Traditional And Contemporary Requirements Needed To Show The Existence Of A Contractual Agreement

‘Whether or not a contractual relationship exists between the parties still boils down to an analysis of the existence of what is termed the phenomena of agreement, that is, an offer matched by corresponding acceptance, notwithstanding more recent attempts to avoid such criteria’.

Discuss the traditional and contemporary requirements needed to show the existence of a contractual agreement.

This question, is asking for the extent of traditional and contemporary requirements needed towards making a successful contractual agreement, by considering significant factors like offer and acceptance to determine whether they are necessary or not to form an agreement. Traditional requirements for an agreement must be established by an unequivocal offer made by the offeror and must be fully accepted by the offeree[footnoteRef:1]. This approach is objective and provides certainty to a decision or agreement, however it is also strict and does not take into consideration the reality of certain situations, by stating that no consensus ad idem (no agreement) can be made for objective reasons. Contemporary requirements are more subjective, meaning that the courts may stray from the acceptance of the offeree, and take into account the circumstances and situation that the agreement was broken or made, which can affect the outcome of a case. These requirements are used regularly after the case in Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation (England) Ltd[footnoteRef:2], in which Lord Denning suggested that the circumstances of all documents and parties should be examined to reach an agreement[footnoteRef:3]. This essay, is going to distinguish why contractual agreements may need traditional and/or contemporary requirements in order to present an agreement between the offeror and offeree. It will suggest if both traditional and/or contemporary requirements are effective or considered ‘harsh’ in a way that means one party (whether this be the offeror or offeree) is not gaining the best outcome possible from the agreement. I will be discussing whether there are issues regarding both contemporary and/or traditional requirements needed for a contractual agreement between both parties and discuss factors of both types of requirements needed for an agreement whilst using cases for all points made to provide comparisons for whether certain requirements may be needed more than others. [1: Robert Merkin, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 36.] [2: Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401.] [3: Robert Merkin, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 36.]

A contract can be defined as a written or verbal agreement/meeting of the minds (consensus ad idem), especially one concerning employment, sales, or tenancy that is intended to be enforceable by law[footnoteRef:4]. Contracts are agreements made from two contracting parties who are known as the offeror and offeree. An offeror is the party who provides an offer to the offeree, who can then choose to accept or deny the agreement that is provided in a written or verbal form of communication[footnoteRef:5]. Offer and acceptance are both traditional requirements for a contractual agreement and are still needed in the present as seen in Per Blackburn J in Smith v Hughes[footnoteRef:6], which has influenced many jurisdictions to this day. As the plaintiff wished to sell oats to the defendant for a price of 34s per quarter, and as the defendant travelled to buy these oats, he realised they were ‘new’ oats and wished to purchase ‘old’ ones, but refused to pay the asking price as he thought it was too high (obiter dicta). The ruling was that due to lack of communication between both parties, led to the reinforcement of the traditional requirement/principle; caveat emptor. So the ratio decidendi was that were no grounds for rescission of a contract based on the facts of the case and both parties agreed to the sale of the oats. The defendant thought they were old (obiter dicta), whereas the plaintiff knew they were new, so the issue occurred when the defendant failed to make the age of the oats a term of the contract. In present day, this traditional, legal principle is still valid and governs countless justifications in the UK. It may be useful in relation to items sold by auction, as well as reinforcing the fact that parties should contract on terms that are relevant and necessary to them, without disregarding important parts of the description of the items for sale[footnoteRef:7]. Therefore, contracts need to be descriptive in the sense that it shows an exact understanding of what the party is offering in an agreement, and proves that this requirement is needed in present day in order to make a contractual agreement, otherwise there is no contract. If the party neglects to provide relevant information needed for the offeree or provides false statements in a contract, this is understood as misrepresentation[footnoteRef:8] and can be prosecuted, so clear offer and acceptance is needed for the existence of a contractual agreement. [4: John Simpson, Contract, (Lexico, 2019) https://www.lexico.com/en/definition/contract, accessed 29 October 2019] [5: ‘Offeror’, (Your Dictionary) https://www.yourdictionary.com/offeror accessed 29 October 2019] [6: Per Blackburn J in Smith v Hughes [1871] LR 6 QB 597] [7: Lorna Elliot, ‘Smith Vs Hughes: Offer and Acceptance’, (Contracts and agreements, 20 January 2019) http://www.contractsandagreements.co.uk/smith-vs-hughes-offer-acceptance.html ] [8: ‘Misrepresentation’, (Law Resources) http://www.e-lawresources.co.uk/Misrepresentation.php, accessed 29 October 2019 ]

The traditional requirement of acceptance must follow a certain criteria; it must be full and complete, must not amount to a counter offer but must be a mirror image of the offer. Mere requests may not amount to counter offers, acceptance must be communicated and silence will not amount to valid acceptance[footnoteRef:9]. The postal rule, is a traditional type of acceptance that was used at a time before technology had become advanced or invented to the standard that it is at in present day. It meant that offerees accepted an offer via letters in the post, and are seen as accountable by taking all reasonable steps upon their posting of the letter, like putting it in the post-box. By doing so, the offeree has completed all tasks they possibly can and the postal service is now responsible for the letter as it is their requirement to certify the letter reaches its destination, and if the offeror has concerns about an acceptance being communicated by post, they are able to enquire as such within the initial offer[footnoteRef:10]. As seen in case Adams v Lindsell[footnoteRef:11], the defendant wrote to the claimant with an invitation to treat by selling wool and asking for a reply ‘in the course of post’, which was then 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 had assumed (obiter dicta) the claimant was no longer interested in the wool and sold it to a third party, so the claimant sued for breach of contract. To which the judge ruled in favour of the claimant, as the ratio decidendi states the moment the letter was posted to the post office, it shows clear acceptance of the offer so the defendant breached the contract by including a third party and disregarding the offeree[footnoteRef:12]. This ruling was objective in the sense that it did not take into accountability the fact that the offeror did not have authority with the postal office having delayed the letter without him knowing of this, however he could of sent another letter confirming with the offeree whether he wanted to accept the offer or not. Therefore the postal rule was a difficult way to communicate as the offeror was unaware that the offeree accepted the offer due to lack of communication made, and the delaying of the postal office. So this was a traditional requirement needed to make a contractual agreement, but had many issues regarding lack of communication, by needing a third party (postal office) to actually allow the offeror and offeree to communicate to form an agreement. It seemed unreliable when issues took place with arguments whether the contract was agreed at the time of receiving or the time of sending, as the offeror is incapable of knowing whether the offeree has sent an acceptance letter or not. Therefore the traditional postal rule was a requirement needed to form a contractual agreement, but was not an affective one because of the confusion it caused. [9: Robert Merkin, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 31.] [10: Kier Baker, ‘A 21ST CENTURY ‘POSTAL RULE’: CAN CONTRACT LAW DELIVER?’, (Keep Calm and Talk Law, 1 February 2016) http://www.keepcalmtalklaw.co.uk/a-21st-century-postal-rule-can-contract-law-deliver/] [11: Adams v Lindsell [1818] 106 ER 250] [12: ‘Adams v Lindsell [1818], (Websroke, 14 January 2017) https://webstroke.co.uk/law/cases/adams-v-lindsell-1818 ]

As technology has developed overtime, the Courts had to develop its understanding of when a contract becomes a formal agreement under an email or form of instantaneous communication, which was found in the case of Entores v Miles Far Eastern[footnoteRef:13], in which the claimants sent an offer in England to the defendants in Holland via Telex. The courts ruled that the agreement was made in England based on the ratio decidendi that the claimants received the acceptance whilst located in England, so English Law applied and the postal rule was excluded, because there was an instantaneous form of communication between both parties, and no third party involved forming the agreement[footnoteRef:14]. So the postal rule is excluded and the receipt rule follows, as it favours both parties so neither the offeror or offeree suffers at a disadvantage. It is a contemporary requirement when forming a contractual agreement, so it is argued that this requirement is needed more the traditional requirement (the postal rule) for consensus ad idem, as it is a modernised form of Law that is suited in present-day cases, where agreements are formed/exist via emails etc, between different countries. [13: Entores Ltd v Miles Far East Corporation [1955] 2 QB 327] [14: ‘Entores Ltd v Miles Far East Corporation [1955]’, (Webstroke Law, 10 January 2014) https://webstroke.co.uk/law/cases/entores-v-miles-far-east-corporation-1955 ]

Acceptance by conduct means that an offer has been accepted by the offeree if the act that needed to be performed in the contract has been acted upon. The High Court decided that failure to meet the terms with a requirement to sign and return a contract did not prevent a contract from being accepted by conduct[footnoteRef:15]. It does not need to apply the traditional requirements needed for acceptance; that it must be communicated and that silence will not amount to valid consensus ad idem, as it is applied through actions, so clearly if the performance has been carried out then the offer has been accepted. Acceptance by conduct is therefore a contemporary requirement to form a contractual agreement as it still indicates acceptance of an offer through actions, the courts developed this approach in the case of Brogden v Metropolitan Railways[footnoteRef:16], where the complainants supplied coal to the defendants and completed business deals regarding the coal for multiple years on an informal basis. There was no written or verbal contract between both parties, but they decide to make a formal written agreement for future dealings, and decided upon a draft written agreement, but there was no acceptance actually communicated between the defendant and complainants, however Brogden continued to supply the products to the Metropolitan Railway. The Ratio Decidendi was that there was a valid contract between both parties as the draft was amended and created a counter offer which was accepted by the conduct of the parties, even though there was no statement of acceptance, performing the contract without any protests was enough[footnoteRef:17]. Therefore, the previous traditional requirement needed to form a contract with verbal or written consent is still needed to show the existence of a formal agreement, but needed to add another requirement in order for an agreement to be formed, as the previous requirements of written and verbal acceptance were too vague in the sense that some agreements where made by performing an act, proving acceptance. [15: Baker, ‘Contracts; accepted by conduct’ (Thomson Reuters Practical Law, 26 March 2015) https://uk.practicallaw.thomsonreuters.com/6-605-4885?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 ] [16: Brogden v Metropolitan Railways [1877] 2 APP CAS 666] [17: ‘BROGDEN V METROPOLITAN RAILWAY CO: HL 1877’, (May the Law be with you, 13 March 2019) https://swarb.co.uk/brogden-v-metropolitan-railway-co-hl-1877/ ]

To conclude, it is clear in this essay that both traditional requirements and contemporary requirements are needed to show the existence of a contractual agreement, as offer and acceptance are both traditional requirements needed to form a contractual agreements, so therefore the requirements exist. However, the different variations of acceptance are more modern requirements introduced by courts as circumstances of situations have developed, i.e. acceptance by conduct and the receipt rule. I would state that there are issues with traditional requirements as they are strict and cannot be applied fairly throughout different circumstances in cases, which differ between how and when the offer was then accepted, so it makes sense for the contemporary requirements to be subjective in the courts to reach the best possible outcome within each specific case put forth. The postal rule, certified that the agreement was made as soon as the offeree sent the acceptance via post, which caused issues and disadvantages for the offeror as there was a third party involved in which they had no control over, so when the receipt rule was established, it became more clearer for both parties involved of where they stood in terms of coming to an agreement and allowed contracts to form via online/emails. Therefore, both traditional and contemporary requirements are needed to show the existence of a contract, but depending on the circumstance, depends on which ratio decidendi is used for each case.

Bibliography:

1. Adams v Lindsell [1818] 106 ER 250
2. Brogden v Metropolitan Railways [1877] 2 APP CAS 666
3. Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401
4. Entores Ltd v Miles Far East Corporation [1955] 2 QB 327
5. Per Blackburn J in Smith v Hughes [1871] LR 6 QB 597
6. ‘Adams v Lindsell [1818], (Websroke, 14 January 2017) https://webstroke.co.uk/law/cases/adams-v-lindsell-1818
7. Baker, ‘Contracts; accepted by conduct’ (Thomson Reuters Practical Law, 26 March 2015) https://uk.practicallaw.thomsonreuters.com/6-605-4885?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
8. ‘BROGDEN V METROPOLITAN RAILWAY CO: HL 1877’, (May the Law be with you, 13 March 2019) https://swarb.co.uk/brogden-v-metropolitan-railway-co-hl-1877/
9. ‘Entores Ltd v Miles Far East Corporation [1955]’, (Webstroke Law, 10 January 2014) https://webstroke.co.uk/law/cases/entores-v-miles-far-east-corporation-1955
10. Simpson J, Contract, (Lexico, 2019) https://www.lexico.com/en/definition/contract, accessed 29 October 2019
11. Baker K, ‘A 21ST CENTURY ‘POSTAL RULE’: CAN CONTRACT LAW DELIVER?’, (Keep Calm and Talk Law, 1 February 2016) http://www.keepcalmtalklaw.co.uk/a-21st-century-postal-rule-can-contract-law-deliver/
12. Elliot L, ‘Smith Vs Hughes: Offer and Acceptance’, (Contracts and agreements, 20 January 2019) http://www.contractsandagreements.co.uk/smith-vs-hughes-offer-acceptance.html
13. ‘Misrepresentation’, (Law Resources) http://www.e-lawresources.co.uk/Misrepresentation.php, accessed 29 October 2019
14. ‘Offeror’, (Your Dictionary) https://www.yourdictionary.com/offeror accessed 29 October 2019
15. Merkin R, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 36.
16. Merkin R, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 36.
17. Merkin R, Poole’s Textbook on Contract Law (14th edn, Oxford, 2018) 31.