The Essay On Common Law And Equity, Postal Rule, And Contract Formation.

(a)In the context of contract law, analyse the discussions between Annabelle and Chris as to whether there has been an offer and acceptance.

(b)In the context of contract law, outline and discuss the other two elements, which were not discussed in Question 2(a), required for a contract to be established using the relationship between Benjamin and Chris as an example. 

(c)In the context of contract law, explain the meanings and effect of ‘term’ and ‘representations’ respectively. 

(d) Set out and discuss the remedies that are available to an injured party for a breach of contract

Common Law and Equity

Common law and equity are branches of law which have not been created through express legislations. Thus knowing the difference between both the laws is necessary. Common laws are those laws which exist in the legal words due to the rulings made by the courts. Common law is based on those rulings which have been made by the judges in older cases. Other terms by which common law is known are case laws and precedent. On the other hand the branch of law whose development had been done to supplement rigid statute law which may lead to hardship in relation to the outcome is called equity. According to McKendrick (2014) the branch of law in which punishment is decided based on the elements of fairness and justice after taking into consideration the overall circumstances which includes motive behind the wrongful act or offence is known as equity. 

The primary differences between the branches of law are as follows:

• Common law originates from the decision which had been made by the judges in older cases and is binding in the present cases having similar facts in from of precedents. The judges of a lower court have to abide by the precedent set by a superior court. On the other hand equity is made up of general principles of justice and fairness which supplements and statutory common law in certain circumstances.
• To make it simple equity can be defined as a form of relief which are not available within the scope if common law or legislative law. On the other hand common law is legal principals itself.
• Equity relies upon good faith, reasons, fairness and justice. On the other hand common law comprises of the application precedent laws to present issues. 

1. Postal rule and its exceptions

The postal rule is a rule which has been provided in relation to the situation where the communication of acceptance has been attempted to be done through post. The provisions in relation to the rule had been first coined in the 19^th century in the case of Adams v Lindsell (1818) B & Ald 681. The rule had been further reaffirmed in the case of Dunlop v Higgins (1848) 1 HL Cas 381 followed by Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216 and then the case of  Henthorn v Fraser [1892] 2 Ch 27. The rule is applicable only in relation to acceptance and not any other contractual letters. In this case the plaintiff had posted the letter of acceptance but the letter had not reached the offeror within the prescribed time stated in the offer. In this case the court ruled that it would cause hardship to the plaintiff where acceptance would be held as completed when the letter actually reaches the offeror as the letter has already gone beyond the control of the offeree. Thus the court ruled that as soon as the letter has gone beyond the reach of the acceptance such as when it has been posted the acceptance is said to be formed.

Thus when a letter of acceptance has been posted by the offeree it is regarded as a valid acceptance even if the letter reaches its intended destination after the stipulated time or it does not reach the destination at all.

Postal Rule

There are a few exceptions to the postal rule:

Firstly, it had been held in the case of Re London and Northern Bank 1900 that the postal rule is not applicable when the letter of acceptance has not be posted in a proper manner. Here the letter of acceptance had been handed to a postman who only had the authority of delivering not collecting letter.

Secondly, in the case of Henthorn v Fraser 1892 the court ruled that the postal rule is not applicable where post is not considered as a usual communication method. The rule is also not applicable where postal acceptance is expressly prohibited. The postal rule is not applicable when the letter has been incorrectly addressed.. 

In the Pinnel's Case (1602) 5 CoRep 117a It had been ruled by the court that when a person owes  money to another person and a part payment has been made signifying full and final settlement it is not considered as a good consideration under common law. For instance where X owes Y $30 and Y accepts $20 as a full settlement there is nothing in law which would prevent her from claiming the additional $10 latter as no consideration has been provided in relation to accepting the lesser payments. This is because an already existing obligation at law is present on X through which he is bound to make full payments to Y.

However as provided in the case of London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130 the part payment will be accepted as a valid consideration if any additional consideration has been provided. For instance the lesser payment made by X is added with a book it would be a valid consideration. The doctrine of “accord and satisfaction” is also an exception which takes place in relation to unliquidated debts. Here the agreement to discharge the obligation is the accord and the consideration is the satisfaction,

In the case of Hirachand Punamchand v Temple [1911] 2 KB 330 it has held by the court that where a third party has made the part payment it would be a binding agreement as a consideration is present.

As provided by Wood v Robarts (1818) compensation agreements at the time which the company is wound up are also binding in the parties to the agreement.

Whether the discussion which took place between Chris and Annabelle accounted to a valid offer and acceptance

Exceptions to the Postal Rule

Offer and acceptance are two of the four primary elements which are required to form a valid contract. In relation to an offer the judges in Gibson v Manchester City Council [1979] 1 WLR 294   have provided a ruling that a valid offer has to be “unambiguous and sufficient” otherwise it cannot be regarded as an offer at all. An invalid offer is an invitation to treat. In the same way invitation to treats also cover advertisements as ruled in the case of Partridge v Crittenden [1968] 2 All ER 421. In this case the court ruled that goods which are displayed in the shop for the purpose of advertisements are considered as invitation to treat.

Provisions in relation to a valid acceptance and a counter offer have been ruled in the case of Hyde v Wrench [1840] EWHC Ch J90. In this case the issue before the court was to determine whether a valid acceptance has been made by the party or not. in the case an valid offer had been made for the sale of a farm for 1000. The offeree made an offer to purchase the farm at 900. The offer of the offeree was considered as a counter offer as it was not a mirror image of the original offer and contained different provisions relating to the price. The counter offer rejects the original offer. Thus the offer which had been made to sell the farm at 1000 is now no longer available to be accepted. 

It has been provided through the scenario that Annabelle had visited the Millennium art gallery. She had been found to have interest in a collection of 7 paintings which had been described as being painted by Lowry along with having a price tag of $550,000. It can be stated that in this situation the paining is also like goods which are displayed in a shop for advertisements and thus it is an invitation to treat made by the Millennium Art Gallery as per the provisions of Partridge v Crittenden. 

An discussion had been made between Annabelle and the manager of Millennium that she wants  to purchase the paintings at a price of $450,000. This discussion between them would be regarded as an offer as the expression is sufficient and unambiguous as per the provisions of Gibson Case.

In reply it had been stated by the manager that he wants to sell the painting at a price of 500,000. This discussion accounts to a counter offer as it has altered the term in relation to the price of 450000 and is unequivocal.

Formation of Contract

The counter offer of 500000 has been followed by another counteroffer which has been made by Annabelle where she has again altered the price to 480000. This means that the offer of 500000 is no longer eligible to be accepted as it has been rejected by the counter offer.

An offer was made by Annabelle to purchase the paintings at 500000 which had been accepted by the manager when he purchased the painting from Benjamin and sold it to Annabelle. At this time the offer and acceptance took place.

Conclusion

Thus the offer and acceptance had been concluded between Annabelle and the manager as per the above discussion

b) Along with the elements of offer and acceptance, the element of consideration and intention of creating a legal obligation is also required for the purpose of establishing the formation of a valid contract. The elements are discussed in this part of the paper in the light of the situation which took place between Annabelle and the manager for the purchase of the painting.

As stated by Knapp et al. (2016) a contract cannot be formed until a valid consideration is found to be present in the agreement between the parties. Consideration is payment of compensation or money which is received by the party upon entering into a contract. The consideration must be something which is of a value. It is a promise of an act or omission which is provided against the act or omission done on the part of the other party to the contact. In this case the consideration for the manager has been the price which has been paid by Annabelle in relation to the painting and the consideration for Annabelle has been the paintings of Lowry bought against the price of 500000.

Another element which is required to form a contract is the intention of creating a legal obligation. As per this element the parties to the contract must have the intention of legally binding each other to the agreement to be formed between them and thus acknowledging their legal right and obligations under the contract.  In the case of Edwards v Skyways Ltd [1964] 1 WLR 349 it had been stated that ICLR is presumed to be present in a commercial agreement. On the other hand in the case of Balfour v Balfour [1919] 2 KB 571 it had been stated that domestic relationships do not have the intention of creating a legal relation however the parties can rebut the presumption. As the contract between Annabelle and Managers is a commercial dealing ICLR is presumed to be present. ICLR is also determined through the application of the objective test as done in Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1. 

c) A term of a contract is a provisions which has been incorporated into the contract either in an express or implied way by the parties to the contract. A term of a contract has a legally binding effect on the parties to the contract. On the other hand a representation is a statement which is made by one of the parties to let the other party known about a product or a service. A representation does not have a legally binding effect on the parties to the contract. A person is not reasonable expected to rely on a representation or a mere puff to get into a contract. However there are specific legal provisions in place to determine whether a statement made by a party is a term or a mere representation. The appropriate remedy and cause of action can be known after it is analyzed that a statement is a term or a representation.

There are four rules which are in place to determine whether a statement is a term or a representation. These are

The parole evidence rule – As per this rule when an oral contract has been documented all the statements which are written in the contract are contractual terms and anything else which is not included has no value.

Time of incorporation- in the case of Routledge v Mckay [1954] 1 WLR 615   it had been ruled by the court that the longer the time between the statement and the formation of a contract the more chances is that it is a representation.

Relative expertise of parties- in Oscar Chess v Williams [1957] 1 WLR 37 the court ruled that where there is greater knowledge on the part of the representator the statement is a term and conversely it is a representation  if the representee has more knowledge.

Importance of the statement- in the case of Bannerman v White (1861) 10 CBNS 844 it had been state by the court that whether the importance of the statement has been represented by the representee to the representor it is to be a term of the contract.

d) There are various forms of remedy which an injured party may avail in case of a breach of contract. The remedies to bee provide to the party are based on the circumstances. There are six kinds of remedies which are available to the aggrieved party:

• Damages – as provided in Addis v Gramophone [1909] AC 488damages are provided to the aggrieved party to return its position prior to the formation of the contract. Damages are only available where an actual loss is suffered by the party to the contract.
• Rescission- this remedy is provided to the parties in case if situation like undue influence, duress or misrepresentation. Recession is provided in from of a equitable remedy solely on the judge’s discretion. A remedy of recession has been provided by the court in the case of Long v Lloyd [1958] 1 WLR 753. Here the contract is ended at the option of the aggrieved party.
• Repudiation- repudiation signifies end of contract and is provided as a remedy when the other party has violated a condition of the contract rather than warranty. the court provided a remedy of repudiation in the case of Poussard v Spiers (1876) 1 QBD 410
• Injunctions- injunctions is an order to prevent a party from doing something and are provided by the judges as an equitable remedy based on their discretion as it was done in Page One Records v Britton [1968] 1 WLR 157
• Specific performance- In this remedy the judge orders the other party to carry out a specific act and is provided when other remedies are not adequate to compensate the party as it was done in the case of Cohen v Roche [1927] 1 KB 169

In the given situation as misrepresentation has been done by the art gallery Annabelle has the right of rescinding the contract. 

References 

Adams v Lindsell (1818) B & Ald 681

Addis v Gramophone [1909] AC 488

Balfour v Balfour [1919] 2 KB 571

Bannerman v White (1861) 10 CBNS 844

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1.

Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216

Cohen v Roche [1927] 1 KB 169

Dunlop v Higgins (1848) 1 HL Cas 381

Edwards v Skyways Ltd [1964] 1 WLR 349

Gibson v Manchester City Council [1979] 1 WLR 294

Henthorn v Fraser [1892] 2 Ch 27

Henthorn v Fraser 1892

Hirachand Punamchand v Temple [1911] 2 KB 330

Hyde v Wrench [1840] EWHC Ch J90.

Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.

London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130

Long v Lloyd [1958] 1 WLR 753

McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).

Oscar Chess v Williams [1957] 1 WLR 37

Page One Records v Britton [1968] 1 WLR 157

Partridge v Crittenden [1968] 2 All ER 421

Pinnel's Case (1602) 5 CoRep 117a

Poussard v Spiers (1876) 1 QBD 410

Re London and Northern Bank 1900

Routledge v Mckay [1954] 1 WLR 615   

Wood v Robarts (1818)