Freedom of Contract

Topics: Contract, Offer and acceptance, Contractual term Pages: 7 (2175 words) Published: December 16, 2012
“Freedom of contract is the bedrock of English private law”

Freedom of contract is defined as the: “Right of an adult to make a legally binding mutual agreement with one or more other persons, without governmental interference as to what type of obligations he or she can take upon himself or herself.”[1] English law has for a while now been known as believing in freedom of contract. This means that the state has not, normally, enforced legislation which has got in the way when it comes to the freedom of parties to accept the terms of their contracts. When looking more recently, there has been numerous advances into the principle of freedom of contract, above all when looking at consumer protection. It still happens to be the case that English law does give parties substantial flexibility both as how they finish contracts and the terms that they include.

To understand how freedom of contract is seen in English private law, it is important to understand things such as offer and acceptance and implied terms within a contract.

“Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. Agreement consists of an offer by an indication of one person (the "offeror") to another (the "offeree") of the offeror's willingness to enter into a contract on certain terms without further negotiations…”[2]

For it to amount to an offer it has to be shown that the offeror had the purpose to be bound. This is seen in Harvey v Facey [1893] UKPC 1. The outcome of this case resulted in “The Privy Council held that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer.”[3]

It is important to separate an offer from an invitation to treat. While an offer will show the way to a binding contract upon acceptance, an invitation to treat cannot be accepted; it is just an invitation for offers. An example of an invitation to treat can be seen in Fisher v Bell [1961] 1 QB 394 where “the defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. The court applied the literal rule of statutory interpretation.”[4]

When legitimate acceptance comes about a binding contract is established. As a result it is vital to know what a valid acceptance consist of in order to establish if the parties are bound by the agreement. There are three major rules when it comes to acceptance:

1. The acceptance has to be communicated to the offeree.
2. The terms of the acceptance need to exactly match the terms of the offer. 3. The agreement has to be certain.

English law allows contracting parties the freedom to set lots of the terms that contract the business. However this will be subjected to two areas where the law will imply terms. Firstly, some terms will be implied by statute. Secondly, the courts will imply terms just to give "business efficiency" to a contract.

The main terms implied by statute in the Sale of Goods Act 1979 consist of: “1.Section 12: the person selling the goods has to have the legal right to sell them. 2. Section 13: if you’re selling goods by description, e.g. from a catalogue or newspaper advert, then the actual goods have to correspond to that description. 3. Section 14: the goods must be of “satisfactory quality” – that is, they should meet the standard that a reasonable person would regard as “satisfactory”. Also, if the buyer says they’re buying the goods for a particular purpose, there’s an implied term that the goods are fit for that purpose. 4. Section 15: if...
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