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Foundations Of Contract Law
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Jamie is retiring from the catering business. His neighbour’s daughter Sonia has just finished college and is about to open up a restaurant. Last Monday Jamie told Sonia he was selling his catering equipment and was prepared to let her have everything for £ 5,000 but that he wanted an answer by Friday as one of his friends was also interested. On Wednesday Sonia telephoned Jamie to ask whether she could have 2 months to pay. Jamie was not in so she left a message on his answer machine asking for 2 months to pay. On Wednesday, Jamie posted a letter to Sonia saying he had sold the equipment to his friend. He did not pick up his answer machine messages. As Sonia had heard nothing and was unable to get hold of Jamie on the phone, she wrote out a cheque for £5,000 and put it in an envelope with a note saying, “ Here is £5,000 for the catering equipment” and put it in the post on Thursday. On Friday Sonia saw Jamie’s wife and Sonia asked if her letter and cheque had arrived. Jamie’s wife said no and hadn’t she received Jamie’s letter saying had already sold the equipment to his friend. The letter from Jamie did not arrive until Saturday.Advise Sonia as to whether she has a contract with Jamie for the equipment.
The issue that needs to be decided in the present case is that an offer was made by Jamie to his neighbor's daughter Sonia to sell all his catering equipment for $5000. Jamie also told Sonia that she should reply to is offered by Friday because one of his friends was also interested in purchasing the catering equipment from him. On Wednesday, Sonia made a telephone call to Jamie in order to ask if she could have two months to pay the amount. Due to the reason that Jamie was not them, Sonia left a message on Jamie's answering machine. For the other hand, Jamie posted a letter to Sonia on Wednesday in which he informed Sonia that he has sold the catering equipment to his friend. By this time, Jamie had not picked up the messages on his answering machine. On the other hand, when Sonia did not hear from Jamie, she wrote a cheque for $5000 and put the same in post on Thursday. Therefore, the issue that needs to be decided in the present case is if there is a contract between Sonia and Jamie for the sale of catering equipment.
In order to constitute a valid acceptance, there should be an offer and the acceptance should be in response to such an offer. According to this principle, not only should an offer be made but the offer should be in existence at the time when the same has been accepted by the other party. On the other hand, an offer may come to an end in many different ways like revocation, rejection, termination, death and a condition which brings the offer to an end. In this regard, the law provides that the original offer is terminated by a counteroffer made by the other party. Therefore if the party to whom the original offer has been made response by putting forward an alternative proposal, in such a case, it can be considered as a counter offer and the effect of such an offer is that the original offer is terminated.
Traditionally, a contractual agreement is analyzed in terms of offer and acceptance. In such a case, an offer is made by one party known as the offeror and the other party, known as the offeree accepts the same and it results in the creation of a legally binding contract. It also needs to be noted in this regard that an offer has to be distinguished from an invitation to treat. At the same time, it is also significant to make a distinction between bilateral and unilateral contracts. The leading case in this regard is that of Carlill v Carbolic Smoke Ball Co. At the same time, in order to amount to an offer, it is required to be shown that the party making the offer had the intention to be bound by such an offer (Harvey v Facey, 1893). As mentioned above, and offered also needs to be distinguished from an invitation to treat. That main difference between the two is that while on acceptance, an offer results in the creation of a legally binding contract, an invitation to trade cannot be accepted by the other party to create a contract as it is only an invitation for offers by the other party. In this regard, the law provides that the goods on display in shops are generally not offers but they only amount to an invitation to treat. In such a case, an offer is made by the customer to purchase the goods. It is for the trader to decide whether to accept the offer or not (Pharmaceutical Society of Great Britain v Boots, 1953). In the same way, generally advertisements are also considered as invitations to treat (Partridge v Crittenden (1968) 2 All ER 425). However, it needs to be noted that in some cases, an advertisement may also amount to an offer. An example in this regard can be given of the case of Carlill v Carbolic Smoke Ball co (1893).
An offer can be terminated by the death of the party making the offer or by the death of the party to whom the offer has been made. Similarly, an offer is also terminated by lapse of time. When no time has been prescribed in the offer, the offer terminates after the lapse of reasonable time. However, in what amounts to a reasonable time depends on the circumstances of each case (Ramsgate Victoria Hotel v Montefiore, 1866). In the same way, the law provides that the party making the offer can evoke the same at any time before the offer has been accepted by the other party (Dickinson v Dodds, 1876).
In Dickinson v Dodds (1876), a house was offered for sale by Dodds to Dickinson and while making the offer, it was stated that the offer will remain open until 12 June, 9 AM. It was decided by Dickinson to accept the offer on 11 June but Dodds was not informed immediately. Later on, a third-party informed Dickinson that the house has already been sold to someone else. Thereafter, Dickinson tried to accept the offer however Dodds replied that the house has been sold and therefore it was too late. On the other hand, Dickinson claimed that there was a legally binding contract between them as the offer has been accepted by him. In this regard, the court stated that no particular form of revocation is required. The only thing that is required in such a case is that the offeror should convey to the offeree, directly or indirectly, that the offeror had changed his or her mind regarding the offer. Therefore, the court stated that there is no doubt that the same thing has happened in this case and Dickinson was aware that Dodds was no longer ready to sell the house. The court also stated that the promised to keep the offer open for a particular period was not supported by any consideration therefore it was not binding on the party making the offer to keep it open for that particular period.
However in this regard it needs to be noted that this provision does not apply to the cases involving unilateral offers where the acceptance of the offer needs full performance (Errington v Errington Wood (1952). At the same time, it also needs to be noted that the original offer is terminated when the other party makes a counter offer. A counter offer takes place when the party to whom the offer has been made response by making an offer but on different terms. This results in destroying the original offer and as a result, the party to whom the offer has been made can no longer accept the original offer (Hyde v Wrench, 1840).
On the other hand, once valid acceptance has taken place, there is a legally binding contract between the parties. As a result, it is significant to know what constitutes a wedding except in so that it can be established if the parties are bound by the agreement or not. There are three main rules related with acceptance. These rules of acceptance provided that (i) the acceptance should be communicated to the offeree (ii) the terms of acceptance should match exactly with the terms of the original offer and (iii) the agreement should be certain. At the same time, the law related with the communication of acceptance provides the general rule that the party making the offer should receive acceptance before it is effective (Entorres v Miles Far East, 1955). At the same time, the law also provides that the silence of the party cannot amount to acceptance of the offer. This rule has been provided by the court in case titled Felthouse v Bindley (1862). However, it has also been provided by the court in Brogden v. Metropolitan Railway Co. (1877) 2 App. Cas. 666 that acceptance can take place to conduct of the party (Butler Machine Tool v Ex-cell-o Corporation  1 WLR 401).
The facts of the present case are also somewhat similar to that of Dickinson v Dodds (1876). In this case also, the party making the offer had agreed to keep the offer open for a particular number of days. This so-called agreement was nothing more than an offer. It was heard by Dickinson from a third party that Dodds was going to sell the house to someone else and therefore, Dickinson tried to give notice to Dodds regarding his acceptance of the offer. Therefore, it was held by the court that so long as the buyer is aware that the other party wanted to deal somewhere else, the offer has to be considered as revoked. In this regard, it does not matter if the buyer had heard regarding it from the offeror himself or from someone else. At the same time, it was also stated by the court that unless the promise to keep the offer open for a particular period is supported by consideration, the same cannot be considered as binding. On the other hand, if the promise and is supported by consideration, it is a valid option.
When it has been agreed by the parties that post will be used as a means of communication, the postal acceptance rule applies in such a case. According to the postal rule, where a letter has been addressed and stamped properly, the acceptance is purported to have taken place when the letter containing the acceptance has been placed in the post box. This rule was provided by the court in Adams v Lindsell (1818).
In the present case, Jamie made an offer to Sonia to sell the catering equipment and at the same time, Jamie also agreed to keep the offer open till Friday. However, instead of accepting the offer straight away, Sonia made the phone call to Jamie in order to ask if she could have two months to pay. As Jamie was not in, Sonia left a message on the answering machine on Wednesday. On the same day, a letter was posted by Jamie in which the informed Sonia that he had sold the catering equipment to his friend. Jamie had not listened to the message left by Sonia on his answering machine. On the other hand, when Sonia did not hear from Jamie, she wrote a letter to Jamie accepting the offer made by him and also sends a check of $5000. The letter was posted by Sonia on Thursday. On Friday, Sonia came to know from Jimmy's wife that the catering equipment had been sold and Jamie had not received the letter containing the acceptance. On the basis of the above mentioned discussion, it can be said in the present case that first of all by making a counteroffer, the original offer made by Jamie has been terminated and it is no longer possible for Sonia to accept the original offer made by Jamie. At the same time, although the postal role provides that the acceptance is considered to have taken place when the letter containing the acceptance has been placed in the post box, however in the present case, the letter along with the object was placed in the post box by Sonia on Thursday while Jamie had already sold the catering equipment to his friend on Wednesday. So far as the promise made by Jamie to keep the offer open till Friday is concerned, this promise was not supported by consideration and therefore was not binding.
As a result, it can be set in the present case that Sonia does not have a legally binding contract with Jamie for the sale of catering equipment as Jamie was not bound by the promise to keep the offer open because it was not supported by consideration and at the same time, due to the reason that a counteroffer has been made by Sonia. Therefore, as the equipment was already sold by Jamie on Wednesday, Sonia cannot accept the offer made by Jamie on Thursday.
While preparing and completing this assignment, I was able to develop my skills as a learner as this assignment helped me increase my knowledge regarding the various aspects of the law of contract, particularly offer and acceptance, the postal acceptance rule, and what the law provides regarding the promise made by the offeror to keep the offer open for a particular time. At the same time, this assignment also increased my analytical skills and allowed me to apply knowledge to the facts of the given case.
Adams v Lindsell (1818) 106 ER 250
Carlill v Carbolic Smoke Ball co  1 QB 256
Dickinson v Dodds (1876) 2 Ch. D. 463
Entorres v Miles Far East  2 QB 327
Errington v Errington Wood  1 KB 290
Felthouse v Bindley  EWHC CP J35
Harvey v Facey  UKPC 1
Hyde v Wrench (1840) 49 ER 132
Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109
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