
payments and when the husband did not make any payment, she filed a suit against
him (Saprai, 2017). The court decided that it was a family agreement and it is presumed
that there was no intention to create legal relation. Therefore, there existed no contract.
Acceptance
A contract can come into force only when an offer made is accepted by the person to
whom it is intended. On acceptance, a legally binding contract comes into existence and
such acceptance cannot be revoked once communicated (Bayern, 2015). It is an
essential element to make a contract enforceable and valid.
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Legal Position of Joshua
With respect to displayed shoes
This case relates to the legal principle of an invitation to offer. With reference to the
facts of case Fisher v Bell [1961], any item displayed in a shop with a price tag is an
invitation to offer and not an offer and therefore, it cannot be legally enforced. The Lucci
shoes displayed in the store cannot be bought by Joshua for £90 as the offer made by
him at the counter was not accepted and therefore, there was no valid contract. The
displayed price was merely an invitation to offer. Therefore, the shoes cannot be
purchased by Joshua for £90.
With respect to promising for university fees
This case relates to the intention of parties to create a legally binding agreement. With
reference to the facts of case Balfour v Balfour [1919], the agreement between
Joshua and his mother for payment of university fee upon admission was a family
agreement. The parties had no intention to make it legally binding. For making the
agreement enforceable, it is important to prove that there existed an intention to create
legal relation. However, due to the absence of any such intention, the agreement cannot
be made enforceable and the mother cannot be made legally bound to pay £25000 to
Joshua.
With respect to a Gym membership
This case relates to the legal principle of the unilateral offer and its enforceability when
accepted by performance. With reference to facts of case Carlill v Carbolic Smoke
Ball Company [1892], the Gym made an offer to the public and clearly stated that upon
the performance of terms of the offer, the reward shall be provided. The reward was a
free Gym membership for three months. It was a unilateral offer made by the Gym. The
offer was then accepted by Joshua by completing its terms. On the performance of
stated terms, a valid contract came into force and the gym was bound by its terms.
Here, Joshua has a right for enforcement and is therefore entitled to three months of
free membership.

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Conclusion
With references to the discussion and analysis carried out in the report, the legal
position of Joshua has been identified in the various circumstances. Based on the
principles of offer and an invitation to offer, Joshua shall not be able to enforce any
rights for purchasing the Lucci shoes as no valid contract was established between him
and the store. Similarly, no rights can be enforced in case of the money promised by the
mother for payment of his University fees. This is because there was no intention
among the parties to be bound legally. Lastly, Joshua has enforceable rights against the
Gym as the offer given by Gym was a unilateral offer and therefore, on acceptance by
Joshua, it became a valid contract.
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References
 Bayern, S., 2015. Offer and Acceptance in Modern Contract Law: A Needles
Concept. Calif. L. Rev., 103, p.67.
 Carter, J.W. and Courtney, W., 2017. Unexpressed Intention and Contract
Construction. Oxford Journal of Legal Studies, 37(2), pp.326-356.
 Dance, J., 2017.Construction of Contracts: An Analysis of Objectivity and
Subjectivity within Contractual Transactions.Bournemouth University.
 Fried, C., 2015. Contract as promise: a theory of contractual obligation. Oxford
University Press, USA.
 McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University
Press (UK).
 O'Gorman, D.P., 2013. Redefining Offer in Contract Law. Miss. LJ, 82, p.1049.
 Peel, E., 2015. Treitel on the Law of Contract (Vol. 414). London: Sweet &
Maxwell.
 Poole, J., 2016. Textbook on contract law. Oxford University Press.
 Saprai, P., 2017. Balfour V Balfour and the separation of contract and
promise. Legal Studies, 37(3), pp.468-492.
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