Commercial Law Essay On Legally Binding Contracts.

Bernard vs Alan

Discuss about the Commercial Law for Legally Blinding Contract.

It is the general position in contract law that for a contract to be valid there are essential elements that include an offer, acceptance, consideration and an intention to be legally bound, that must be present (Carter and Harland, 1998). Moreover, it will be deduced in this discussion that it is inconceivable that a contract will be enforceable where one party was a minor but the law is not cast on stones as will be shown. It is to be noted from the outset that the application of the rules in contract law emanate from the substance of common law, doctrines of equity and precedents which will be applied skilfully in determining the legal position of the parties in dispute (Beale, 2004). An offer is an expression of willingness to enter into a legally binding contract (Australian Woollen Mills Pty Ltd v The Commonwealth, 1954). An offer must certain and does not create any ambiguity as it is capable of being accepted. The acceptance of an offer must be communicated to the other party for it to be valid of the other party must have reason to believe that an acceptance has been made. (Day Morris Associates v Voyce 2003). For a contract to be validly enforceable there must be a sufficient consideration given by the other party (Chappell v Nestlé 1959) Suffice to say, for the contract to be enforceable between the parties must have an intention that the contract will legally bind them (Edwards v Skyways Ltd 1964).

John made a misrepresentation of his grade in the in the invitation to treat message that was put on the Facebook site. A Misrepresentation is a statement that is made by a party to the contract before they enter into the agreement and its intention is to ensure that the other party is induced sign the agreement. For an action on misrepresentation to pass it must be in evidence that the statement that was made a false assertion of fact (Avon Insurance plc. v. Swire Fraser Ltd, 2000). John’s statement about the grade was clearly untrue as he did not score a distinction on the subject. It must also be in evidence that the parties hereunder relied on the statement to enter into agreement. This means that it must be shown that if the statement had not been made they would have not enter into contract (Smith v. Chadwick, 1884).

Charleen vs Alan

Alan has made an offer through his social network page that he is selling his book at a price of $200. Bernard replies to the offer made and expresses his interest in buying the book, however, he stated that he could only afford $150 for it. The issue that is up for determination is whether the acceptance that was made by Bernard was valid and whether the payment of the $200 on 3rd night after deep thinking amounted to an enforceable contract. The other issue in contention is whether the payment made by Bernard though post was valid.

There has been a strenuous debate among contract law scholars as to whether the display of items in the internet amounts to an offer or an invitation to treat. The issue here is whether Alan’s display of the book for sale on Facebook amounted to an invitation to treat. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) (1953) it was affirmed that the display of items in a shop amounted to an invitation to treat because it was upon the customer to select the item of choice and make an offer to the teller to purchase the item. It has been conceded that the offer is properly made when the item is taken to the counter for pay (Fisher v Bell 1961). On the other hand, it has been argued that since the display of items in the internet will attract several offers to buy the product from clients, the vendor is not legally bound to accept all of such offers. It can be concluded from the foregoing argument that Alan’s display of an item on the internet was not an offer per see but rather an invitation to treat and he is not bound to legally accept all offers made. It also to be noted that john took Bernard’s money and promised him that he will deliver the book by 7th November. The legal consequences are discussed hereunder.

Where a party makes an offer with certain terms and an acceptance is made but with new different terms that do not agree with the initial offer, the acceptance is deemed to be a counter offer and not a valid acceptance. The court in Hyde v Wrench (1840) stated that where new terms are provided in an acceptance to a contract, the acceptance is regarded as a counter offer. In the case in question there ‘was a battle of forms’ and in the court of appeal has held in Tekdata Interconnections Ltd v Amphenol Ltd (2009) that the last offer wins the battle. It is thus submitted that a valid acceptance must be in response to the offer made.

It is submitted that Bernard made a counter offer which was inform of an acceptance. He responded with new terms to the agreement thereby engaging in a battle of forms in which the last offer was not put until later on in 3rd November where he also gave his consideration through post. It is entirely true, as stated above, that the last offer wins the battle in a counter offer. Additionally, the ‘postal rule’ is to the effect that once acceptance is communicated by post the contract is deemed to have been formed when the letter is sent and not received (Holwell securities Ltd v Hughes, 1974). This may have a superficial appearance of validating the agreement between Alan and Bernard but it will be later revealed by law that the agreement was not enforceable.

Indeed, a consideration was given by Bernard although it was made late because an earlier acceptance to Alan’s offer was made by Damien whose legal position will be discussed later in the paper. Over and above all, since Bernard has made payment already which Alan has pocketed and the book was in fact free, he is entitled to an award of compensatory damages because there was no enforceable contract. In conclusion, it can thus be concluded that the offer made did not amount to a valid acceptance and Bernard cannot rely on the reply he made in the social network to Alan’s offer to enforce the agreement.

Charlene is Alan’s sister and she saw Alan’s post and has expressed her willingness to buy the book but Alan responded with a smile as he paid little attention to her. Charlene has left her consideration of $200 which Allan has pocketed on the table and the issue that is presented for determination is whether such an agreement is enforceable bearing in mind that Charlene was possibly be a minor since persons sitting for the GCE ‘Levels are in most instances between the age of sixteen and seventeen. The other issues that will be determined will be whether the two siblings had an intention to be legally bound.

It is a general principle in law that for a contract to be enforceable and binding, the parties the must be of legal capacity. It has been held that contracts that are entered to by minors are unenforceable unless they are contracts of necessity (Nash v Inman 1908). In Singapore, the position is that the contract will be valid only once a minor has attained the age of I8 (Civil Law (Amendment) Act 2009 section 35). It is worth noting that a contract with a minor will be valid if the subject matter of the agreement is a necessity. It was held in Peters v Fleming (1840) that gold rings were necessities to a child of a member of parliament.

With regards to intention to be legally bound, the litmus test for determining the intention of the parties has always been determined by the rebuttal presumption. In family agreements the presumption is that the parties do not always intend to be legally bound by the agreement (Balfor v Balfour 1919). In Jones v Padavatton, (1969) a mother promised her daughter that she will pay her if she gives up her job and went to London to study for the bar. The court held that there was no sufficient evidence to rebut the presumption that an intention to be legally bound did not exist.

In Wakeling v Ripley (1951) Mr. Riply who was a wealthy man asked his sister and brother to relocate to Australia to support him with the promise that he will pay them and they will stay in his house without paying rent and he will bequeath them all his wealth upon his death. Unfortunately, Mr. Riply did not meet the end of his promise. It was held that, despite it being a family agreement there was sufficient evidence to rebut the presumption that an intention did not exist between the two family members. The court established a test that should be considered so as to rebut the presumption in family and social agreements. It was held that it must be determined whether there was any degree of hostility between the parties, the seriousness of the conduct that was promises and the expense that was involved in coming to perform the promise. It has also been stated that where in a family relation, the agreement is a commercial one; the presumption will be that an intention existed between the parties (Roufos v Brewster, 1971).

It is imperative to note that the courts have developed a modern approach towards determining the intention of the parties which appears to be extinguishing the rebuttable presumption test. It has been held that test should be an objective one that seeks rather than a subjective one, which determines whether a reasonable person will infer that an intention existed if put in the same circumstances of the parties (Edmonds v Lawson, 2000). In Soulsbury v Soulsbury (2007) a spouse agreed to forego payment of maintenance to the expense that the other party will bequeath her property in his will. The promise was not fulfilled and the court applied the objective test to determine the intention where they held that an intention to be bound existed between the two family members.

It is submitted that the agreement that was being made was one of necessity because being a student she needed the book which will be beneficial to her education. It then seems to be conceded that her capacity to contract will not be a bar to her to make an agreement on necessities which indeed is breathing life to the holding in (Peters v Fleming, 1840).

With reference to the issue on intention it is submitted that, in applying the presumption test from the outset, there is no intention to be legally binding. By further applying the Objective test entrenched in Wakeling v Ripley (1951) it can be summed up that, taking all circumstances into consideration there was no ‘consensus ad idem’ (meeting of the mind) between Alan and his sister.  It was the intention of Alan not to sell the book to her sister and on the other hand the sister had the intention to buy the book. It can thus be conceded that the two had different intentions altogether and there they lacked the meeting of the minds. It has been held that the courts will look at the literal meaning of the words that were made in during the offer and acceptance and determine whether there was a meeting of the minds between the parties (WYDA Associates v. Merner,1996). Where there is no a meeting of the minds the parties will not be bound by the terms of the agreement and therefore the contract will not be enforceable.

In Conclusion, the agreement between Allan and his sister is not enforceable despite Charlene giving a valuable consideration. The consideration was also given after Damien had made a valid acceptance of the same. It can be concluded that having there been no valid enforceable contract between the two Charlene is equally entitled to an award of compensatory damages.

Damien discovers Alan’s offer and decided to contact him through a personal phone, accepting the offer made on the social network site. The issue for determination here is whether the acceptance that was communicated by Damien through the phone was valid. It is submitted that the rules governing instantaneous mode of acceptance shall be determined in terms of their applicability in the case between these two parties. On the other hand, the other issue that will emerge is if there was an intention to be legally bound between the two parties. The fundamental question at the end will be if there was any breach of the agreement by Alan because he delivers to Damien the book without the handwritten notes and claimed the notes are in the book and at the same time the books were offered for free in school.

It is submitted that the traditional approach to the postal rule does not apply to instantaneous modes of communication such as electronic mail and mobile phone messages. The leading case here and probably one that goes furthest is Entores Ltd v Miles Far East Corpn (1955) where the claimant was based in London and he made an offer through telex to a client in Amsterdam who also made an acceptance through telex. Denning LJ, in this case, affirmed that the contract was fully formed when the acceptance was received by the defendant and that the contract is formed where the acceptance has been received.

In commercial agreements, the presumption that usually exists is that the parties intend to be legally bound. In Edwards v Skyways Ltd (1964) the defendants had promised that they will make a payment of an ex gratia amount and even went to publish the promise in the newspaper. The claimant who was a pilot never received the extra amount that was promised because the company claimed that they had rescinded their decision. It was held that there was no sufficient evidence to rebut the presumption that the intention to be legally bound existed.

From the above, it can be agreed that the rule of acceptance in electronic modes of communications will apply to this case. It can be stated that the acceptance of Alan offer that was made over the mobile phone was deemed to be valid once it was received by Alan, which he did. Alan and Damien were not friends and therefore it the nature of their relationship can be said to a commercial one and thus it will be an uphill battle here for Alan to show that an intention to be legally bound did not exist. Not even when applying the objective test here it can still be agreed that there was an intention to be legally bound existed between the two.

In Conclusion, it is conceded that there was a valid and enforceable contract between Alan and Damien because all the essential requisites of a valid contract have been fully satisfied. It is thus a plausible conclusion that the only valid contract that was formed in this case is between Alan and Damien and going by the acceptance rule mentioned above the contract was formed when the acceptance was received on Alan’s Mobile phone. On the contrary, because of Alan’ trickery to defraud his colleagues yet the book was a free collection at school Damien will be entitled to the award of compensatory damages that will put him the position he was before the contract occurred. The only thing that could be validly sold was Alan’s written notes which he did not have. 

Dispute resolution cannot only be undertaken in courts but there is a breadth of options available which form part of Alternative dispute resolution mechanism. Arbitration in Singapore can be handled by the small claim tribunal which when admitting a claim to its jurisdiction it will looks at the nature of the claim being made and the monetary value of what is in dispute. Essentially, the small claims tribunal has put a cap on the limit to be claimed to $10,000. In this case, it advised that the claims of three individuals are within the jurisdiction of the tribunal because the value that is in dispute is less than $10,000. It is of interest to note that the small claims tribunals have also been remarked to be expeditious in handling claims and less costly. The tribunal also disallows the parties to a dispute from being represented by lawyers in the tribunal and less a great injustice will occur to one of the parties.

 Unlike other forms of alternative dispute mechanism like mediation, arbitration has been argued to be expensive. It is also unfortunate or rather burdensome that in arbitration the parties will have to pay the arbitrator for handling the dispute and also pay for the location that was being used to listen and decide on the matter. It bears noting that the final finding and holding in an arbitration matter are binding. In arbitration the arbitrator will appointed by the parties that are in dispute and this has been said to promote fairness. The process of arbitration has been said to be almost similar to the court litigation process and thus it involves a lot of formalities and it could be slower in handling matters. Mediation refers to a situation where parties come together and sought out their issues in a just and fair manner through the use of a person who is not a party to tors of the dispute referred to as the mediator (Leonard, 1982). However, what distinguishes mediation from other dispute mechanisms is that it is relatively less costly and that the final finding in a mediation matter is not binding. The final outcome in the dispute in mediation is in many times held to be a fair outcome that suits both parties in dispute. It also involves less bureaucracies and formalities and it can be said to be more expeditious than arbitration.

References

Australian Woollen Mills Pty. Ltd. v. The Commonwealth [1954] HCA 20

Avon Insurance v Swire Fraser Ltd [2000] 1 ALL ER Comm 573

Balfour v Balfour [1919] 2 KB 571

Beale, H. (2004). Chitty on Contracts, Sweet & Maxwell

Carter J, W.and Harland, D. (1998). Cases and materials on contract laws in Australia, Butterworths

Civil Law (Amendment) Act 2009

Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL

Edmonds v Lawson [2000] EWCA Civ 69

Edwards v Skyways Ltd [1964] 1 WLR 349 1964

Entorres v Miles Far East [1955] 2 QB 327

Day Morris Associates v Voyce and another - [2003] All ER

Fisherv Bell [1961] 1 QB 394 (QB)

Holwell Securities Ltd v Hughes [1974] 1 WLR 155

Hyde v Wrench [1840] EWHC Ch J90

Jones v Padavatton [1969] 1 WLR 328

Leonard L, (1982) ‘Mediation and Lawyers’ Ohio State Law Journal29

Nash v. Inman [1908] 2 KB 1

Peters v Fleming (1840) 151 ER 314

Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) 1 QB 401

Roufos v Brewster [1971] 2 SASR 218

Smith v Chadwick (1884) 9 App Cas 187

Soulsbury v Soulsbury [2007] EWCA Civ 969

Tekdata Interconnections Limited v Amphenol limited [2009] EWCA Civ 1209

Wakeling v Ripley (1951) 51 SR (NSW) 183

WYDA Associates v. Merner (1996) 42 Cal.App