The Essay On The Contract Between Sam And Josie Was Concise.

The Issues

Discuss about the Contract Between Sam and Josie.

1. Is a contract established between Sam and Josie?
2. If a contract exists between Sam and Josie, then, whether Josie has violated the contract with Sam. What are the remedies can Sam availed against Josie?

The five basic ingredients which are required to make a valid contract are offer, acceptance, consideration, legal intention and capacity of the parties.

An offer is made by the offeror which is communicated to an offeree. An offer is the expression of the wish of the offeror which he desire to be performed by an offeree and is held in Smith v Hughes[1]. An offer can be by words or conduct but should come in the knowledge of the offeree to make it binding in nature.

When the offer is received by the offeree and when the same offer is accepted by the offeree without bringing any variation to the terms of the offer then it is an acceptance and is held in Crown v Clarke[2]. An acceptance can be made through words or gestures but must receive within the knowledge of the offer to make it binding in nature and is held in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd[3]. When the acceptance is made through post then it is deem to be complete when put in transit. But, in other forms of communication, that is, telephone, email, it must receive within the knowledge of the offeror to make it binding, in cases of answering machine, if the message is left on the machine which can be accessed by the offeror then it is complete when the message comes in the message box of the machine within the normal working hours of the offeror[4].

When the acceptance is not communicated but changes are made to the terms of the offer, then, it is counter offer which has the capacity to cancel the offer and is held in Hyde v Wrench[5]. The counter offer is the new offer and which must be accepted without any changes to make a valid agreement in law.

Once an offer is validly made then the offeror if intends to cancel the same then it must be reached within the knowledge of the offeree before the acceptance is made. If revocation is made through answering machine, then, the revocation is communicated when the same is dropped at the message box of the machine and is accessible by the offeree within the normal working hours and is held in and is held in Brinkibon v Stahag und Stahlwarenhandelsgesellschaft mbH[6].[7]

When an offer is made with a particular time to accept the same then the offeror can revoke such offer any time provided there is no consideration which is attaché to the same.

The Relevant Law

Now, an invitation to receive offer is an invitation to treat where a person desires to receive offers from the offeror. He advertises his intention or auction or tender or display the goods which depict the intention of the inviter to receive offers. The offeror then makes an offer to the inviter who then accepts the offer so made to him resulting in formation of an agreement and is held in Pharmaceutical Society of Great Britain v Boots[8].

An offer and acceptance together results in the formation of an agreement. When an agreement is also supported with consideration, capacity of the parties and the legal intention of the parties, then, a contract is established in nature and is held in Coulls v Bagots Executor & Trustee Co Ltd[9].

When a contract is made then the parties must comply its terms. The terms of the contract can be condition or warranties.

Condition is the core terms of the contract without which a contract cannot be [performed. If such terms are violated then the plaintiff can cancel the contract and sue for damages and is held in Poussard v Spiers and Pond [10]

Warranties are secondary to conditions and die snot hamper the main core area of the contract. If warranties are violated then only damages can be asked for and the contract cannot be violated and is held in Bettini v Gye[11].

Issue I

A painting is made by Josie and she intend to sell the same at a cost of $ 900. In order to do so she displayed the same at her house studio.

Considering the law applied in Fisher v Bell[12], any article or good which is displayed comes within the category of invitation to treat and any visitor who wishes to purchase such article has an obligation to offer a price to the displayer of the good.

Applying the law to the facts of the case, Josie is the displayer of her painting and is an offeree//inviter. Sam is the interested party and he must make an offer to Josie.

Now, as per the facts, Sam on 19^th February (Sunday) makes an offer to buy the painting at $ 700. Since the invitation  is of $ 900 but the same is not within the range of Sam so an offer is made by Sam at a lower price of $ 700.

So, a valid offer is made by Sam to Josie which is of $700.

Offer and Acceptance

The offer of Sam is not approved by Josie. A counter offer is made by Josie and she submits that she can accept a price which is not less than $ 800.

This offer is communicated by Josie to Sam through a written document wherein she submits that an offer is made at $ 800 and which must be accepted by Sam by 21^st February (Tuesday). Howler, since this offer is not supported by any consideration on the part of Sam, thus, Josie is empowered to revoke the said offer any time before any acceptance is made.

Now, Josie, later does not intent to sell the a painting to Sam so she revoke the offer by leavening a message at the answering machine of Sam. The message was duly left and which can be accessible to Sam during normal working hours of Sam. Thus, the contract is revoked by Josie on 29^th February.

Later, Sam posted the letter of acceptance. but the letter of acceptances is of no relevance because before the acceptance can be made, the offer was already revoked by Josie though leaving message on the answering machine,

Thus, there can be no acceptance against a revoked offer.

So, there cannot be any contract that can be established amid Sam and Josie,

Issue II.

If an assumption is made that there is valid contract that is established between Josie and Sam, then, Josie is in breach of the contract that is made with Sam because he sold the painting to Wendy on 20^th February at $ 900. So, by selling the pointing Josie has breached the contract that he has established with Sam.

Now, painting is the core of the contract that is made between Josie and Sam. Since the painting is sold so the core of the contract is devastated. So, a condition of the contract is breached. Thus, as per law , Sam can sue Josie for breach of condition and thus can cancel the contract. Sam can also sue Josie for damages.

If a contract does established amid Sam and Josie, then, Josie I sin breach of the contract when she sold the painting to Wendy and thus Sam can sue for damages and can cancel the contract. 

The statement is now analyzed.

The five basic ingredients which are required to make a valid contract are offer, acceptance, consideration, legal intention and capacity of the parties.[13]

Revocation of an offer

To make any contract enforceable in law, the basic ingredient that is required is consideration. Consideration is something of value which moves from the promisor to the promisee in exchange of the acts that are undertaken by a promisee on behalf of the promisor[14]. In the leading case of Currie v. Misa[15], it was held that a consideration can be some interest, right, profit which is accrued by one party and there is some detriment or forbearance which is born by another party. A contract is considered to be enforceable and the importance of the element is rightly analyzed in the leading case of Thomas v. Thomas[16].[17]

If the party to the contract is doing something which is pre existing then it cannot be considered to be a good consideration in law. If one party to the contract wants the other party to perform something extra then there must be something extra that must be provided to support such extra work. If one party is performing something which he is already bound to perform then he cannot compel the other party to pay something extra for the same. In the leading case of Stilk v Myrick[18], a dispute arises amid the captain of the ship and its crew members. A contract was made amid the two wherein the captain is paying the crew so that the crew ca held the captain in the journey of the ship. But at the time of journey two of the crew members backed out and in order to persuade the other members, the captain agreed that he will pay the compensation of these two crew members to the rest of the crew. However, the court held that the other crew members cannot force the captain to pay the extra payment because what the remaining crew members were doing is something which is already obligated to do within the contract. There is nothing extra that is undertaken by the crew members for which they must get something extra from the captain. Whereas in another leading case of  Hartley v. Ponsonby  the suit of the crew members was upheld as they has performed duties which were beyond their contractual obligations. also, in Williams v Roffey Bros & Nicholls (Contractors) Ltd[19], it was held that every promise must be supported by some form of consideration and the actions must not be pre existing duties of the parties to the contract.[20]

Invitation to Receive Offer

The principle laid down above is also applied in situations where in a debtor is paying money to the creditor in full settlement of his claim. In Pinnels Case[21], the court held that payment by the debtor in full settlement of his claim is not a good consideration is not enforceable. In the leading case Cole was obligated to pay some amount of money due to Pennel on 11^th November 1600. But, on the request of Pennel, Cole pay a less amount of money on 1^st October and consider the same as full settlement of money due to Pennel. But, court held that the acts of Cole are pre existing duties under the contract and thus nothing extra is done by Cole and which is supported by consideration. Thus the act of Cole is not enforceable and Pennel can sue for the rest of the amount. The principle was retreated in Foakes v. Beer[22].  

So, when the contract are simple in nature then the rule laid down in Pinnel’s case is filly applicable. The rule establishes that of any changes are made to the contract terms then they must be supported by some gain or benefit. If the parties are obligated to perform their pre existing duties then no extra consideration can be sought for the same. But, the leading rule is very harsh especially for those debtors who are paying in good faith and thus bring undue advantage to the creditor who are again feeling free to bring legal action against the debtor. Thus, in order to curb this menace, there are few exception that are established:

1. When the debtor pay to the creditor an amount which is considered as the full settlement of the claim of the debtor but the payment must be made before the due date. When the payment is made before the due date then it is a valid consideration and the actions are enforceable;
2. When the parties establishes a contract, then, both the parties mutually agree and incorporate a term to the contract that part payment of debt can be considered as valid consideration amid the parties;

• If the debtor is paying something apart from money, that is, cannery, horse, etc, which is against the full and final payment of creditor then such consideration is valid in law and is held in Couldery v Bartrum[23].

1. If the debtor is paying his debts not at a place which is pre decided by the parties but at some other place then it is a valid consideration;
2. When there is establishment of composite agreement by the parties which is established under the Bankruptcy Act 1966, then the part payment of dent by the debtor for full settlement of the claim is valid in law;
3. When the action of the debtor, that is, part payment made by the debtor at the request of the creditor, then later the credit is barred from backing out his words and if the creditor has accepted the money in full settlement of the claim then the rule of promissory estoppel will apply and the payment made by debtor is held to be in settlement of the full claim;

• When the payment is made by the debtor to the creditor in the denomination other then what is pre decided by the parties then such payment is held to be made in full settlement of the claim of the creditor;
• When the dent of the debtor is not paid by him but the same is paid by third party to the creditor then such payment is held to be valid in law and is rightly established in Welby v. Drake[24].

So, these exceptions do not apply the principle that is laid down in Pinnel case.  These exceptions remove the hardship that is caused through the Pinnel case. Thus, the application of Pinnel case is only to the extent till the time the contracts are of simple nature. But, in other situation, the problems that are faced by Pinnel case is removed by the application of exceptions that are established.

Conclusion

There is  no contract that is made between Sam and Josie because Josie has revoked the offer by leaving a message on the answering machine of Sam before the letter of acceptance is made by Sam.

Books/Article/Journals

Eliza, MIK, ‘The Effectiveness of Acceptances Communicated by Electronic Means, Or – Does the Postal Acceptance Rule Apply to Email’ (Journal of Contract Law, 2009).

Gillies, Peter, ‘Business Law’  (Federation Press, 2004).

Poole, Jill , ‘Textbook on Contract Law’ (Oxford University Press, 21-Apr-2016 ).

Case laws

Bettini v Gye (1876) QBD 183

Brinkibon v Stahag und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 42.

Crown v Clarke (1927) 40 CLR 227.

Couldery v Bartrum (1880) 19 Ch. D. 394

Coulls v Bagots Executor & Trustee Co Ltd (1967) 119 CLR 460.

Currie v Misa (1875) LR 10 Ex 153.

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527.

Fisher v Bell [1961] 1 QB 394.

Foakes v. Beer (1884).

Hyde v Wrench (1840) Beav 334.

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

Poussard v Spiers and Pond (1876) 1 QBD 410.

Pinnels Case (1602).

Roscorla v. Thomas (1842) 3 QB 234.

Smith v Hughes [1871] LR 6 QB 59.

Stilk v Myrick (1809) 170 ER 1168

Thomas v Thomas (1842), 2 QB 851.

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5.

Welby v. Drake (1825)

Online Material

Alex Kuklik, ‘The Law of contract’(2017)<https://sydney.edu.au/lec/subjects/contracts/Summer%202016-17/LPAB%20-%20Contract%20-%20Summer%202016%20-%20Lecture%203.pdf>.