Evaluation of the law of contract

What you'll learn

• How to evaluate formation: offer and acceptance, intention, consideration and privity.
• How to evaluate contract terms: incorporation, classification and exclusion clauses.
• How to build AO3 arguments about certainty, fairness, commercial practicality and reform.
• How to use legal authority in concise, persuasive evaluation paragraphs.

The aim of evaluation in contract law

In contract law, evaluation means judging whether the rules work well. You are not just describing the law; you are asking whether it is clear, fair, practical and in need of reform.

A strong evaluation paragraph usually follows this pattern:

1. State the area of law you are evaluating.
2. Give a short rule and authority.
3. Explain why the rule is useful.
4. Explain the criticism or limitation.
5. Reach a balanced judgement.

Formation of contract

Offer and acceptance

An offer is a clear promise to be bound on specific terms. Acceptance is final and unqualified agreement to those terms.

The law uses an objective approach: it asks what a reasonable person would think the parties said or did, not what they secretly intended. In Carlill v Carbolic Smoke Ball Co (1893), an advert promising £100 to users who still caught flu was held to be a unilateral offer accepted by performing the required act. This shows flexibility.

Other rules create certainty. In Hyde v Wrench (1840), a counter-offer destroyed the original offer. In Pharmaceutical Society of Great Britain v Boots (1953), goods on a shop shelf were an invitation to treat, not an offer, so the customer made the offer at the till.

The strength is predictability: parties can know when obligations arise. The weakness is artificiality, especially with modern contracting online, where automated systems, “click acceptance” and instant messages can make old rules feel strained. The postal rule from Adams v Lindsell (1818), where acceptance is effective when posted, is often criticised as outdated.

Intention to create legal relations

The law uses presumptions. Domestic or social agreements are presumed not to be legally binding, as in Balfour v Balfour (1919), where a husband’s promise to pay his wife money while abroad was not enforceable. But the presumption can be rebutted: in Merritt v Merritt (1970), separated spouses who made a written agreement did intend legal consequences.

Commercial agreements are presumed to be legally binding. In Rose & Frank v Crompton (1925), however, an “honour clause” showed the parties did not intend legal enforceability.

This area is practical because it prevents courts being flooded with family disputes. However, it can be criticised for relying on assumptions about relationships that may feel outdated or unfair.

Consideration

In Currie v Misa (1875), consideration was described as a benefit to one party or detriment to the other. The law does not require equal value: in Thomas v Thomas (1842), £1 rent was sufficient consideration even though not adequate.

The doctrine is criticised as technical. In Foakes v Beer (1884), part payment of a debt was not good consideration for a promise to give up the rest. This may be commercially harsh. Yet Williams v Roffey Bros (1990) softened the doctrine by recognising “practical benefit” as good consideration where a contractor promised extra payment to ensure work was completed on time.

Promissory estoppel also reduces unfairness. In Central London Property Trust v High Trees House (1947), a landlord could not go back on a promise to accept reduced rent during wartime for that period. However, estoppel is generally a shield, not a sword: it usually defends against a claim rather than creating a new cause of action.

Privity of contract

The traditional rule was strict. In Tweddle v Atkinson (1861), a groom could not enforce promises made between the fathers to pay money to the couple because he was not a party. In Dunlop v Selfridge (1915), Dunlop could not sue a retailer because there was no contract between them.

The Contracts (Rights of Third Parties) Act 1999 reformed this. Under s1, a third party may enforce a term if the contract expressly says so or the term purports to confer a benefit on them, unless the contract shows otherwise.

This reform is a major strength because it reduces injustice. But privity still matters: contracting parties can exclude the 1999 Act, and third parties must still fit the statutory requirements.

Contract terms

Evaluation of terms asks whether the law fairly decides what promises are included, how important they are and whether parties can exclude liability.

Incorporation of terms

Terms may be incorporated by signature, notice or previous dealings. In L’Estrange v Graucob (1934), a person who signed a document was bound by its terms even though she had not read them. This supports certainty but can be harsh.

For notice, the term must be brought to the party’s attention before or at contracting. In Parker v South Eastern Railway (1877), reasonable notice could incorporate ticket terms. In Thornton v Shoe Lane Parking (1971), a car park exclusion clause given after the machine accepted money was too late. In Interfoto v Stiletto (1989), an especially onerous term required particularly clear notice.

The law is strong because it protects reasonable expectations. But it can still be difficult for consumers faced with long standard-form contracts they realistically never read.

Classification of terms

A condition is a major term; breach allows termination and damages. In Poussard v Spiers (1876), missing opening performances was breach of condition.

A warranty is a minor term; breach gives damages only. In Bettini v Gye (1876), missing rehearsals was breach of warranty.

An innominate term is classified by the seriousness of the breach. In Hong Kong Fir Shipping v Kawasaki (1962), the court asked whether the breach deprived the innocent party of substantially the whole benefit of the contract.

The three-way classification is flexible. The criticism is uncertainty: parties may not know in advance whether breach of an innominate term allows termination.

Exclusion clauses

Exclusion clauses must be incorporated and interpreted properly. The courts may use contra proferentem, meaning ambiguous wording is interpreted against the party relying on it. In Curtis v Chemical Cleaning (1951), a cleaner could not rely on a clause where its effect had been misrepresented.

Statutory control is crucial. The Unfair Contract Terms Act 1977 restricts exclusion clauses, especially in business liability. The Consumer Rights Act 2015 protects consumers: terms must be fair and transparent, and unfair terms are not binding.

In Photo Production v Securicor (1980), the House of Lords accepted that clear exclusion clauses can be effective even for serious breach, subject to statutory controls. In George Mitchell v Finney Lock Seeds (1983), a limitation clause failed the reasonableness test under UCTA 1977.

The evaluation is balanced. Exclusion clauses support freedom of contract and allow businesses to price risk. But without controls, they can be oppressive, especially where bargaining power is unequal.

Ideas for reform

Reform means changing the law to make it clearer, fairer or more suitable for modern contracting.

Reforming formation

One reform idea is to update communication rules. The postal rule from Adams v Lindsell (1818) could be replaced by a general receipt rule, especially because modern communication is usually instant or trackable. This would improve certainty.

Another idea is clearer statutory guidance for online contracts: when automated acceptance occurs, when terms are incorporated and how notice should work for digital terms.

Reforming consideration and privity

Consideration could be simplified. One option is to enforce serious promises where there is clear intention to create legal relations, rather than requiring technical consideration. This would reduce problems from Foakes v Beer (1884), but it might also make casual promises too easily enforceable.

Privity has already been reformed by the Contracts (Rights of Third Parties) Act 1999. A further reform could make third-party rights easier to identify, but too much expansion may undermine party autonomy.

Reforming terms and exclusion clauses

For terms, reform could involve clearer rules for standard-form contracts. Consumers and small businesses often click or sign without reading. The law could require clearer summaries of unusual or onerous terms, building on Interfoto v Stiletto (1989).

For exclusion clauses, one reform idea is stronger protection for small businesses, which may face standard terms similar to consumers but without the same level of protection under the Consumer Rights Act 2015.