Legal Issues And Advice On Offer And Acceptance In Business Contracts

Example 1: Analysis of Offer and Revocation in Selling a Car

1.In a letter, dated 1 March and posted the same day Ann wrote to Jack offering to sell him her car for $12,000. She wrote,” I will give you until 7 March to make up your mind”. However, soon after posting the letter Ann changed her mind and on the morning of 2 March posted Jack a second letter advising him that the car was no longer for sale. Jack received Ann’s first letter at 10.00 am on 3 March. At 2.00 pm on the same day, Jack posted the following reply to Ann: ‘I like your offer very much but due to my present financial position will you accept payment of $1000 per month over a year? This letter reached Ann on the morning of 4 March. On the afternoon of 4 March Jack received an unexpected cheque for $16,000 from his uncle, and at 4.00pm he posted a second letter to Ann which said: ‘Forget my last letter; I accept your offer made in your letter dated 1 March and can pay you immediately I receive the car’. An hour after posting that letter Jack received Ann’s second letter advising that the car was no longer for sale. On 5 March, Ann received Jack’s second letter.

Ann seeks your advice on whether there is a contract between her and Jack.

2.Batty was driving to work in his car when his car broke down. He telephoned his local garage, Qualal Motors, and told them of his difficulty. They agreed to send out a mechanic, Eddie, to repair the car. When Eddie checked the car he discovered that it could not be repaired at the roadside but would have to be towed to the garage. Batty agreed to this. Eddie winched up the car on to the towing vehicle for the purpose of towing it to the garage. However, a worn clip on the towing gear being used by Eddie slipped open causing the car to fall. The car ran backwards over Batty’s foot breaking several of his toes. Also, the car’s suspension was severely damaged in the fall. Displayed on the back of the towing vehicle was a notice: “All towing is undertaken at the customer’s risk. Qualal Motors and their employees accept no liability for any damage, injury, or consequential loss, howsoever caused, while a car is being towed.” Batty wrote to Qualal Motors claiming compensation for the injury to his foot and for the cost of repairing the damage to his car’s suspension. They rejected his claim and referred him to the notice on the towing vehicle and to a similar notice that was displayed in their garage.

Rules for Valid Offer in Business Contracts

Advise Batty of any legal rights he may have against Qualal Motors to obtain compensation for his injury and the damage to his car. 

The main issue in this case is whether it is possible to consider the Jack and Ann as contracting parties on the terms of offer letter send by the Ann to the Jack? This issue mainly involves the rules related to the offer and acceptance, and also the implementation of these rules. 

Any contract is the valid contract if such contract includes all the important elements of the contract such as offer, acceptance, consideration, intention to create legal relations, and capacity. If any one element is missing from the agreement then such contract is not a valid contract.

Offer is the statement of readiness or promise made by one party to the contract known as offeror to the other party of the contract known as offeree, if offeree shows willingness to do or not do any act. It is necessary for the valid contract that party made the valid offer, because if offer is not valid then such contract is not binding on the parties. Offer can be made by the offeror in any form, as no specific manner is decided by the law for the purpose of making the offer. Following are the rules which govern the validity of the offer, which means, for making the valid offer, offeror must complied with these rules:

• Communication related to the offer must be given by the offeror to the offeree.
• Offer must be clear in nature, which means, there must not be any confusion in the offer.
• Offeror can make the offer to either single person or whole world (Consult Australia, 2012).

Cancellation of offer: these are the most important provisions related to the offer, because there are number of situations in which offer is considered as cancelled offer. It must be noted that, offeror holds the power to cancel the offer, but offeror can cancel it until the time it is not accepted or approved by the person to whom such offer is directed. Following are some ways through which offer made by offeror can be considered as cancelled offer: 

First, offer can be cancelled by the person who made it (offeror) through the revocation. Revocation is the method through which offer can be terminated by the offeror, but offeror must remind that he/she can revoke it until the time it is not accepted by the offeree. Once offer is accepted by the offeree then there is valid contract between the parties and offeror lost the power to revoke/cancel it (Dickinson v Dodds (1876) 2 Ch. D. 463).

Revocation of Offer by Offeror

Ann writes the letter to the Jack in which she gives the offer of selling her car for amount of $12000, and this letter (Letter 1) was posted by Ann to the Jack on 1^st March. Ann further stated in the letter that offer given by her is only valid until the date of 7^th March. Later, she realized that she is not any more interested in selling her car, and then she wrote another letter (letter 2) to the jack in which she revokes the offer given by her in the letter posted on 1^st march. She posted this another letter on 2^nd March.

However, offeror can also terminates the offer any time, and this can be done in that case also when he/she announced to open the offer until the particular date. Revocation of the offer is fall in the discretion of the offeror, but such discretion must be used only before the time it is accepted by the offeree. For making the revocation effective, it must be communicated to the offeree; otherwise revocation of offer is considered as invalid.

Second, offer can be terminated by the offeree also, and such termination is divided into two ways that are rejection of the offer and counter offer. First way that is rejection of the offer, in which offeree rejects the offer made by the offeror. It must be noted that, it is not possible for the offeree to accept the offer if such offer is once rejected by the offeree. On the other hand, offeree can reject the offer made by the offeror by making the new offer. In other words, offeree can accept the original offer by making modifications in the terms of that offer. If offeree provides his acceptance to the offer made by the offeror in context of those terms which are not exactly same as the original offer, then such offer is called as counter offer. Offer with modified terms is considered as the counter offer, even though modification is very small.

Hyde v Wrench, (1840) Beav 334 is the case law which can be used to understand this concept of the counter offer. In this case, Court highlights the concept of the counter offer. As per this case, there was no valid contract exists between the plaintiff and defendant, because instead of accepting the original offer, plaintiff made the new offer to the defendant for purchasing thee land for $950. This new offer made by plaintiff was known as counter offer because in this plaintiff fails to accept the original offer.

Termination of Offer by Offeree i.e., Rejection or Counter Offer

Court further stated that, once the original offer was rejected by the offeree by making the counter offer, then it was not possible for the offeree to accept the offer. In this case, no valid contract was exists between the parties. 

Jack made the counter offer by accepting the original offer with the modified terms. As per the law, offeree made the counter offer if he/she accepts the original offer by making modifications in the terms of that offer. If offeree provides his acceptance to the offer made by the offeror in context of those terms which are not exactly same as the original offer, then such offer is called as counter offer. Offer with modified terms is considered as the counter offer, even though modification is very small.

In this case, decision of the Hyde v Wrench will implement, and as per this case, there was no valid contract exists between the plaintiff and defendant, because instead of accepting the original offer, plaintiff made the new offer to the defendant for purchasing thee land for $950. This new offer made by plaintiff was known as counter offer because in this plaintiff fails to accept the original offer. In the similar manner, in the present case also, Jack made the offer to make payment in instalments and this is considered as the new offer because he change the terms of the offer made by the Ann. This new offer automatically rejects the original offer made by the Ann in Letter 1, and once the offer is rejected it cannot be accepted by the offeree. Jack made the

Therefore, second letter posted by Jack in which he accept the original offer is not valid.

It must be noted that, counter offer automatically cancels the original offer made by the offeror, and as per the general rule once offer is rejected by the offeree then offeree cannot accept the offer. In other words, original offer cannot revive by the offeree if such permission is not provided by the offeror.

After considering the different provisions it can be said that acceptance given by the offeree is considered as the invalid acceptance if such acceptance was not given on the exact terms of the original offer. Kennedy v. Lee (3 Mer. 454), is the perfect example of this statement, and as per this case, offeree cannot accept the offer given by the offeror until such offer was un-subsisted by the defendant.

Example 2: Legal Liability and Compensation for Car Accident During Towing

Counter offer is also called the mirror rule which states that acceptance given in context of the offer must reproduce the terms related to the original offer.

Jack receives the Letter 1 in which Ann gives the offer to sell her car on March 3, and in reply to this letter, Jack posted his acceptance. In letter of acceptance, Jack stated that he requested the Ann to accept the payment of $12000 in instalments of $1000 every month. This letter of acceptance is received by the offeror that is Ann on March 4. This letter of acceptance is posted by Jack on   3^rd March that is on same day on which he receives the letter 1 at 2:00 A.M.

On the same day, Jack’s uncle sends him the cheque of $ 16000 and he receives this cheque after posting the acceptance letter. After receiving the cheque, he send another letter to the Ann in which he accept the original offer  given by Ann on the same terms and conditions of the original offer. 

Later, jack receives the Letter 2 posted by Ann in which she revokes the offer made to the Jack in the Letter 1.

In the present case, provisions of the offer and acceptance will applied and as per these provisions, once the offer is rejected by the offeree then it is not possible for the offeree to accept the offer again. In this, Jack already rejects the offer made by the Ann by making the counter offer. Jack made the counter offer in the letter of acceptance posted by Jack on 3^rd March.

Above stated rules and implementation clearly stated that Jack and Ann are not contracting parties because no contract is present between the two.  

2.The main issue in this case is whether exclusion clause imprinted by Qualal motors on the back of the towing machine is valid or not, and whether Batty holds any right to file claim against the Qualal motors for the injuries suffered by her?

Contracts terms are those elements of the contract which identify the powers and obligations of the contracting parties and through these terms only court resolve the issues occurred between the parties to the contract. There are two types of terms related to the contract and these terms are express terms and implied terms. Both the terms consider the power and obligations of the parties related to the contract.

Legal Rights of Customers in Towing Industry

It is necessary for the contracting parties to incorporate their discussion in the contract in the form of terms. In other words, negotiations occurred between the parties of the contract is incorporated as the term in the contract signed between the parties. Those terms which are expressly stated under the contract are known as the express terms and those terms which are imposed by the statute are known as the implied term.

Exclusion clause is one of these terms, as it is the clause through which one party related to the contract exclude their liability in any particular situation or all situations occurred in that contract. In other words, one party of the contract incorporate exclusion clause under the contract signed between the parties for the purpose of excluding their liability in terms of that contract. There are some important elements which must be considered by the party while incorporating the exclusion clause under the contract, unless such clause is considered as the invalid clause. This can be understood with the help of case law White v Blackmore [1972] 3 WLR 296.

Exclusion clause is also known as the limited liability clause, and in Australia, this clause is governed by both contract law and by Competition and Consumer Act 2010. These clauses are effective if it complied with all the provisions of these law or if they does not breach any provisions of these laws.

This clause is effective in nature if it is incorporated in proper way in the contract signed between the parties, which means, clause is only effective, if it is properly incorporates into the contract, otherwise clause is not valid in nature.

It is the obligation of the party who wants to rely on the exclusion clause to bring the clause in the notice of the party against whom such clause is used. This can be understood through the case law Thompson v LMS Railway [1930] 1 KB 41. In this case, plaintiff was not able to read and because of this he gave her niece money for the purpose of purchasing the excursion ticket. on the front side of the ticket was printed "Excursion, For Conditions see back"; and on the back side of the ticket, there were number of conditions stated in which one of the condition stated that excursion ticketholders does not hold any right to take action against the company in terms of the any injury caused to the ticketholder. Later, plaintiff stepped out of the train and gets injured.

Understanding Liability Disclaimers on Towing Vans

The main issue in this case before the court was whether the defendants had taken the reasonable steps for the purpose of bringing the condition to the notice of the plaintiff. In this case, court held that defendant does not own any duty towards the plaintiff because they bring the condition in the notice of the plaintiff by highlighting about the conditions and exclusion clause on the front side of the ticket. Therefore, in this case, Court held that it was not relevant on the part of   the plaintiff to not read the conditions of the excursion ticket, and plaintiff does not hold any right to claim against the company.

In the present case, there is agreement between the batty and employee of the Qualal motors, as agreement is verbal in nature but still employee is under obligation to tell the Batty about the exclusion clause.

It must be noted that, there must be proper incorporation of the exclusion clause, which means, clause must be incorporated in such manner as it comes into the notice of the reader.

Batty is not aware about the exclusion clause before entering into the transaction with the Qualal motors, ad such clause is not notified to the Battty by the employee of the Qualal motors. Batty entered into the transaction at the time when she agreed on the advice given by the employee off the Qualal motors and at that time, contract created between the parties. 

In this case, provisions of the exclusion clause will be applied, and as per these provisions clause is effective in nature if it is incorporated in proper way in the contract occurred between the parties, which means, clause is only effective, if it is properly incorporates into the contract, otherwise clause is not valid in nature. It is the obligation of the party who wants to rely on the exclusion clause to bring the clause in the notice of the party against whom such clause is used.

It must be noted that, there must be proper incorporation of the exclusion clause, which means, clause must be incorporated in such manner as it comes into the notice of the reader. In case law, McCutcheon v MacBrayne [1964] 1 WLR 125, exclusion was printed between the 27 paragraphs and in the small fonts. Court stated that in this case, exclusion was not incorporated in the document in the proper manner. Therefore, in this case consistency of dealing was not present, because of which there is no course of conduct.

In the present case, employee of the Qualal motors fails to bring the exclusion clause stated on the back of the towing machine in the notice of the Batty, such clause is not incorporated in proper manner. Therefore, Qualal motors cannot rely on the exclusion clause because they fail to bring the exclusion clause in the notice of the Batty, and also fails to incorporate the clause in the proper manner.

In this case, Batty can file claim against the Qualal motors for the purpose causing injury and damage while towing her car.

In this case, batty holds the right to file case against the Qualal motors and take amount from them in context of her injury and damage to her car 

References:

ACL. Agreement. Available at: https://www.australiancontractlaw.com/law/formation-agreement.html. Accessed on 20th July 2018.

ACL. Hyde v Wrench, (1840) Beav 334. Available at: https://www.australiancontractlaw.com/cases/hyde.html. Accessed on 20th July 2018.

ACL. Unfair contract terms. Available at: https://www.cbs.sa.gov.au/assets/files/unfair_contract_Guide_ACL.pdf. Accessed on 20th July 2018.

Arts law. Exclusion clauses, disclaimers and risk warnings. Available at: https://www.artslaw.com.au/images/uploads/Exclusion_clauses_disclaimers_and_risk_warnings_December2014.pdf. Accessed on 20th July 2018.

Bristow, G. Exclusion Clauses - Drawing The Line. Available at: https://classic.austlii.edu.au/au/journals/MacarthurLawRw/1998/1.pdf. Accessed on 17th July 2018.

Consult Australia, (2012). Australian contract law. Available at: https://nerdyturtlez.com/tutor/order.php?id=773305. Accessed on 17th July 2018. 

Dickinson v Dodds (1876) 2 Ch. D. 463

Hyde v Wrench, (1840) Beav 334,

Kennedy v. Lee (3 Mer. 454),

Legal Service Commission. Exclusion Clause. Available at: https://www.lawhandbook.sa.gov.au/ch10s02s06.php. Accessed on 17th July 2018.

Thompson v LMS Railway [1930] 1 KB 41

McCutcheon v MacBrayne [1964] 1 WLR 125.  

White v Blackmore [1972] 3 WLR 296.