Legal Advice On Contractual Liability For Bob: Essay.

Offer and Acceptance - Email Offer

Bob Broke runs a company which manufactures and sells computer equipment. He relates the following set of facts to you:

On 1 January Bob receives an email from Mike Jones which reads: “I offer to purchase 30 Toshiba Satellite laptops for $ 300 each, inclusive of GST, delivery and insurance”. In response, on 2 January Bob sent an email to Mike saying “I accept your offer, but the price would have to be $ 300 plus GST. On 3 January Mike sends an email back saying “No, I can't agree to that”. On 5 January Bob then sends an email saying “OK, I accept your offer of 1 January”, however when he sends the computers to Mike with an invoice for $ 9 000, Mike sends the computers back and refuses to pay for them, saying that he has purchased computers elsewhere.

On 10 January, Bob sends a letter to Tom stating “Please send me 200 Pentium 5 hard-drives at $ 50 each”. On 12 January Tom puts a letter into the post stating “OK – I will deliver the hard-drives before the end of the month. Bob subsequently finds that he no longer needs the hard drives, and on 14 January sends Tom an email saying “Please cancel my order of 10 January”. Tom’s letter reaches Bob on 15 January, and the hard-drives are delivered a few days later with an invoice for $ 10 000, which Bob refuses to pay.

Steve has done favours for Bob, such as looking after Bob’s cat when he (Bob) went on holiday. On 1 February, Steve says to Bob “I need a new computer for my travel agency”. Bob says “OK, because you looked after my cat, I’ll give you a new computer”. Bob then changes his mind and says to Steve: “Sorry, mate, trading has been bad these last few weeks – I just can’t afford to give you the computers”.

Bob is thinking of buying a delivery van. He has been in negotiations with Capital Motors, whose sales manager is Mary. One Monday morning he sees a form sent by Mary in which she offers to sell him a Toyota Hilux 3000 automatic with air-conditioning for $ 33 000. The top sheet of the form contains a line which says “I agree to the purchase of this vehicle as specified in this document” and with a space for a signature and date. Bob sets the document aside on his desk, and it soon gets mixed up with piles of other paperwork. Later during the day, he signs the form, thinking that it was the front page of another contract he had been sent by a supplier of microchips. He gives it to his office manager, Tim, and says “Send this by fax”. A few days later he receives a call from Mary asking him when he will pick up the vehicle. He tells Mary that he did not order a vehicle from her. When Mary tells him about the fax, he realizes what happened and tells her that he had sent it by accident and that he never intended to agree to the contract. She says “Too bad, we have a deal – I have already ordered another vehicle to replenish my stock”.

Assume that you are Bob’s legal adviser and that he has asked you for legal advice. Advise him as what contractual liability, if any, he has in the above circumstances, citing relevant statute and case law authority, using the ILAC format.

Rationale

• engage in legal research;
• identify the legal issues arising out of novel factual situations, to analyse the applicable law and to differentiate between which rules are applicable and which are not and then apply the law to the problem;
• explain and summarise the applicable law in such a way as to create a report for a client which states what liabilities arise from novel factual situations

 And more specifically

• your knowledge of the law of contract formation and the law relating to factors affecting the validity of contracts
• Your ability to undertake an assessment task relevant to the workplace and professional practice.

Offer and Acceptance - Email Offer

1. The issue that arises concern the offer made on 1^st of January; that is whether Bob would be liable for the offer that he made on the said date. From the stated facts, it is clear that Mike did not in the first instance accept the offer made by Bob, but he in turn made another offer which Bob refused.

The law of contract requires that when an offer is made it should be accepted without any alteration by the accepting party. Therefore if an offeree puts some other conditions which are not reflected under the offer it is deemed that the offer has been rejected. When the offeree changes the terms of the offer then it is deemed that such a party has made a counter offer than can either be accepted or rejected.

It is therefore clear from the above facts that the offer made by Bob on the 1^st January was rejected by Mike and he in turn made a counter offer. Bob ordinarily is not obliged to accept the counter offer made by Mike. Therefore Bob owes no responsibility to Mike since the offer he made was rejected by him when he altered the terms of the offer.

The law of contract requires an offer to be accepted without any change of terms by the offeree. A change results in a counter offer hence the first offer would be rendered void. Therefore, there are liabilities or rights in these set of facts between Bob and Mike that can be enforced in a court of law.

2. The issue that is to be determined is whether the offer made on 10^th January is enforceable under the law of contract. This, however, would be in light of the prevailing circumstances which would probably give rise to another issue. This issue is whether the email sent to cancel the order would have the effect of vitiating the contract in relation to the letter of acceptance posted prior.

The law of contract requires the offeree to accept the terms of the contract unconditionally. A communication of acceptance can be made through many ways. One of the ways through which acceptance is made is by way of postage of a letter. Generally, it is deemed that acceptance has been made on the day the letter is posted and not on the date of the receipt of the said letter. Therefore the email sent after the postage of the letter of acceptance cannot annul the acceptance made initially by way of postage of letter of acceptance.

The offer made on 10^th of January is validly accepted since there is no such alteration made on the face of it. By posting a letter of acceptance on 12^th January, it is deemed in the law of contracts that acceptance was made on the 12^th January. The email sent to cancel the offer does not supersede the letter of acceptance posted.

Acceptance is made once the letter of acceptance has been posted. The law of contract, therefore, requires Bob to take delivery and pay for the goods delivered since acceptance was made on the 12^th January.

Cancellation of Order - Letter of Acceptance and Subsequent Email

3. The issue at hand here is whether the promise made can be enforced under the law of contract. This would be interesting since the promise was not written down.

However, under the law of contract verbal agreements can be enforced. However, they have to be made in good faith and they ought to be reasonable. The person making the promise should demonstrate his commitment to fulfilling the promise that he made. It is important to take cognizance of a consideration made in promises since they would be enforced based on a consideration advanced by the offerer. It is important in verbal contracts to establish whether all the ingredients of a valid contract exist.

In determining the enforceability of a promise, it is important to establish whether there is a consideration or not. The new computer, which is to be given because of favors done to Bob is the consideration in this instance. The contract, therefore, is enforceable since there was a consideration. It is also clear from the facts that Bob was committed and he intended to fulfill his promise. He, in fact, made the promise in good faith.

A promise, therefore, can only be enforced if the promisor intends to fulfill his promise and he in fact makes the promise in good faith. Consideration is a basis in enforcement of any promise made. In this case, Steve can successfully claim the new computer promised since the promise was made in good faith and there is a consideration in place.

4. The issue herein is whether the offer form signed wrongly by Bob without his knowledge of what is contained therein is valid.

The law of contract gives a remedy to instances when fundamental mistake that goes to the root of the contract are occasioned. In court, whenever a party claims that what he signed is fundamentally different to what he believed, a plea of non est factum is pleaded (Petelin v Cullen

High Court of Australia (1975) 132 CLR 355). In essence, the party disputing the offer or contract to which he signed tells the court that it was by mistake and without his knowledge that he signed the alleged document. This plea asserts that the document signed is different from the one intended to be signed (Saunders v Anglia Building Society (Gallie v Lee) [1970] AC 1004).

In this situation, it is clear that Bob never intended to sign the offer presented by Mary. He signed the document thinking it was another contract presented by a microchip company. This is a fundamental mistake that would invite the plea of non est factum to remedy the mistake. The document was fundamentally different from the one he thought he was signing.

Bob in this instance signed a different document that he did not intend to. Ordinarily, if the strict law of contract is enforced, Bob would have to be disadvantaged as a result of a fundamental mistake. The law of contract, however, contemplates such instances and it provides a window to the aggrieved party and hence the contract is held void. Mary therefore in this instance cannot enforce the offer made.

 “Chapter Three: The Law Of Contracts”. 2017. https://www.longchamps3e.nelson.com/instructor/03Ch03.pdf.

 “Is A Verbal Agreement Legally Binding?”. 2017. Findlaw.Com.Au. https://www.findlaw.com.au/articles/5626/is-a-verbal-agreement-legally-binding.aspx.

Corbin, Arthur L. “Offer and Acceptance, and Some of the Resulting Legal Relations.” The Yale Law Journal 26, no. 3 (1917): 169-206.

Hill, Simone W. B “Email Contracts - When is the Contract Formed?” [2001] JlLawInfoSci 4; (2001) 12(1) Journal of Law, Information and Science 46

Household Fire and Carriage Accident Insurance Co v Grant (1879) 4 EX D 216

United Nations Convention on Contracts for the International Sale of Goods citation, 11 April 1980.