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  • Topic: Contract, Invitation to treat, Carlill v Carbolic Smoke Ball Company
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  • Published : January 27, 2013
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LAW OF CONTRACT NOTES FOR DIPLOMA STUDENTS
The Following are for the Lecture 1.
Agreement: is an offer made by one person and an acceptance of that offer by a person to whom the offer is made. The offer and acceptance change their characters and become promises.
Refer to Section 2 (1) (e) of the Act.
Contract: must be an agreement. The agreement must be enforceable by law. Essential Ingredients:
1.
2.
3.
4.

Free Consent
Competency or Capacity
Consideration
Creates Legal relations

Proposal or Offer
Refer to Section 2(1) (a) of the Act.
Proposal means a signification from one person to another of his willingness to do or abstain from doing anything with a view to obtain the assent of that other to such act or abstinence.
Characteristics:
1. Must be made willingly: Proposer must be willing to be bound by the terms stated;
2. Terms must be clear and certain. Refer to Section 29 of the Act Case Law: Alfi E.A. Ltd v. Themi Industries and Distributors Agency Ltd. (CAT Dsm Civil Appeal 28 of 1984) and Nitin Coffee Estates Ltd: In both cases the “Price” was not stateed hence agreement becomes “Uncertain”; 3. Final Expression: Terms must be firm and final. Changing the terms in statements cannot be regarded as a proposal.

Contracts under various situations
1. Unilateral Contracts: These are one sided contracts. For example Advertisements. Case Law: Carlill v. Carbolic Smoke Ball Co. (1892) 2Q.B.484. is an English contract law decision by the Court of Appeal, which held an advertisement containing certain terms to get a reward constituted a binding unilateral offer that could be accepted by anyone who performed its terms. It is notable for its curious subject matter and how the influential judges (particularly Lindley LJ and Bowen LJ) developed the law in inventive ways. Carlill is frequently discussed as an introductory contract case, and may often be the first legal case a law student studies. The case concerned a flu remedy called the "carbolic smoke ball". The manufacturer advertised that buyers who found it did not work would be awarded £100, a considerable amount of money at the time. The company was found to have been bound by its advertisement, which it construed as creating a contract. The Court of Appeal held the essential elements of a contract were all present, including offer and acceptance, consideration and an intention to create legal relations. The Court of Appeal unanimously rejected the company's arguments and held that there was a fully binding contract for £100 with Mrs Carlill. Among the reasons given by the three judges were (1) that the advert was not a unilateral offer to all the world but an offer restricted to those who acted upon the terms contained in the advertisement (2) that satisfying conditions for using the smoke ball constituted acceptance of the offer (3) that purchasing or merely using the smoke ball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smoke balls by relying on the advert was a clear benefit to Carbolic (4) that the company's claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound.

Example in an Auction Sale & Proposal In tenders.
Proposals and Invitation to Treat
An invitation to treat is merely an announcement to other that a person is prepared to entertain an offer for a certain thing or service.
The invitation to treat may provide minimal terms of a proposed offer.

In Chitty on Contracts (2004), the editors point out that:
"As a general rule, a display of goods at a fixed price in a shop window or on a shelf in a selfservice store is an invitation to treat and not an offer. An offer may be made by a prospective buyer. At this stage the retailer may accept or reject the offer. "Similar principles would seem to apply where a supplier of goods or services indicates their availability on a website: that is, the...
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