Just to add more confusion for everyone, there are actually many different types of contracts. However, it’s not as bad as it seems. The logic and legal reasoning applied to all of these contracts are consistent. So it’s possible to understand them all if you can understand one. We look at a range of different types of contracts below.
Of course it is recommended to consult a contracts lawyer for accurate and specialised legal assistance, however this is a rough guide for you to understand the law behind contracts.
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Tenders
Mostly applicable for the construction industry, tenders are essentially where you bid to win the job. The scope of works is issued, each company will review and put forth their price to complete the job. It’s not necessarily the lowest price will win. There are many other factors that head contractors take into account when deciding.
The head contractor invites companies to submit their tenders for the job, and they have the power to accept or reject any job. The only time they may actually strike up a contract is if they specify they will do something. For example, if they clearly state that the lowest tender will be accepted. In this case they have started a contract with whoever comes back to the lowest tender.
In the case of Blackpool & Fylde Aero Club v Blackpool Borough Council BC [1990], Blackpool Council was calling for tenders to operate pleasure flights. One of the clauses in the invitation for tender stated no tender submitted after the cut-off date would be considered. Blackpool & Fylde Aero Club did submit on time, but due to an administration error was not considered by the Council. This meant they lost any chance of winning the tender at all. The Court of Appeal held that the invitation to consider all valid tenders was breached, and thus the Council was liable to pay damages.
Auctions
An auction is also a form of contract. When the bidder makes an offer for a price by raising their hand, this is considered an offer. The auctioneer can either accept by banging the gavel or reject. The case of Payne v Cave [1789] decided this important factor.
This doesn’t mean once you bid you are bound into a contract through. If at any point, the bidder changes their mind, they are free to withdraw their bid before the auctioneer accepts the offer. The auctioneer is not obliged to accept any bid, and is also not obliged to accept the highest bid.
‘Battle of the forms’
This is another situation that arises mostly in commercial contracts. This is the circumstance where we literally have a battle between parties of different forms. One party has accepted an arrangement based on their contract, and another party has a different contract. When Courts are faced with this type of situation, they look at not only the contracts, but also the conduct of each party.
There are three main approaches to settle this kind of dispute.
- ‘Last shot’ approach. This means each time there is a negotiation, that is technically a new counter-offer. By law, each time there is a counter-offer, it actually terminates the previous contract to replace it with the new offer. So whichever was the last counter-offer will be considered as the binding contract.
- ‘Higher status’ approach. This dictates that whichever form holds the higher legal status will prevail.
- ‘Global’ approach. This happens in the rare case where the arrangement seems to have no offer or acceptance at all. Legislation will then take over.
Standing offers
Standing offers occur in commercial arrangements mostly, where one party offers to provide goods at a certain price over a specified period of time. Most companies work in this way with their suppliers.
One example, is if you are a cafe owner. You need suppliers to provide a range of different things in order for you to stay in business. Your supplier for coffee could offer to sell you coffee beans at a discounted rate until July next year, when the price will be reviewed. You are under no obligation to purchase at all, but each time you put an order through at that price with that supplier, they are essentially individual contracts you’ve entered into with the supplier. There are also no rules against you from purchasing from other suppliers if you wish.
Contract by conduct
Sometimes, you may not have officially signed anything but you conduct alone can be interpreted as accepting that contract. Such as the situation in Brogden v Metropolitan Railway Co [1877]. In this case, Brogden supplied coal to Metropolitan Railway Co for a while already. The parties met to strike a deal to lock in a price for the next year. They only managed to sign the draft copy of the contract, never the actual binding contract, and this is how Brogden argued when the dispute arose.
However, the Court decided that because Brogden was acting in accordance with the terms of the draft anyway, this constitutes a contract by conduct. If your intentional actions are in accordance with the contract, this can bind you to it nonetheless. The court doesn’t take into account circumstantial actions of course, it must be expressly for that purpose.
Conclusion
There is a lot to take in when discussing contracts, and it can get quite complicated the more you investigate. Consulting a contracts lawyer is always the best way to go, but it doesn’t hurt to familiarise yourself with the legal parameters either. The essential factor that make a contract is the idea of an offer being placed and an acceptance occurring. There are many different situations, but the main idea remains the same. This can simplify the legality a little for if you are concerned.
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