Contract law 1 Flashcards

1
Q

Tell about obligations by choice (3)

A
  • Voluntary obligations (i.e. by one party)
  • Conventional obligations/contracts (i.e. by two or more parties
  • Essentially a relationship between party A&B, mutual understanding of the obligations and duties
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2
Q

Tell about the nature of a contract (5)

A
  • Must be an agreement
  • Must be in legal capacity to enter into a contract
  • Consent to enter -intention to be bounded
  • Formal requirements (e.g. in writing, not necessary in Scotland)
  • Agreement must no be prohibited
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3
Q

What are must the both parties be in order to have legal capacity for a contract?

A
  • Proper age
  • Mental capacity (not elder, not insane
  • Able to consent and not be forced
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4
Q

Contracts are….

A

Agreements between parties who have the capacity to make it, in the form demanded by law and they need to be able to perform and not illegal or impossible. Otherwise, grounds for compensation

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5
Q

What are the formalities related to contracts?(4)

A
  • Writing
  • Verbally if evidence
  • Inferred (reasoned conclusion) from the acting’s of the parties
  • Has to be mutual understanding of what the contract is about (details create certainty)
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6
Q

What are required in writing under Requirements of Writing (Scotland) Act 1995? (4)
EACH NEED TO SIGN A DOCUMENT TO MAKE THIS VALID

A

1) A contract or unilateral obligations for the creation variation, extinction of an interest in land(except for a lease for less than a year)
2) A gratuitous unilateral obligation EXCEPT an obligation undertaken in the course of a business (Unique to Scotland, if you make a personal promise needs to be in writing except business purpose)
3) A trust by which a person declared himself sole trustee of his own property
4) Making of a will or codicil (codicil= an addition or supplement which explains, modifies or revokes a will or part of one)

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7
Q

What defects effects contracts validity? (3)

A
  • Parties not having full capacity (too young, drunk or bankrupt)
  • Error in mind of one or both parties, not mutual understanding or agreement (may be induced by fraudulent statement)
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8
Q

What is a void contract?

A
  • Contract has no legal effect,
  • Neither party can enforce it
  • Even a third party cannot acquire any rights under it
  • NO RIGHTS NO DUTIES
  • “contract” is nullity

E.g. A sells to B and the contract is void, if B resold to C, C acquires no rights

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9
Q

Void contract case:

Morrison v Roberson 1908

A

Case that established the common law principles that govern
unilateral error in Scots Law. Man claiming to be son of
Wilson of Bonnyrigg approached Morrison and offered to
buy two cows from him. Due to the name, Wilson and their
good reputation he made the deal and agreed on credit.
Judgement: The action was successful as there were no
contract between Morrison and this fraud ‘Telford’, and
purported transaction was a complete nullity. Telford had no
rights to pass the cows on, so morrison recovered the cows.
Only entered to the contract because of the mistaken belief
of the identity.

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10
Q

What is a Voidable contract?

A
  • May be reduced or set aside, until done, it is valid and has full legal effect
  • Third party has rights up till voided

e.g. A sells to B and the contract is voidable, B has resold the goods to C before the validity of the contract is challenged, C acquires the title for the good

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11
Q

What is unenforceable contract?

A

Cannot be enforced by a court decision, may be unenforceable under common law or statute.
If an unenforceable contract is performed, the court will not interfere to cancel the contract or order repayment of the money.

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12
Q

Tell about formation of a contract

A
  • Agreement between parties “Meeting of the minds” = Consensus in idem
  • Law concerns only what is agreed, not what the parties thought they agreed (Objectively examine, objective test)
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13
Q

Tell about case Muirhead and Turnbull v Dickson 1905 (Contract law case)

A

Hire purchase – hybrid contract created in 19th century to allow consumers to buy good on credit.
‘Hire charges’ paid as instalments to purchase. Followed by one optional instalment after the hire
charges to transfer ownership. Dickson claimed it was a contract of sale. The court, looking at the
contract objectively, held that it was a contract of sale and that despite the mental differences
between the two parties, there was a contract of sale. Thus Muirhead and Turnbull could not retain
the piano.

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14
Q

Objective test

A

No express agreement re terms; nevertheless bound, for even “where parties honestly differed, the
commercial contracts cannot be arranged by what people think in their inmost minds. Commercial
contracts are arranged according to what people say.”

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15
Q

Tell about contract case Mathieson Gee (Ayrshire) Ltd v Quigley 1952

A

They thought they were hiring staff and equipment, when Mathieson Gee only provided hire for
equipment, the equipment was delivered as said and they sat on the site (pond for a fortnight), they
eventually collected them away, presented the bill to which Quigley argued that you didn’t do your
end of the contract of cleaning the pond. NO CONTRACT as no same thinking. House of Lords said
there was no contract, but parties believed there were, and had argued accordingly. Objective
approach – court looks at the change of letters, House of Lords ruled that it didn’t actually show an
agreement. The two sides failed to match on their agreement of what each other thought were the
terms. Mathieson Gee were insolvent, and therefore could not afford to pay Quigley’s damage. The
conduct of the parties was never examined. Themselves believed to have a contract, courts
objective approach said they didn’t.

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16
Q

What must exist in an contract? (3)

A
  • Offer with fine terms and details
  • Acceptance which meets the offer
  • Intention to be legally bound by the agreement
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17
Q

Tell about an offer

A

A proposal from one party in such definite terms that if it accepted, a legally binding contract will be formed. (You can accept what is put as the terms). Offer needs a valid acceptance to in order to create a contract. Present something for someone to accept or reject as desired

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18
Q

Tell about invitation to treat

A

An invitation to another person as being willing to negotiate a contract. This is not an offer but an indication of the party’s bargaining position - he does not intent to be bound by a simple acceptance.

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19
Q

Tell about invitation to treat case Harvey v Facey 1893

A

Telegram was sent about selling of Bumper Hall Pen(plantation in Caribbean). 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, no
detail, merely of invitation to treat

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20
Q

Tell about invitation to treat case (not too important) Philip v Knoblauch 1907

A

Offer, not invitation to treat because the information was so specific that must have had intention
to conclude contract. a detailed letter quoting terms and asking if the addressee were buyers was
considered to be an offer

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21
Q

Invitation to treat case Fisher v Bell 1961

A

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.

There is no obligation on a retailed to sell the goods on display in a shop window. There is no obligation to the customer under the law of contract to sell them at the displayed price

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22
Q

Invitation of treat case about goods displayed

Pharmaceutical Society of GB v Boots Cash Chemist 1952

A

Boots introduced the then new self service system into their shops whereby customers would pick
up goods from the shelf put them in their basket and then take them to the cash till to pay. The
Pharmaceutical Society of Great Britain brought an action to determine the legality of the system
with regard to the sale of pharmaceutical products which were required by law to be sold in the
presence of a pharmacist. The court thus needed to determine where the contract came into
existence.
Held:
Goods on the shelf constitute an invitation to treat not an offer. A customer takes the goods to the
till and makes an offer to purchase. The shop assistant then chooses whether to accept the offer.
The contract is therefore concluded at the till in the presence of a pharmacist.

The customer is entitled to put back the goods if they change their mind, and the store is entitled to withdraw the goods from sale at any time until the contract has been conducted at the cash desk

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23
Q

Tell about offer to the public

A

An offer to the public may be classed as an offer that can be accepted to form a contract - don’t need to perform individual acceptance

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24
Q

Offer to the public at large case - Carlill v The Carbolic Smokeball Co. Ltd 1893

A

The company argued:
o The advert was not an offer
o Even if it was an offer, it had not been addressed specifically to Mrs Carlill
o Even if there had been a valid offer she had not notified the company of any acceptance and
so there was no contract
Can be only accepted by the individuals it addressed. Also accepted by performance (e.g. taking the
item to the counter), otherwise contract needs to be accepted before it being binding.
- The court held:
o The advert was expressed in such definite terms that it was an offer.
o An offer can be made to the general public and it will be deemed to be an offer to whoever
accepts it.
o Mrs Carlill had accepted the offer in exactly the manner proscribed by the offer, i.e. by
buying and using the smokeball.

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25
Q

Carlill v The carbolic smokeball Co. Ltd 1893 more details

A

A Newspaper advert placed by the defendant stated:-
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after
having used the ball three times daily for two weeks according to the printed directions supplied with each
ball…
£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter.”
Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought
to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a mere invitation to
treat rather than an offer:
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu.
5. There was no consideration provided since the ‘offer’ did not specify that the user of the balls must have
purchased them.
Held:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a
unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected
all the arguments put forward by the defendants for the following reasons:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales
puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since
acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a
reasonable time limit or confining it to only those who caught flu whilst still using the balls.
5. The defendants would have value in people using the balls even if they had not been purchased by them
directly.

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26
Q

Tell about lapsing of offer

A

Offer can lapse in certain circumstances, and when this happens, it will be unavailable for acceptance; cannot be performed. DEPENDS WHAT IS REASONABLE UNDER CIRCUMSTANCES

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27
Q

Tell about express revocation

A

Where withdrawn (revoked) before acceptance, unless offeror promises to hold open for a certain period

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28
Q

Tell about implied revocation (3)

A

1) Time limit for acceptance in offer passes or reasonable time passes without reply or acceptance
2) Where counter offer (or qualified acceptance) received
3) Where either party dies or goes insane prior to the acceptance

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29
Q

Tell about counter offer

A

Where a qualified acceptance is received, this determines/diminishes the original offer. Counter offer includes additional terms or some contradictory terms or even partial terms

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30
Q

Counter offer case Wolf and Wolf v Forfar Potato Co. Ltd 1990 KNOW THIS

A

Forfar sent a telex to Wolf & Wolf offering to sell potatoes. The offer was open until 5pm the
next day. Wolf & Wolf telexed back what purported to be an acceptance but contained extra
conditions. Forfar advised Wolf & Wolf by phone to say the extra conditions are not acceptable.
Wolf & Wolf sent another telex in which they attempted to accept the original offer. There was
no contract and the court found the counter offer killed off the original offer. The pursuers appealed to the Court of Session where it was held that on the making of a qualified
acceptance and counter-offer, the original offer falls and that on the failure to obtain the terms requested
in the counter-offer, the party cannot fall back on and accept the original offer.

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31
Q

Tell about time related to contracts

A

Time is essence, if promised a time frame, offer must stand open till that time frame, and if accepted within that time frame, contract is binding. Where acceptance is not tendered within a reasonable time of the receipt of offer, the offer is implied revoked. Again what is reasonable time frame

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32
Q

Time is essence case Wylie and Lochead v McElroy and Sons 1873

A

The parties were in negotiations over iron-work for new business premises. The original offer
to carry out the work was made in April but was not accepted until 5 weeks later (and even
then not on identical terms) M and sons argued that because of the length of time delay and
the fact iron prices fluctuate on a regular basis the original offer was no longer available for
acceptance.

33
Q

Time is essence case Glasgow Steamship Company v Watson 1873

A

A coalmaster offered to supply a shipping company with coal at 7 shillings per ton. The
acceptance was sent after nearly ten weeks, however during this period the price of coal
went up by 2 shillings. As a consequence the acceptance was refused so the shipping
company accused Watson of breach of contact. It was held that the offer was no longer
capable of being accepted. Lord Inglis stated that if no fixed time for response is given, an
offeror should reply within reasonable time.

34
Q

Tell about recall of offer (5)

A

1) offer cannot be recalled during a promised period for it being open
2) if not accepted within the time period, the offer is revoked
3) If no time period, offer is open for a reasonable time, and if not accepted during that, it is revoked
4) If no promise to keep offer open is made, offer can be recalled anytime before acceptance
5) Revocation of offer is only effective when it reaches the offeree

35
Q

Tell about acceptance of an offer

A
  • Normally, when prescribed You need to use the same form of communication as the offer was, otherwise acceptance is invalid
  • If not prescribed, acceptance can take any form
36
Q

Use of format case Baillie Estates Ltd v Du Pont (UK) Ltd 2009

A

Contractual email negotiations, about purchasing of a large printing press, mainly through
email. Very detailed email was sent to which Baillie agreed only by saying ‘Go ahead’, and
Du Pont equally vaguely responded ‘its on the way’ without further details of what. Baillie
thought contract was concluded, after which a day later Du Pont sent further email
attachment which included some additional information of credit checks etc which might
impact the contract. Court ruled enough details to be a contract, thus combining before
Du Ponts standard terms and conditions. Also they had additional small print, Du Pont
disclaimer no email communication should be considered contractual unless clearly
stated.

37
Q

Acceptance format case Holwell Securities Ltd v Hudges 1974

A

Dr Hughes granted Holwell Securities an option to purchase his house for £45,000.
The option was to be exercisable ‘by notice in writing’ within 6 months. Five days
before the expiry, Holwell posted a letter exercising the option. This letter was
never received by Hughes. Holwell sought to enforce the option relying on the
postal rule stating the acceptance took place before the expiry of the option.
Held:
By requiring ‘notice in writing’, Dr Hughes had specified that he had to actually
receive the communication and had therefore excluded the postal rule.

38
Q

Give specification about acceptance and revocation receiving

A

Acceptance once sent can be revoked, but only if it reaches the offeror before acceptance does.

39
Q

Tell about the postal Rule

A

Because of the past sanctity and reliability of the post office, when acceptance was put to letter box it was considered valid contract. Here the rule is that acceptance takes effect at time of posting irrespective of when letter is received.

40
Q

Postal rule case Dunlop v Higgins 1848

A

was an early decision confirming the postal rule in the Scots law of contract formation.
The decision was based on the earlier case of Adams v. Lindsell. Dunlop & Company
offered by post to sell 2,000 tons of pig-Iron at some price. The offer was sent on
January 28, 1845. It reached Higgins on January 30, 1845. Higgins posted the letter
of acceptance on the same day. But, the defendant received it on February 1, 1845
with some delay. The defendant refused to supply the goods, because the prices have
increased.
Judgment
It was held that the acceptor was not responsible for any delay in the course of the
transit. Hence there was a binding contract. The posting of a letter accepting an offer
constitutes a binding contract even if the letter never arrives due to the fault of the post
office.

41
Q

Postal rule case Countess of Dunmore v Alexander 1830

A

An acceptance can be withdrawn after posting, at time of posting revocation.

Regarding the employment of a servant, an acceptance letter and a rejection letter arrived at
the same time, was there a contract? No contract due a postal acceptance can be revoked by
speedier means, unconvincing decision, not relying on precedent and only a majority decision.

42
Q

If contract is revoked, how does this make it valid?

A

Revocation must be received by offeree BEFORE he posts acceptance, otherwise posting of acceptance forms a contract

43
Q

Acceptance case Jacobsen & Sons v Underwood 1894

A

Defender offered to buy from the pursuers a quantity of straw, offer stated time
frame of ‘by Monday 6th’, the pursuer posted a letter acceptance on the evening of
6th, due to insufficient addressing of the letter, it was delivered on 7th, defender
saying the acceptance was too late. Held: the defenders alleged but failed to prove a
custom of trade to the effect that when a date was fixed for reply to an offer the
reply must be not only despatched but received by that date.

44
Q

Tell about acceptance validity

A

Silence is not enough, and offer cannot include a term in offer stipulating that silence by certain time constitutes acceptance. Acceptance to the world, however doesn’t need specific acceptance in order to be implied.
Terms become valid after contract is formed, then unless both parties agree, no room for negotiation
When do negotiations turn to contract?

45
Q

Acceptance case Felthouse v Bindley 1862

A

Felthouse has a conversation with his nephew about buying a horse. Uncle granted him the
permission to buy it and it would be the nephews. Being busy at the auction, Nephew advised the
auctioneer Bindley not to sell the horse, but accidentally he did for someone else. Felthouse sued
in the tort of conversation what the horse was his property and there was a valid contract, Bindley
argued that Felthouse had not communicated his acceptance for the offer. Ruled: no contract for
the horse, no acceptance of the offer as silence is not an acceptance and obligation cannot be
imposed by another.

46
Q

Tell about acceptance and terms case Thornton v Shoe Lane Parking Ltd 1971

A

The claimant was injured in a car park partly due to the defendant’s negligence.
The claimant was given a ticket on entering the car park after putting money
into a machine. The ticket stated the contract of parking was subject to terms
and conditions which were displayed on the inside of the car park. One of the
terms excluded liability for personal injuries arising through negligence. The
question for the court was whether the term was incorporated into the contract
ie had the defendant brought it to the attention of the claimant before or at
the time the contract was made. This question depended upon where the offer
and acceptance took place in relation to the machine.
Held:
The machine itself constituted the offer. The acceptance was by putting the
money into the machine. The ticket was dispensed after the acceptance took
place and therefore the clause was not incorporated into the contract.

47
Q

Battle of the forms - remind yourself topic 3 p 10

A

Where there is a battle of the forms whereby each party submits their own terms the last
shot rule applies whereby a contract is concluded on the terms submitted by the party who is the
last to communicate those terms before performance of the contract commences

48
Q

Tell about intention to be legally bound

A

-A contract is not automatically formed just because there is no consensus in idem, as demonstrated by a valid offer and acceptance.

49
Q

Tell about some cases of agreements that cannot be enforced in court

A

Social and domestic agreements, but dependant on the circumstances

50
Q

Tell about Age as Legal capacity

A

Age of Legal Capacity (Scotland) Act 1991:

  • Under 16: No capacity except for common transactions for age and reasonable terms
  • 16-18: Full capacity but subject to having “prejudicial transactions” set aside before 21. You are fully liable at 16-18 as you need to understand the terms and conditions
  • Over 18: Full legal capacity
51
Q

Factors regarding contractual capacity

A
  • Insanity/metal illness (makes a contract void or unforceable) (insane persons affairs can be dealt with appointed curator bonis. Could be difficult to question of capacity where short of insanity
  • Intoxication - both drink & drugs level is important (Renouncing contract is essential as soon as sobered up, time is essence) (Person in state of absolute drunkenness cannot exercise reason, but any only darkens reasoning, which does not then affect the contract
52
Q

Insanity contractual capacity case Loudon v Elder’s Curator Bonis 1923

A

Elder, a Dundee merchant, ordered goods fromLoudon on March 23 and 28. On March 31, before
any of the goodswere delivered, Elder was certified insane and on April 1 Loudon were informed
that thecontracts were cancelled. The company sued Elder’s curator bonis for damages forbreach
of contract. Elder was proved to have been insane at the time the orders weregiven. Held: There
was no liabilityfor breach of contract as the orders were null and void.

53
Q

In toxication case in contractual capacity Taylor v Provan 1864

A

Provan offered to buy cattle from Taylor at various prices, all of which Taylor refused. Taylor
refused to sell for less than £15 per beast. After a few drinks Provan offered to buy the cattle
for £15 per head, Tatlor accepted. Provan tried to have this contract set aside on the basis of
his own intoxication. The court held that the contract was binding. The court held that he
was not too intoxicated to consent.

54
Q

Drunkness case contractual capacity Pollock v Burns 1875

A

Pollock, described as an “habitual drunkard”, brought an action to try to suspend a charge on a
bill of exchange he alleged he had signed when incapable through drink. Held: Pollock could
not successfully challenge the bill, as he had waited until six months after the bill became
due.

55
Q

Active Q: A valid and enforceable contract in Scotland is formed by offer and acceptance. Is this
sufficient, or are there other requirements. If so, what are they?

A

Notes p 12

56
Q

Active Q: An offer is distinct from an invitation to treat. How? With reference to case law, discuss
why the distinction is important in practice.

A

p. 12 Notes

57
Q

Active Q: In which circumstances must a contract be agreed in writing in order to be valid? If a
contract that should be in writing is agreed orally, is it possible that it might still be valid? If
so, when?

A

Notes p.12-13

58
Q

Active Q: Explain the postal rule, and highlight the potentially out of the ordinary situations that
might occur when it is applied.

A

notes p. 13

59
Q

Active Q: When can an offer be revoked?

A

Notes p.13

60
Q

Active Q: What is a ‘qualified acceptance’ in contract law?

A

Notes p.13

61
Q

Name false identity cattle case

A

Morrison v Robertson 1908

62
Q

Name hire purchase piano case

A

Muirhead and Turnbull v Dickson 1905

63
Q

Name the pond cleaning case

A

Mathieson Gee (Ayrshire) Ltd v Quigley 1952

64
Q

Name the Bumper Hall Pen case

A

Harvey v Facey 1893

65
Q

Name Flick knife case

A

Fisher v Bell 1961

66
Q

Name selfservice case

A

Pharmaceutical Society of GB v Boots Cash Chemist 1952

67
Q

Name Carbolic smokeball case

A

Carlill v The carbolic Smokeball Co. Ltd 1893

68
Q

Name the important counter offer case

A

Wolf and Wolf v Forfar Potato Co. Ltd 1990

69
Q

Name the ironwork case (late response)

A

Wylie and Lochead v McElroy and Sons 1873

70
Q

Name the Coal selling case (late reply)

A

Glasgow Steamship Company v Watson 1873

71
Q

Name the printing press case

A

Baillie Estates Ltd v Du Pont (UK) Ltd 2009

72
Q

Name the notice in writing case

A

Holwell Securities Ltd v Hughes 1974

73
Q

Name the delay in post case

A

Dunlop v Higgins 1848

74
Q

Name the servant case

A

Countess of Dunmore v Alexander 1830

75
Q

Name the posting date case (if date is stated posting on that day is not enough)

A

Jacobsen & Sons v Underwood 1894

76
Q

Name the buying a horse case

A

Felthouse v Bindley 1862

77
Q

Name the parkhouse case

A

Thorton v Shoe Lane Parking Ltd 1971

78
Q

Name intoxication case cattle

A

Taylor v Provan 1864

79
Q

Name habit drunk case

A

Pollock v Burns 1875