Analysis Of Whether A Valid Contract Exists Between Josie And Sam

Issue of offer and acceptance

(i) Advice Josie whether there is a binding contract with Sam. 

Issue: After considering the fact that have been mentioned in the present scenario, the issue arises if Josie and Sam have entered into a valid contract. This issue arises due to the fact that Sam visited the studio of Josie and the like the painting of sunflowers. It was mentioned on the painting that the price was $900. However Sam made an offer to purchase the painting for $700. Josie told Sam that she cannot accept less than $800 for the painting. Therefore Sam became ready to purchase the painting at $800, but he told Josie to hold the painting was sometime, because he wanted to consult with his wife. Therefore, it can be said that in this case, Josie had offered to sell the painting for $800 and at the same time, she had also agreed that the offer will remain open until midnight, Tuesday. But on Monday itself another art enthusiast visited Josie and made an offer to purchase it for $900. Josie immediately sold the painting to Wendy for $900 and she also left a message on the answering machine of Sam. But as the machine was not working, Sam could not get this message. On Tuesday, Sam decides to purchase the painting as his wife had also agreed. But when he called Josie to purchase the painting, the call was disconnected before the offer would be accepted by Sam. Under these circumstances, Sam decides to write a letter to Josie, accepting the offer. Therefore it has to be seen if a valid contract has been created between the parties.

Another issue that has to be decided in this case is the postal role of acceptance can be applied to the facts of the present case, and it can be concluded that the offer was accepted at the moment when the letter containing acceptance was placed in mailbox by Sam. 

Law: The present issue can be decided by applying the principles of law of contract. The law of contract provides that certain elements must be present in order to consider an agreement as a legally valid contract. Similarly, if even one of these elements is not present, the agreement is not enforceable under the law. In this regard, the first such element is offer. The offer needs to be made by one party to the contract. Therefore if an offer has not been made, a valid contract may not arise. For making an offer, it is required that there should be at least two parties present (Graw, Parker, Whitford, Sangkuhl, 2015). But the law of contract provides that an offer can also be made to the whole world. An example of such a case was seen in Carlill v Carbolic Smoke Ball Co (1892). In this case, an offer was made by the company and the court held that this offer was made to the world at large. Such offer can be accepted by any person who can perform the conditions that have been stated in the offer. Therefore an offer is an invitation made by one party and communicated to the other party, inviting such party to enter the legally enforceable agreement on particular terms (Latimer, 2016). Such invitation can be treated as an offer if the party making the offer had the intention of being bound by the terms of the offer (Harvey v Facey, 1893).  Another requirement is that the offer should be differentiated from an invitation to deal. The purpose of making an invitation to deal is to invite offers from the other party. The law provides that when an offer has been accepted, it results in a legally enforceable contract, but the invitation to deal cannot be accepted because it is merely a request for offers (Graw, 2011). An advertisement is a good example of an invitation to deal. Similarly the goods that have been displayed in the shop window, along with their price tag are also invitation to treat. In such cases, if the other person wants to purchase the goods, he or she can make an offer and it will be decided by the trader if he wants to sell the goods or not, or to accept the offer or not (Pharmaceutical Society v Boots, 1953). For example, in Fisher v Bell (1961) the court had concluded that displaying flick knives in the shop window and mentioning the price cannot be considered as the violation of law according to which the sale of such knives had been prohibited. Therefore, generally the advertisements are considered as invitations to deal (Partridge v Crittenden, 1968), but in some cases, an advertisement may also amount to an offer (Carlill v Carbolic Smoke Ball co, 1893). For instance, in this case, Josie had displayed the paintings and mentioned their price which can be considered as an invitation to deal because it was not an offer.

Distinction between offer and invitation to deal

Regarding the issue of cost, the role of acceptance, it needs to be pointed out that as already mentioned, the elements of Offer And Acceptance are the basic requirements of a legally enforceable contract. But the law of contract had also introduced the postal rule. This rule, acts as an exception to the general rule according to which the party making the offer is allowed to withdraw it anytime before it has been accepted by the other party. Therefore the general code provides that the acceptance will be considered to have been communicated only when the offeror had received it. But the postal rule acts as an exception to the general rule. Therefore the court had to consider in Adams v Lindsell (1818) what is the exact moment when it can be said that a contract by post has been created. In this regard, keeping in view the delay in communication that takes place in post, the parties are not in a position to be aware if the acceptance has been communicated or not. Such a situation created a number of problems and therefore this rule was created by the court. Therefore, according to the postal rule, when the parties have contemplated post to communicate acceptance, it will be considered that the acceptance is complete at the moment when the latter getting the acceptance is put in mailbox (Sweeney, O’Reilly & Coleman, 2013). On the other hand, in face-to-face communication no such uncertainty is present regarding the exact moment when the contract has been formed. Similarly, this problem does not arise when the parties have used instantaneous modes of communication.

Application: In this case, Josie had made an offer to Sam. According to which she was ready to sell the painting for $800, and at the same time, she has also mentioned that the offer will be open till Tuesday midnight. But Josie sold the painting to Wendy on Monday. As a result, Sam wants to know if he can enforce the promise against Josie according to which the offer should have remained open till Tuesday. The law of contract provides that a promise to keep the offer of open cannot be enforced against a party unless consideration has been provided to support the offer. In this case, Sam had not provided any consideration in return of the promise made by Josie that the painting will not be sold in Tuesday. In Dickinson v Dodds (1876), an offer was made by the defendant regarding his house. At the same time, the defendant also promised that the offer could be accepted by the plaintiff till Friday. But on Thursday itself, a third-party expressed its willingness to purchase the property and the defendant accepted this offer. Then the defendant asked his friend to go to the plaintiff and inform him that the property has been sold. However, the plaintiff comes to the defendant on Friday and tries to accept the offer. Therefore, plaintiff came to the court, seeking specific performance of the contract. But in this case the court stated that. The defendant had already revoked the offer. Consequently, a contract was not formed between the parties. Therefore, the defendant was not obliged to eat the offer open till Friday. In support of this conclusion, the court pointed out towards the fact that the plaintiff had not supplied any consideration in return of the promise to keep the offer open. As a result, according to the law of contract, the party making the offer is allowed to withdraw the offer any time before it has been accepted unless such party had provided consideration to support the promise.

Requirement of consideration for promise to keep offer open

In the present case also, no consideration was provided by Sam in return of the promise made by Josie that she will not sell the painting.

Regarding the application of the postal rule, it can be said that in the present case, the rule cannot be applied. Therefore, it cannot be concluded that the acceptance of offer was communicated when Sam had listed the letter containing the acceptance of the offer. The reason behind this conclusion is that before Sam had accepted the offer, it has been withdrawn by Josie. She had sold the painting to Wendy and she also left a message for Sam. Therefore, even if the message was not hard by Sam, the offer has been effectively revoked by Josie.

Conclusion: Hence, in the present case, it can be concluded that a binding contract was not created between Josie and Sam. 

(ii) The remedies that might be available for the breach of contract.

In this part of the question, it has to be considered that if a breach of contract has taken place, what are the remedies that may be accessed by the other party? In this regard, the main remedies that are available to the innocent party for a breach of contract include damages and liquidated claims. The law provides for the grant of damages in case of a breach of contract. In such cases the damages are treated as a substitute for performance of the contract. Therefore, the intention behind granting damages to the innocent party is to put the party in the same position in which such party would have been in case of the proper performance of the contract (Vermeesch and Lindgren, 2011). As a result, generally the courts do not award punitive damages. Another requirement, that is present in case of the grant of damages that the loss suffered by the plaintiff should not be too remote and similarly it is also required that the innocent party has done everything reasonably possible to reduce the damages.

Equitable remedies are also available in such a case. The main equitable damages that may be granted by the court for the breach of contract include specific performance and injunctions. In this context, specific performance is an order given by the court according to which the breaching party is required to perform its part of the contract. Therefore, the remedy of specific performance will only be avoided if adequate relief cannot be provided by the remedy of damages. In the same way, specific performance cannot be granted in case of contracts dealing with personal service. Injunctions are the orders that have been made by the court and which direct a party were to do a particular thing, for instance, in order that the party should not continue with the breach. 

Generally has been claimed that the Pinnel's rule has created many difficulties. As a result, under some circumstances, it may appear that the application of this rule will be unfair in a particular case. Under these circumstances, the rule needs to be evaluated and similarly the impact of the rule on the doctrine of consideration. Also needs to be examined. For this purpose, needs to be considered if there are any problems related with the application of Pinnel's rule (Re Pinnel's Case, 1602). Similarly, a number of exceptions have also been developed so that the courts may deal with these problems. The most significant exception to the Pinnel's rule is the exception of promissory estoppel.

Inapplicability of postal rule

The role provided in Pinnel's case requires that the payment of a smaller amount will not result in the total discharge of the debt obligation. The reason given in support of this rule is that in such a case the promise made by the creditor according to which, he will not sue for the rest of the amount is not supported by consideration. As a result, such promise cannot be enforced against the creditor. In this case the court expressed the opinion that the payment of smaller amount of the date due in satisfaction of a larger amount cannot be considered as the satisfaction of the total debt. Instead, a gift of a horse, hawk or a robe may amount to a valid satisfaction of the debt.the reason given by the court was that in such cases, the gift may be more beneficial for the creditor as compared to cash.

The court further mentioned that paying and accepting lesser amount before the due date. Can also act as a valid consideration. The reason is that early repayment of debt is something more than mentioned in the original agreement between the parties. Another important case related with this rule is that of Foakes v Beer (1884). In this case, the judgment was obtained from the court against Foakes. However, Foakes agreed with the other party that he will settle the debt by paying 500 pounds at once and 150 pounds in the form of our yearly installments and in return Beer would not take any action under the judgment. Foakes paid the debt according to the agreement, but Beer wanted to claim the interest on the judgment debt. When the matter came before the court, it was held that Beer can recover the interest on the amount in view of the rule that the payment of smaller amount, cannot act as consideration in return of the promise that Beer would not take any action under the judgment.

But at the same time, the Pinnel's rule has also faced a lot of criticism. There are many persons who believed that this rule allows the creditors from reverting back from the promise made by them and claim the rest of the amount. An example in this regard can be of the case titled Couldery v Bartrum (1881), where Jessel MR had made the conclusion that according to the common law anything may be accepted by the creditor except cash. Therefore, a horse or a canary may be accepted by the creditor, but on account of a strange peculiarity of common law, cash, cannot be accepted in full satisfaction of the debt. 

References

Graw, Parker, Whitford, Sangkuhl, 2015, Understanding Business Law 7th ed LexisNexis Butterworths

Latimer, P, 2016, Australian Business Law CC, 2016 Edition.

Stephen Graw, 2011, An Introduction to the Law of Contract, 7th Ed., Thomson Reuters.

Sweeney, O’Reilly & Coleman, 2013, Law in Commerce, 5th Ed., LexisNexis.

Vermeesch,R B, Lindgren, K E, 2011, Business Law of Australia Butterworths, 12th Edition,.

Case Law

Adams v Lindsell ([1818] 1 B                

Carlill v Carbolic Smoke Ball co [1893] 1 QB 25

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

Central London Property Trust Ltd v High Trees House Ltd. (1947) KB 130

Couldery v Bartrum (1881) 19 ChD 394 at 399

Fisher v Bell [1961] 1 QB 394

Foakes v Beer (1884) 9 App Cas 605

Harvey v Facey [1893] UKPC 1

Partridge v Crittenden (1968) 2 All ER 425

Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401

Pinnel's case (1602) 77 ER 237