CONTRACT CASES

By: Venessa Daley

SEPTEMBER 14, 2020

BUSINESS LAW
Tuesday 6pm-8pm
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Table of Contents

Table of Contents ............................................................................................................................ 1

Offers .............................................................................................................................................. 3

Gunthing v Lynn ......................................................................................................................... 3

Carlill v Carbolic Smoke Ball Co. Ltd........................................................................................ 4

Fisher v Bell ................................................................................................................................ 5

Pharmaceutical Society of Great Britain v Boots Cash Chemists .............................................. 6

Patridge v Crittenden .................................................................................................................. 7

Grainger v. Gough ...................................................................................................................... 8

Harvey v Facey ........................................................................................................................... 9

Blackpool v Blackpool Council ................................................................................................ 10

Termination of offers .................................................................................................................... 12

Hyde v Wrench ......................................................................................................................... 12

Stevenson v McLean ................................................................................................................. 13

Ramsgate Hotel v Montefiore ................................................................................................... 14

Dickinson v Dodds .................................................................................................................... 15

Routledge v Grant ..................................................................................................................... 16

Acceptance .................................................................................................................................... 18

Powell v Lee ............................................................................................................................. 18

Brogden v Metropolitan Railway.............................................................................................. 18

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Entores v Miles Far East Corp. ................................................................................................. 19

Felthouse v Bindley .................................................................................................................. 20

Adams v Lindsell ...................................................................................................................... 21

Household Insurance v Grant Contrast ..................................................................................... 22

Holwell Securities v Hughes..................................................................................................... 23

Consideration ................................................................................................................................ 25

Currie v Misa ............................................................................................................................ 25

Dunlop v Selfridge .................................................................................................................... 26

Roscorla v Thomas ................................................................................................................... 27

Lampleigh v. Braithwaite.......................................................................................................... 28

Tweddle v. Atkinson ................................................................................................................. 29

White v Bluett ........................................................................................................................... 30

Thomas v Thomas ..................................................................................................................... 30

Collins v Godefroy.................................................................................................................... 30

Stilk v Myrick & Hartley v. Ponsonby ..................................................................................... 30

Pearce v. Brooks ....................................................................................................................... 30

Pinnel’s case.............................................................................................................................. 30

Central London Property Trust v High Trees House ................................................................ 30

References ..................................................................................................................................... 31
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Offers

Gunthing v Lynn

Law Principle: (Have clearly stated terms; it must be definite)

Facts

The buyer of a horse, who was the plaintiff in this case, promised the seller that they would pay

$5 more for the horse, or buy another horse from the seller if the horse was lucky. The horse was

not in the condition that the plaintiff believed and a dispute arose between the parties as to whether

the seller was owed the conditional payment mentioned by the buyer.

Issue

The court had a number of issues to decide. The most prominent issue was whether the offer from

the buyer, to pay more for the horse if it was lucky, could be considered to be a valid offer for the

purposes of the sale. This would give an indication as to whether the seller could rely on the

payment that had been mentioned. Specifically, the court was required to understand whether the

terms ‘lucky’ and ‘buy another horse’ could be defined and considered legally binding on the

parties.

Held

The court held that the condition to pay $5 extra for the horse if it was lucky, was deemed to be

too vague to create a binding contract between the parties. The words contained in an agreement

must be clear so that the parties can be sure of the terms upon they are contracting. As a result of

this, the only part of the transaction that was sufficient for the court was the purchase of the horse

for the price of $63 and that was the vast majority of the legal agreement between the parties.
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Carlill v Carbolic Smoke Ball Co. Ltd.

Law Principle: The offeror must have an intention to do business

Facts

The defendant, the Carbolic Smoke Ball Company, placed an advertisement in a newspaper for

their products, stating that any person who purchased and used their product but still contracted

influenza despite properly following the instructions would be entitled to a £100 reward. The

advert further stated that the company had demonstrated its sincerity by placing £1000 in a bank

account to act as the reward. The claimant, Mrs Carlill, thus purchased some smoke balls and,

despite proper use, contracted influenza and attempted to claim the £100 reward from the

defendants. The defendants contended that they could not be bound by the advert as it was an

invitation to treat rather than an offer on the grounds that the advert was: mere ‘puff’ and lacking

true intent; that an offer could not be made ‘to the world’; the claimant had not technically provided

acceptance; the wording of the advert was insufficiently precise; and, that there was no

consideration, as necessary for the creation of a binding contract in law.

Issue

Whether the advert in question constituted an offer or an invitation to treat.

Held

The Court of Appeal found for the claimant, determining that the advert amounted to the offer for

a unilateral contract by the defendants. In completing the conditions stipulated by the advert, Mrs

Carlill provided acceptance. The Court further found that: the advert’s own claim to sincerity

negated the company’s assertion of lacking intent; an offer could indeed be made to the world;
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wording need only be reasonably clear to imply terms rather than entirely clear; and consideration

was identifiable in the use of the balls.

Fisher v Bell

Law Principle: Invitation to treat is not an intention to do business

Facts

The defendant shopkeeper displayed in his shop window a flick knife accompanied by a price

ticket displayed just behind it. He was charged with offering for sale a flick knife, contrary to s. 1

(1) of the Restriction of Offensive Weapons Act 1959.

Issue

The issue was whether the display of the knife constituted an offer for sale (in which case the

defendant was guilty) or an invitation to treat (in which case he was not).

Held

The court held that in accordance with the general principles of contract law, the display of the

knife was not an offer of sale but merely an invitation to treat, and as such the defendant had not

offered the knife for sale within the meaning of s1(1) of the Act. Although it was acknowledged

that in ordinary language a layman might consider the knife to be offered for sale, in legal terms

its position in the window was inviting customers to offer to buy it. The statute must be construed

in accordance with the legal meaning, as“…any statute must be looked at in light of the general

law of the country, for Parliament must be taken to know the general law” (per Lord Parker C.J.

at para. 4). It is well established in contract law that the display of an item in a shop window is an
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invitation to potential customers to treat. The defendant was therefore not guilty of the offence

with which he had been charged.

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Law Principle: Invitation to treat is not an intention to do business

Facts

The defendant ran a self-service shop in which non-prescription drugs and medicines, many of

which were listed in the Poisons List provided in the Pharmacy and Poisons Act 1933, were sold.

These items were displayed in open shelves from which they could be selected by the customer,

placed in a shopping basket, and taken to the till where they would be paid for. The till was operated

by a registered pharmacist. However, the claimant brought proceedings against the defendant for

breach of section 18(1) of the Pharmacy and Poisons Act 1933, which requires the supervision

of a registered pharmacist for the sale of any item in the Poisons List.

Issue

The question was whether the contract of sale was concluded when the customer selected the

product from the shelves (in which case the defendant was in breach of the Act due to the lack of

supervision at this point) or when the items were paid for (in which case there was no breach due

to the presence of the pharmacist at the till).

Held

The Court of Appeal held that the defendant was not in breach of the Act, as the contract was

completed on payment under the supervision of the pharmacist. The display of the goods on the

shelves were not an offer which was accepted when the customer selected the item; rather, the
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proper construction was that the customer made an offer to the cashier upon arriving at the till,

which was accepted when payment was taken. This analysis was supported by the fact that the

customer would have been free to return any of the items to the shelves before a payment had been

made.

Patridge v Crittenden

Law Principle: Invitation to treat is not an intention to do business

Facts

The defendant advertised for sale a number of Bramblefinch cocks and hens, stating that the price

was to be 25 shillings for each. Under the Protection of Birds Act 1954, it was unlawful to offer

for sale any wild live bird. The Royal Society for the Prevention of Cruelty to Animals (RSPCA)

brought a prosecution against the defendant under the Act. At his trial, the defendant was found

guilty of the offence by the magistrates; he appealed this conviction.

Issue

The issue on appeal was whether the advertisement was properly construed as an offer of sale (in

which case the defendant was guilty) or an invitation to treat (in which case he had committed no

offence). A further issue was whether it was appropriate to adopt a different interpretation of the

phrase ‘offer for sale’ in the context of criminal law than was accepted in the context of contract

law.

Held

The court held that the advertisement was not an offer but an invitation to treat, and as such the

defendant was not guilty.

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The court also rejected the suggestion that the court should adopt a stricter interpretation of the

phrase ‘offer for sale’ in the criminal context compared to the contractual context, reasoning that

to do so would usurp the legislative function. The legislature had chosen the phrase ‘offer for sale’

based on its existing understanding, and to alter this understanding under the pretext of

‘interpretation’ was not the proper role of the court.

Grainger v. Gough

Law Principle: Invitation to treat is not an intention to do business

Facts

The defendant wine merchant circulated a catalogue which contained a price list for its products.

The claimant ordered a number of bottles of wine from the catalogue and, when the defendant

refused to deliver these at the stated price, alleged that a contract had been formed.

Issue

The issue was whether the price list constituted an offer to sell wine at a certain price (in which

case the contract was fully formed and the claimant had a valid claim), or an invitation to treat (in

which case no contract had been formed).

Held

Rejecting the claim, the House of Lords held that the price list must be construed not as an offer,

but as an invitation to treat. In reaching this conclusion, it reasoned that to interpret the list as an

offer would mean that in theory the defendant would be obliged to deliver an unlimited quantity

of wine at the stated price, upon receipt of an order. This would be unreasonable, and would not

reflect the intentions of the parties as the merchant’s stock is necessarily limited, and it would not
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be possible for him to carry out such an order. Both reasonableness and objective intention are key

to distinguishing between an offer and an invitation to treat. On this basis, the list was interpreted

an invitation to customers to offer to buy wine at the stated price, which the merchant may then

accept or reject. In this case, the defendant was not bound to deliver the wine ordered by the

claimant.

Harvey v Facey

Law Principle: Statements of negotiation are not intentions to do business

Facts

 Harvey was interested in buying a Jamaican property owned by Facey. He sent Facey a

telegram stating “Will you sell us Bumper Hall Pen? Telegraph lowest cash price – answer

paid.”

 Facey responded stating “Bumper Hall Pen £900”

 Harvey responded stating that he would accept £900 and asking Facey to send the title

deeds.

 Facey then stated he did not want to sell.

 Harvey sued, stating that the telegram was an offer and he had accepted, therefore there

was a binding contract.

Issue

 Was the telegram advising of the £900 lowest price an offer capable of acceptance?

Held
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 The House of Lords held that the telegram was an invitation to treat, not a valid offer.

Therefore no valid contract existed.

 The telegram only advised of the price, it did not explain other terms or information and

therefore could not create any legal obligation.

 Harvey’s telegram “accepting” the £900 was instead an offer which Facey could either

accept or reject. He rejected it so there was no contract created.

Blackpool v Blackpool Council

Law Principle: Offer may be communicated verbally, in writing or by conduct –Note – Invitation

to submit tenders are generally considered invitation to treat, although it may also be considered

an offer by the advertisers to consider any offer submitted to them.

Facts

The defendants were a local authority that managed the local airport as its owners. They had

granted the plaintiffs, who were a flight club, a concession to operate casual flights out of the

airport. The concession came up for renewal and the tender invitation was released to the plaintiff

and six other companies. The tender had a clause stating that tenders would not be considered if

they missed the time and date deadline stipulated. The town’s clerk failed to empty the letterbox

on time and as such, the plaintiff’s tender missed the deadline and the defendant accepted a lower

proposal. The plaintiffs brought an action for damages against the defendant for negligence and

for breaching their contract. At an initial hearing, the judge held that the request for tenders by the

defendant required them to consider all the tenders received and, on this basis,, they were liable to

the plaintiff. The defendants appealed this decision.

Issue
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The issue for the court was whether the invitation to submit a bid for tender could be considered

to establish the intent to create a contract between the parties. It is important to note that contracts

were not to be readily implied by the courts which made this deliberation particularly important.

Held

The court dismissed the defendant’s appeal. They found that the invitation to submit a tender was

usually no more than an offer to receive bids but in this circumstance, examining the behaviour of

the parties created clear intention to create a contract and therefore the failure to consider the

plaintiff’s application made them liable.

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Termination of offers

Hyde v Wrench

Law Principle: By refusal and counteroffer

Facts

The defendant, Mr Wrench, offered to sell the farm he owned to the complainant, Mr Hyde. He

offered to sell the property for £1,200, but this was declined by Mr Hyde. The defendant decided

to write to the complainant with another offer; this time to sell the farm to him for £1,000. He

made it clear that this would be his final offer regarding the property. In response, Mr Hyde offered

£950 for the farm in his letter. This was refused by Mr Wrench and he confirmed this with the

complainant. Mr Hyde then agreed to buy the farm for £1,000, which was the sum that had

previously been offered. However, Mr Wrench refused to sell his farm.

Issues

The complainant brought an action for specific performance, claiming that as Mr Wrench refused

to sell the farm, this was a breach of contract. The issue in this case was whether there was a valid

contract between the parties and if a counter offer was made in discussions, whether the original

offer would still remain open.

Held

The court dismissed the claims and held that there was no binding contract for the farm between

Mr Hyde and Mr Wrench. It was stated that when a counter offer is made, this supersedes and

destroys the original offer. This original offer is no longer available or on the table. In this case,

when Mr Hyde offered £950, he cancelled the £1,000 offer and could not back track and accept.
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Stevenson v McLean

Law Principle: By refusal and counteroffer

Facts

The defendant, Mclean, offered to sell iron to the complainant, Stevenson Jaques & Co. This was

for the price of 40s and the offer would remain open until Monday. The complainant sent a

telegram to the defendant, asking whether he would accept a payment of 40 over a two-month

period, or what his longest limit would be for payment. McLean did not respond to this telegram.

The defendant sold the iron to another party, but did not inform the complainant of this action. On

Monday morning, the complaint sent a telegram to accept the offer, unware it had been sold.

Issues

The complainant sued the defendant for non-delivery of the iron and that this was a breach of

contract. The issue in the case was whether there was binding contract between the parties and if

the telegram sent by the complainant was an inquiry for information or a counter offer.

Held

The court heard the complainant was only inquiring for more information about whether the terms

of the offer could be changed; there was no specific wording to indicate that it was a counter offer

or rejection. This was in contrast to Hyde v Wrench. This meant that the offer made by the

defendant was still valid and the second telegram by the complaint formed a binding contract.

While the promise of the offer remaining open until Monday was not itself binding and an offeror

can revoke this at any time, there had been no revocation communicated to the complainant in this

case.
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Ramsgate Hotel v Montefiore

Law Principle: By lapse of time

Facts

The defendant, Mr Montefiore, wanted to purchase shares in the complainant’s hotel. He put in his

offer to the complainant and paid a deposit to his bank account to buy them in June. This was for

a certain price. He did not hear anything until six months later, when the offer was accepted and

he received a letter of acceptance from the complainant. By this time, the value of shares had

dropped and the defendant was no longer interested. Mr Montefiore had not withdrawn his offer,

but he did not go through with the sale.

Issues

The complainant brought an action for specific performance of the contract against the defendant.

The issue was whether there was a contract between the parties after the acceptance of the original

offer six months after it was made.

Held

The court held that the Ramsgate Victoria Hotel’s action for specific performance was

unsuccessful. The offer that the defendant had made back in June was no longer valid to form a

contract. A reasonable period of time had passed and the offer had lapsed. The court stated that

what would be classed as reasonable time for an offer to lapse would depend on the subject matter.

In this case, it was decided that six months was the reasonable time before automatic expiration of

the offer for shares. Yet, for other property, this would be decided by the court in the individual

cases.
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Dickinson v Dodds

Law Principle: By revocation

Facts

The defendant, Mr Dodds, wrote to the complainant, Mr Dickinson, with an offer to sell his house

to him for £800. He promised that he would keep this offer open to him until Friday. However, on

the Thursday Mr Dodds accepted an offer from a third party and sold his house to them. It was

claimed that Mr Dickinson was going to accept this offer, but had not said anything to Mr Dodds

because he understood that he had until Friday. Mr Dodds communicated that the offer had been

withdrawn through a friend to the complainant. After hearing this, Mr Dickinson went to find the

defendant, explaining his acceptance of the offer. The complainant brought an action for specific

performance and breach of contract against the defendant.

Issues

The issue in this case was whether the defendant’s promise to keep the offer open until Friday

morning was a binding contract between the parties and if he was allowed to revoke this offer and

sell to a third party.

Held

The court held that the statement made by Mr Dodds was nothing more than a promise; there was

no binding contract formed. He had communicated an offer for buying his house to the complainant

and this offer can be revoked any time before there is acceptance. There was no deposit to change

this situation. Thus, as there was no obligation to keep the offer open, there could be no ‘meeting

of the minds’ between the parties. In addition, the court stated that a communication by a friend or
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other party that an offer had been withdrawn was valid and would be treated as if it came from the

person themselves

Routledge v Grant

Law Principle: The effect of a promise to keep the offer open for a certain time or to give someone

the right of first refusal- This will not be legally binding unless the offeree gave some payment to

the offeror in return for the promise.

Facts

The defendant contacted the claimant in writing, offering to purchase the lease of the claimant’s

home. The offer stated that it would remain open to the claimant for a period of six weeks.

However, during this period, before the claimant had accepted, the defendant changed his mind

about the purchase and wrote to the claimant once again purporting to withdraw the offer. After

receiving this second letter, still within six weeks from the first, the claimant accepted the

defendant’s offer.

Issue

The issue was whether the defendant was contractually bound by his original letter to keep the

offer open for six weeks, and by extension whether he was therefore bound by the claimant’s

acceptance within that period.

Held

The court held that the original letter did not bind the defendant to keep the offer open for a full

six weeks, and as such it had been validly withdrawn by the defendant, and the claimant’s

purported acceptance was ineffective. The underlying reason for this was that it is a fundamental
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principle of contract law that one party cannot be bound whilst the other is not. In the words of

Best CJ:

“… If a party make an offer and fix a period within which it is to be accepted or rejected by the

person to whom it is made, though the latter may at any time within the stipulated period accept

the offer, still the former may also at any time before it is accepted retract it; for to be valid, the

contract must be mutual: both or neither of the parties must be bound by it…” (p. 4).
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Acceptance

Powell v Lee

Law Principle: Be communicated in the manner implied or expressed in the offer and this may

be verbal, in writing or by conduct.

The plaintiff applied for a job as headmaster and the school managers decided to appoint him. One

of them, acting without authority, told the plaintiff he had been accepted. Later the managers

decided to appoint someone else. The plaintiff brought an action alleging that by breach of a

contract to employ him he had suffered damages in loss of salary. The county court judge held that

there was no contract as there had been no authorised communication of intention to contract on

the part of the body, that is, the managers, alleged to be a party to the contract. This decision was

upheld by the King’s Bench Division.

Brogden v Metropolitan Railway

Law Principle: Be communicated in the manner implied or expressed in the offer and this may

be verbal, in writing or by conduct

Facts

The complainants, Brogden, were suppliers of coal to the defendant, Metropolitan Railway. They

completed business dealings regarding the coal frequently for a number of years, on an informal

basis. There was no written contract between the complainant and the defendant. However, the

parties decided that it would be best for a formal contract to be written for their future business

dealings. The Metropolitan Railway made a draft contract and sent this to Brogden to review. The

complainant made some minor amendments to this draft and filled in some blanks that were left.

He sent this amended document back to the defendant. Metropolitan Railway filed this document,
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but they never communicated their acceptance of this amended contract to the complainants.

During this time, business deals continued and Brogden continued to supply coal to the

Metropolitan Railway.

Issues

When a dispute arose, the issue in this case was whether there was a contract between Brogden

and the Metropolitan Railway and if the written agreement they had was valid.

Held

The House of Lords held that there was a valid contract between suppliers, Brogden and the

Metropolitan Railway. The draft contract that was amended constituted a counter offer, which was

accepted by the conduct of the parties. The prices agreed in the draft contract were paid and coal

was delivered. Although there had been no communication of acceptance, performing the contract

without any objections was enough.

Entores v Miles Far East Corp.

Law Principle: Be communicated in the manner implied or expressed in the offer and this may

be verbal, in writing or by conduct

Facts

The complainants, Entores, were a company that was based in London. They had sent an offer to

purchase 100 tons of copper cathodes to the defendants, Miles Far East Corp. Their company was

based in Amsterdam and this offer was communicated by Telex, a form of instantaneous

communication. The Dutch company sent an acceptance of this offer by Telex to the complainants.

When the contract was not fulfilled, the complainants tried to sue the defendants for damages.
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Issues

In order to decide whether the action for damages should arise in English or Dutch law, the court

had to decide the moment of acceptance of the contract. If it was when the contract acceptance

was sent, damages would be dealt with under Dutch law. If acceptance was when it was received,

then it would be under English law.

Held

The court held that the contract and damages were to be decided by English law. It was stated that

the postal rule did not apply for instantaneous communications. Since Telex was a form of instant

messaging, the normal postal rule of acceptance would not apply and instead, acceptance would

be when the message by Telex was received. Thus, the contract was created in London. This

general principle on acceptance was held to apply to all forms of instantaneous communication

methods. Acceptance via these forms of communication had to be clear before any contract is

created.

Felthouse v Bindley

Law Principle: Silence does not mean consent

Facts

The complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about

buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear

anymore from his nephew concerning the horse, he would consider acceptance of the order done

and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The

defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse.

However, by accident he ended up selling the horse to someone else.

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Issues

Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show that the horse

was his property, in order to prove there was a valid contract. Mr Bindley argued there was no

valid contract for the horse, since the nephew had not communicated his acceptance of the

complainant’s offer. The issue in this case was whether silence or a failure to reject an offer amount

to acceptance.

Held

It was held that there was no contract for the horse between the complainant and his nephew. There

had not been an acceptance of the offer; silence did not amount to acceptance and an obligation

cannot be imposed by another. Any acceptance of an offer must be communicated clearly.

Although the nephew had intended to sell the horse to the complainant and showed this interest,

there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not

amount to an acceptance of his offer.

Adams v Lindsell

Law Principle: Instantaneous communication –acceptance is not communicated until received

Communication by post – (The Postal Rule)- acceptance is valid once the letter is posted

The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in

the course of post'. The letter was delayed in the post. On receiving the letter the claimant posted

a letter of acceptance the same day. However, due to the delay the defendant's had assumed the

claimant was not interested in the wool and sold it on to a third party. The claimant sued for

breach of contract.
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Held

There was a valid contract which came in to existence the moment the letter of acceptance was

placed in the post box. This case established the postal rule. This applies where post is the agreed

form of communication between the parties and the letter of acceptance is correctly addressed

and carries the right postage stamp. The acceptance then becomes effective when the letter is

posted.

Household Insurance v Grant Contrast

Law Principle: Instantaneous communication –acceptance is not communicated until received

Communication by post – (The Postal Rule)- acceptance is valid once the letter is posted

Facts

The defendant, Mr Grant, applied for shares in the complainant’s company, the Household Fire

Insurance. The complainants allotted shares to Mr Grant and they completed this contract by

posting him a letter with notice of the allotment. However, this letter never reached Mr Grant and

it was lost in the post. Mr Grant never paid for the shares as a consequence. When the Household

Fire Insurance company went bankrupt, the liquidator asked the defendant for payment of the

shares. Mr grant refused to pay, as he did not believe he was a shareholder nor was there a binding

contract in his mind.

Issues

The court held that the liquidator was entitled to recover this money, as there was a binding contract

between Mr Grant and the Household Fire Insurance company. This decision was appealed. The

issue in the appeal concerned whether there had been an acceptance of the share offer and if there

was a legally binding contract.

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Held

The appeal was dismissed and it was held that there was a valid contract between the parties for

the shares. The postal rule was affirmed, which states that acceptance is effective when it is mailed,

as long as the parties consider the post as an acceptable way of communicating. This rule is true

even though the letter never arrived to Mr Grant. Lord Justice Thesiger stated that posting

acceptance creates a ‘meeting of minds’, which created a binding contract. Lord Justice Bramwell

dissented, arguing that the postal rule can hinder transactions and that acceptance should only be

effective once the letter arrives.

Holwell Securities v Hughes

Law Principle: Instantaneous communication –acceptance is not communicated until received

Communication by post – (The Postal Rule)- acceptance is valid once the letter is posted.

Facts

The defendant, Dr Hughes, gave the complainants, Holwell Securities, the option to purchase his

house for £45,000. It was stated that this option was exercisable ‘by notice in writing’ within six

months. The complainants posted a letter agreeing to this option by Dr Hughes and this was done

five days before the six-month expiry. However, this agreement letter was lost in the post and it

never reached Dr Hughes.

Issues

Holwell Securities claimed specific performance of the contract when Dr Hughes refused to

complete the sale of his house. This claim was originally dismissed by the court. But, it was

appealed. The issue in the appeal concerned whether the postal rule applied and if there were any
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exceptions to this rule. The complainants tried to argue that the postal rule meant that acceptance

was in effect when the letter was posted, which was before the six-month expiration date.

Held

This appeal was dismissed. It was stated by the court that the postal rule does not automatically

apply in every case, despite the post being an acceptable means of communication in transactions

or business proposals. It is important to look at all the circumstances of the case to see what the

parties intended, which may mean a binding agreement does not apply until it is communicated.

In this case, Dr Hughes stated the option was exercisable ‘by notice in writing’ within six months,

which meant that he would have to receive the communication in writing before a valid contract

would be created. This specification meant that the postal rule did not apply.
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Consideration

Currie v Misa

Law Principle: Consideration was defined as a benefit to one party or a detriment to the other

party.

Facts

Lizardi & Co. sold a number of bills of exchange to Mr. Misa, drawn from a banking firm owned

by Mr. Currie, and were to be paid on the next day. However, Lizardi was in substantial debt to

Mr. Currie’s bank and was being pressed for payment. A few days later, upon paying in the cheque,

Mr. Mirsa learned of Lizardi’s stopped payments and outstanding debts, instructing his bankers

not to honour the cheque. The question arose as to whether the cheque was payable, particularly

as to whether the sale of an existing debt formed sufficient consideration for a negotiable security,

so as to render the creditor to whom it was paid, Mr. Currie, a holder for the value of the cheque.

Issue

The question arose as to whether the existing debt constituted sufficient consideration for the

security so as to constitute a legally-enforceable contract for the creditor.

Held

The Court held that consideration must “consist either in some right, interest, profit, or benefit

accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered,

or undertaken by the other.” (p 162). Thus, there can be no legal contract unless there is

consideration in the form of a benefit gained, or detriment suffered arrangement by the parties. On

the facts, the Court held that the title of a creditor to a negotiable security on account of a pre-
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existing debt and transferred to him, bona fide, without any notice of infirmity of title by the debtor

is indefeasible. The pre-existing debt did not in and of itself form a sufficient consideration for the

negotiable security. Accordingly, there was an absence of any consideration or the making or

payment of the cheque by Mr. Mirsa.

Dunlop v Selfridge

Law Principle: Consideration was defined as the price one party pays for the other party’s act or

promise.

Facts

Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires below a

recommended retail price (RRP). As part of the agreement, Dunlop also required their dealers to

gain the same agreement with their retailers, who in this instance was Selfridge. The agreement

held that if tires were sold below the RRP, they would be required to pay £5 per tire in damages to

Dunlop. This was agreed between the dealer and Selfridges, which effectively made Dunlop a

third-party to that agreement. Sometime after this, Selfridge sold the tires below the agreed price

and Dunlop sued for damages and an injunction to prevent them from continuing this activity. At

the initial trial, the decision was given to Dunlop. This was appealed by Selfridge and the decision

was reversed. Dunlop appealed.

Issue

Selfridge argued that Dunlop could not enforce the contract as Dunlop was not part of the

agreement between the dealer and Selfridges. On this basis, the question for the court was whether

Dunlop had the right to access damages without a contractual relationship.

Held
 27

The court held in a unanimous decision that Dunlop could not claim for damages in the

circumstances. The court found that firstly, only a party to a contract can claim upon it. Secondly,

Dunlop had not given any consideration to Selfridge and therefore there could be no binding

contract between the parties. Lastly, Dunlop was not listed as an agent within the contract and

could therefore not be included as a valid third-party who had rights to claim on the contract.

Roscorla v Thomas

Law Principle: Consideration must not be past

The claimant bought a horse from the defendant. After the sale finished the defendant told the

claimant that it was a sound horse and did not have any vice such as bad temper. The truth however

was quite different from what the claimant had been told. The horse had very bad temper and was

ferocious. The claimant sued the defendant.

The court decided that the claimant could not sue because the statement about the horse had taken

place after the sale was completed. Had the defendant made the same promise before the sale then

the defendant would have a claim. Because the promise was made after the sale, the claimant was

not able to provide any consideration for it; and hence he was not able to make a claim on it.

In another words, for a contract to exist and any terms of the contract to be valid, a consideration

must be provided. The deal had already taken place in which the defendant offered the sale of the

horse and the claimant provided the consideration by paying for it. If the claim (about the horse)

which came after the sale was a promise then the claimant had not provided any consideration for

it.
 28

Lampleigh v. Braithwaite

Law Principle: Consideration must not be past

Facts:

The defendant, Braithwaite, killed a man. He asked the plaintiff, Lampleigh to secure him a pardon

from the king. The plaintiff spent many days doing this, riding and journeying at his own cost

across the country to where the King was and back again. Afterwards, the defendant promised to

pay the plaintiff £100 in gratitude. He later failed to pay the money. The plaintiff sued.

Issues:

The defendant argued that the plaintiff had acted before any promise to pay was given by the

defendant. Therefore, he had only provided past consideration for a promise given in the future.

The court considered whether this past consideration was sufficient to create a valid contract.

Held:

The court found in favour of the plaintiff. The promise was indeed given after the plaintiff had

acted. However, the plaintiff had acted upon a request made by the defendant. The court considered

that the original request by the defendant contained an implied promise to pay the plaintiff for his

efforts. Bowen LJ said:

‘A mere voluntary courtesie will not have a consideration to uphold an assumpsit. But if that

courtiesie were moved by a suit or request of the party that gives the assumpsit, it will bind’.

Consequently, the court held that if A does something for B at their request and afterward B

promises to pay A for their trouble, then that promise is good consideration. The later promise was

considered to be part of the same single transaction and was, therefore, enforceable.
 29

Consideration must move from promisee to the promisor (the party receiving the promise is the

promisee and the party making the promise is the promisor).

Tweddle v. Atkinson

Law Principle: Consideration must move from promisee to the promisor (the party receiving the

promise is the promisee and the party making the promise is the promisor).

Facts

The son and daughter of the parties involved in this dispute were getting married. As such, the

father of the groom and father of the bride entered into an agreement that they would both pay

sums of money to the couple. Unfortunately, the father of the bride died before he paid the money

to the couple and the father of the son died before he could sue on the agreement between the

parties. As a result of this, the groom brought a claim against the executor of the will for the

payment that was previously agreed between the fathers.

Issue

The primary issue for the court was whether or not the son could, as a third party to the agreement,

enforce the contract between the fathers, which was ultimately for the benefit of him and his wife.

It was argued that the intention of the agreement between the fathers was for the couple to derive

a benefit from the payment of the money. Moreover, it was argued that preventing the son from

being able to enforce the contract would effectively ignore the intention of the fathers.

Held

The groom’s claim was rejected by the court. It was held that the groom was not a part of the

agreement between the fathers and he did not provide any consideration for the promise made by
 30

the father of the bride. Also, as a stranger to the contract, the son could not enforce it. On this basis,

the court found in favour for the executor of the will.

White v Bluett

Law Principles: Consideration must be sufficient but need not be adequate.

Thomas v Thomas

Law Principles: Consideration must be sufficient but need not be adequate.

Collins v Godefroy

Law Principles: Consideration must be sufficient but need not be adequate.

Stilk v Myrick & Hartley v. Ponsonby

Law Principles: Consideration must be sufficient but need not be adequate

Pearce v. Brooks

Law Principle: Consideration must not be illegal or vague.

Pinnel’s case

Law Principle: Part payment of a debt is not sufficient consideration

Central London Property Trust v High Trees House

Law Principle: Promissory estoppel is a defense where part-payment is considered in sufficient

consideration
 31

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