termination of contract and intention to create legal relations

1. Law and Ethics
3C Termination of Contract / Intention
to Create

2. An offer may be
brought to an end
by acceptance,
which then creates
a contract.

3. Offer may be terminated by:
1. Rejection or counter-offer made by the offeree
2. Unreasonable lapse of time between the offer
being made and being accepted
3. Revocation or withdrawal of the offer by the
offeror
4. Death of one of the parties
5. Before performance in unilateral contracts

4. 1. Rejection and
Counter-Offer
Rejection of an offer may be
express and implied.
Implied rejection would occur where
the offeree makes a counter-offer
or a conditional acceptance.

5. Hyde v Wrench 1840
Defendant offered to sell his farm for £1000
He rejected a counter-offer of £950.
The plaintiff then decided a few days later to buy the
farm at £1000 but the defendant didn’t want to sell.
Plaintiff sued for breach of contract.
Court ruled that the original offer of £1000 was
terminated by the counter-offer of £950.
Subsequent offer of £1000 is considered a new offer
which the defendant can either accept or reject.

6. 2. Lapse of time
An offer may state an expiry
date, which means that acceptance
cannot take place after that
date.
If no time limit is expressed in
the offer the offer will be
deemed to have expired after a
“reasonable” period of time.
Commane
v Walsh
1983

7. What is reasonable?
Ramesgate Victoria Hotel v Montefiore (1866)
Defendant offered to buy shares
from the hotel and sent a deposit
to the hotel in June.
In November the hotel responded to
the offer and sought the balance.
Defendant said he didn’t want the
shares. Hotel sued.
The court held that the defendant
was within his rights
to withdraw his offer due to the
lapse of time.

9. 3. Revocation
Offeror has the right to
revoke his offer any time
before acceptance has
taken place
Revocation may also take
place by performance.
House for sale example.

10. Routledge v Grant (1828)
Defendant offered to lease the
plaintiff’s house for a specified
amount of money and asked for a
final answer within 6 weeks.
The defendant then revoked his
offer before the expiry of the
six weeks.
The court ruled that the
defendant was entitled to revoke
his offer even before the offer
period had expired.

11. Dickenson v Dodds 1876
Defendant offered his property for
sale and stated that
the offer would remain open until a
specified date but sold the it to
another party.
Plaintiff accepted the defendant’s
offer even though he had been told the
property had been sold to another
party.
He knew the property sold was
sufficient communication to the
plaintiff that the offer was revoked

12. 4. Death
If the offeree dies the
offer is automatically
terminated.
If the offeror dies the
offer is also terminated
unless the offeree has
accepted the offer
before he knew of the
offeror’s death.

13. 5. Before performance of Unilateral
Contracts
Pavey and Matthews Pty. Ltd v Paul
(1987)
No written contract
Disputed the reasonableness of the
amount. The Court said that as
contract was performed the defendant’s
offer of reasonable payment it could
not be revoked and therefore he was
obliged to pay.

14. Shuey v United States (1875)
Offers to the world at large
must be retracted to the world
at large

15. Agreement(Offer+Accept
ance)
Intention
Consideration
Certainty

16. INTENTION TO CREATE LEGAL
RELATIONS

17. - Courts must be satisfied that both
parties entered the contract with the
intention to create a legally binding
relationship
- Strong presumption by the courts of
intention of becoming legally bound
for businesses

18. This is in contrast to the presumption
of the Courts that parties entering into
social agreements do not intend for
them to be legally binding.
Presumptions only rebutted where
there’s strong evidence.

19. Leahy v Rawson
(2003)
Only applies to “the closest
family kinships, such as parent
and child and spouses.”
Relatives, contract to build a
house.
COURT: If there is a commercial
contract between relatives there
is a presumption of
enforcability.

20. 1) Contracts between husbands and
wives
Balfour v Balfour 1919
Court of Appeal held that family
arrangements were not intended to
be legally enforceable as if they
were the courts would be
overwhelmed with work and social
agreement in which the
husband had undertaken no action
to indicate his intention to be
legally bound to his promise.

21. Balfour as precedent
Merritt v Merritt 1970
Court held that a signed note
indicated a clear intention by
both parties that the agreement
would be legally binding as Mr and
Mrs Merritt separated.
Mr. Merritt was obliged to hand
the family home over.

22. 2) Contracts between parent and
child
Jones v Padavatton (1969)
Mrs Jones offered to pay for her daughter to
study for the bar exams in England. She
agreed to provide accommodation for her
daughter and a monthly allowance.
Mother took action to reclaim possession of
the house. The court ruled that in this case
there was no evidence to suggest that the
parties intended this agreement to be legally
binding

23. Commercial Agreements
Automatically binding - even if
family members are involved.
Rose and Frank Co v JR Crompton Bros Ltd
(1925)
No breach of contract because the insertion
of a particular clause stating that the
contract was not to be legally binding meant
that the parties did not intend the agreement
to be legally binding.

24. Edwards v Skyways (1964)
Intention to create legal relations must be
expressed clearly
Pilot redundancy case.
Pension contributions.
Ex-gratia not enough to rebut the presumption
that commercial agreements are legally binding.

29. msstephanielord@yahoo.com