Validity Of Contract In Offer, Acceptance And Consideration

Part A

Issue 1

The issue in this case is to determine whether there was a valid contract between Brett and peter or not

Rules

For the purpose of constituting a contract proper offer and acceptance has to be taken place between the parties to the contract.

For an offer to be complete it must have details of price and the specification of goods or else it is regarded as invitation to treat as stated by AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454.

A person who is making an offer to another person has the duty to communicate such offer to the person to whom it is made. If an offer is not communicated a person cannot accept it as provided in Bressan v Squires [1974] 2 NSWLR 460

There is a clear distinction between legally binding agreements and domestic agreements which have been clearly set out in the case of merritt v merritt [1970] EWCA Civ 6 and balfour v balfour [1919] 2 KB 571 according to which the intention of creating a legally binding agreement is the major requirement for the formation of a contract.

Silence cannot be deemed as acceptance, however if it is stated expressly into the offer that silence would be deemed as acceptance than the person to whom the offer is made had the duty to expressly revoke the offer as provided in the case of Felthouse v Bindley (1862) EWHC CP J 35.

For the purpose of creating a valid contract both the parties have to accept the terms of the contract in the same sense or else the contract would not be held to be valid.

In the case of Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 the question before the court was that whether a valid acceptance has been made or not. It was provided by the court in this case that as the plaintiff was induced by the offer to get into the contract and in addition completed the acceptance on his part it would be deemed as a valid acceptance on the part of the plaintiff.

Application

In the provided circumstances the peter wanted to sell his car to his nephew Brett. The car had a diesel engine.  Brett had no idea that that car had a diesel engine. An offer was sent by peter to Brett in form of a letter. The offer was deemed to be complete as the offer contained details about price and specification of the goods. However it was the duty of peter to duly ensure that the offer has been communicated to Brett and he is aware of it. Although the offer had been sent by post the postal rule will not be applicable as it is valid in case of acceptance only.

Issue 1

The offer has a clause that peter would deem the offer to be accepted if no reply is provided by peter in relation to it till Friday. Although generally silence cannot be taken as a valid acceptance, circumstances where such actions have been expressly stated by the offer it can be taken as an acceptance. Therefore in such circumstances silence would result in acceptance. However it has been provided that the offer had not come into the knowledge of Brett and according to the above discussed principles an offer for the purpose of being accepted has to be brought to the knowledge of the offeree therefore acceptance was yet to be made.

It has been provided by the above discussed cases of Balfour and Merritt that there can be contract between family members where there is clear and precise intention to create a legally binding agreement. In one case the court decided the agreement to be a mere domestic agreement as it did not have any clear legal intention because the transactions were held in domestic course only. In the other case the court stated that as the parties intended to create a legal contract there exists a binding agreement between them. In the provided circumstances it is clear that peter had the intention of creating a legal obligation with Brett as he was not willing to gift the car to him but to sell it at a specific consideration. Therefore there would be no effect on their relationship with respect to the binding agreement.

The relationship of nephew and uncle would not prevent the creation of a legally binding agreement as there is clear legal intention to get into a contract.

Issue 2

The issue in this part is to determine whether or not the offer made by peter has been legally accepted by Brett.

Rules

Until and unless the offer which has been made by one party is accepted by the other a contract is not formed as stated in Blackpool & Flyde Aero Club v Blackpool Borough Council [1990] 3 All ER 25

For the purpose of properly accepting the offer the acceptance has to be communicated to the person who has made the offer generally as provided in Byrne v Van Tienhoven (1880) LR 5 CPD 344

However In the case of Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 the question before the court was that whether a valid acceptance has been made or not. It was provided by the court in this case that as the plaintiff was induced by the offer to get into the contract and in addition completed the acceptance on his part it would be deemed as a valid acceptance on the part of the plaintiff.

Rules

In addition a person has taken any advantage of the contract he cannot deny the acceptance of the contact and paying compensation to the other party as stated in Crown v Clarke (1927) 40 CLR 227

Application

In the provided circumstances Brett has said peter that there is no contract between them as he has not accepted anything. This is true because as the offer had not been communicated to him he cannot accept it. In addition the silence as acceptance clause, would also not be effective in this case as the offer has not been communicated in the first place to Brett.

However it has been provided that Brett got aware of the offer when the car was delivered to him by peter. He did not respond to it but stated using the car. According to the objective test as used  by the case of Clark the subjective intention of a person is not considered rather the objective intention is considered to determine the real intention. In such circumstances it is clear that a reasonable person would have deemed the offer to be accepted as no response has been provided by Brett in relation t the offer. Therefore through the application of the objective test it can be provided that the Brett had the real intention of accepting the offer as he stated using the car and taking advantage of the contract. therefore it would be deemed that the contact has been accepted by Brett.

Brett has accepted the offer made by peter by using the car for three weeks.

Issue 3

The issue in this part is to determine whether the consideration for the purpose of the contract is valid or not

Rule

Consideration is an essential element of the contract without which a contract cannot come into existence.

A consideration is a promise to do or not to do anything in return of a promise.

As provided by the case of Popiw v Popiw [1959] VR 197 for the purpose of the consideration to be valid in relation to a contract it only has to be fairly present and may also not be adequate.

In the case of Wigan v Edwards (1973) the court ruled that it is not the work of the court to determine whether a consideration of a contract is fair or adequate or not. The court only analyzes the question that whether the consideration is present or not in the contract

Application

In the provided circumstances it has been stated that the value of ye car to e sold by peter to Brett was about $2000. However peter opted to sell the car to Brett for a price of $500. In this case the price which has been set by peter for the car is valid consideration as the court will not analyze whether such consideration is adequate and fair or not as it is the discretion of Peter to sell his car at any price he wants. As the consideration is present it is a valid consideration.

The consideration of $500 for the car is valid.

Issue 4

The issue here is whether  Brett can avoid contractual obligations because of mistaken belief

Rule

According to the rules of common mistake a person can avoid a contractual obligation if it can be provided by him that he did not agree to the contract in the same sense as the other party as provided in the case of Bell v Lever Bros [1932] AC 161

The party who has taken advantage of the mistake and used the goods cannot e exempted from contractual liability as provided in the case of McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Application

In the circumstances even if Brett did not want a diesel car he drove it as it was considered to be useful for him. He had the knowledge that the car had a diesel engine and even then he did not return the car until three weeks of using it. Thus as he took advantage of the mistake he would not be eligible to evade contractual obligations according to the principles of the above discussed cases.

Conclusion

Brett cannot evade the contractual obligation he has towards Peter in relation the contract

References

Blackpool & Flyde Aero Club v Blackpool Borough Council [1990] 3 All ER 25

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

Felthouse v Bindley (1862) EWHC CP J 35.

Popiw v Popiw [1959] VR 197

Wigan v Edwards (1973)