Business Law Essay On Bob And Mollie

Discuss about the Business Law for contract Between Bob and Mollie.

Whether a contract was formed between Bob and Mollie

A contract is defined as a statutory agreement between two or more persons that is enforceable in the court of law. The significance of contract lies in the fact that it comprises exchange of promises, which have legal enforceability (McKendrick 2014). In order to render a contract as valid, a contract must include its essential elements.

Essential elements of a contract

• Offer- an offer is a promise made by one person known as the offeror to another person known as the offeree to do something or refrain from doing something in exchange of a return promise. An offer can be made to an individual person to a group of person as was held in Smith v Hughes [1871] LR 6 QB 597. An offer can be made to the world at large which amounts to an invitation to offer as was ruled in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; [1892] EWCA Civ 1.
• Acceptance- the offeree must accept the offer made by the offeror and such acceptance must be communicated to the offeror to form the contract as was observed in Crown v Clarke [1927] 40 CLR 227. The acceptance must be made in accordance to the terms and conditions stipulated in the offer.
• Legal intention- The parties to the contract must have the legal intention to be bound by the terms of the contract after the contract is formed. The contract shall be rendered as valid only if the contracting parties establish that a legal relationship exists between them as was ruled in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309.
• Consideration- it refers to the price that is asked by the promissory in exchange of the promise and forms an essential requisite of a valid contract to make it legally binding upon the contracting parties. Under the common law, it is mandatory for the promisee to provide a consideration that is , payment in some form in exchange for the promise received as was held in Coulls v Bagots Executor & Trustee Co Ltd [1967] 119 CLR 460.
• Capacity- The contracting parties must have legal a capacity to enter into a contract as lack of capacity to form a contract may result in non-enforceability of the contracts. Persons considered to have lack of capacity include parties with mental disorder, intoxicated, bankrupts, minors etc. The requisite of legal capacity to render a contract to be valid was upheld in the case of Gibons v Right [1954] 91 CLR 423.

Termination of offer

In contract law, an offer is said to e terminated in the following number of ways:

1. Revocation- an offer may be terminated any time before the acceptance of the offer even if the offeror has promised to keep the offer open provided a consideration is paid in exchange of such promise. Revocation must be communicated either directly or indirectly (Poole 2016).
2. Rejection- When an offer is rejected by the offeree, it cannot be accepted any longer and rejection may amount to a counter-offer or a refusal as was observed in Hyde v Wrench [1840] Beav 334.
3. Time- if the offer sets out a specific time within which an offer should be accepted, the acceptance of such offer after the expiry of such stipulated time shall be considered as ineffective. If the offer does not stipulate any specific time, the acceptance must be made within a reasonable time otherwise such offer shall expire (Stone and Devenney 2017).
4. Failure of condition- if either the contracting parties fail to satisfy any particular condition set out in the offer, the offer shall lapse. However, such condition must be set out in the offer to be effective. The essential terms of an offer are also known as ‘conditions’ are perceived as fundamental terms. The essentiality of such terms depends on the fact whether such term is so essential that any violation shall amount to termination of the contract. This was upheld in the case of Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [1938] 38SR NSW 632 at p.641-2.
5. Death- the death of an offer shall amount to the expiry of an offer and the offeree must be aware of the death of such offeror.

An offer is said to be open, if the offer does not stipulate any particular time within which the offer should be accepted, the offer should lapse after a reasonable time ((Stone and Devenney 2017). The reasonable time depends on the subject of the potential contract and is often subjected to the discretion of the judge as was held in Carr v JA Berriman [1953] HCA 31 [1953] 89 CLR 327.

However, as per a general rule of the contract, even if the offeror states that the offer shall remain open for a stipulated time, the law does not bar the offeror from revoking such offer prior to its acceptance.

On the facts here, Bob accepted the offer that was advertised regarding purchase of Sony Bravia OLED Televisions and gave his card to the sales manager, Mollie, of the Toshiba showroom as an acceptance to the offer. However, Mollie did not accept the card stating they were sold out.

Mollie offered Bob to purchase the demonstration model TV, which would cost $2000 instead of the real offer $3500. As was observed in Smith v Hughes case, an offer was made by Mollie to Bob regarding the purchase of the TV, which was the demonstration model for the price of $2000. This further signifies that the offer was made along with a consideration, which was to be made by Bob.

However, in order to render a contract as a valid contract and to be enforceable, it is essential that an offer should be made followed by a valid acceptance of such offer as was held in Crown v Clarke case. In the given scenario, a valid offer was made by Mollie to Bob but Bob was confused and required time to think about the offer.

Mollie promised that she would keep the offer open until Friday provided Bob is ready to make a payment of $10 as the booking money. However, Bob refused this arrangement and stated that he would inform within Friday afternoon, which was next day. Here, it can be stated that though Bob did not accept the offer made by Mollies immediately but Mollie stipulated in her offer an essential condition that she will only keep the offer open if Bob provides as booking money of $10, which would be adjusted while the original transaction is made. The offer also included the stipulated tome within which the acceptance must be communicated to her.

Rule

Nevertheless, Bob refused to fulfill the condition set out in the offer, which required him to pay a booking amount for the television. This amounts to a non-fulfillment of an essential condition of the offer made by Mollie.

Further, Mollie sold the TV to Mark on Friday when he offered $2500 for the demonstration model TV at the store. Generally, the offeror may revoke the offer any time before its acceptance even if the offeror has promised to keep the offer open for any particular time. However, this does not amount to a breach of a contract on the following grounds.

Firstly, Mollie offered $2000 to Bob for selling the demonstration TV model, which Bob did not accept. Secondly, Mollie stated that her offer to sell the TV at the offered price of $2000 shall remain open until next day (Friday) only provided Bob pays $10 as booking money immediately which shall be adjusted while he purchases the television on Friday.

Now, as was held in Crown v Clarke, a valid acceptance must be made to a valid offer to form a contract. However, Bob did not make any acceptance while the offer of purchasing the demonstration TV for $2000 was made to him by Mollie.  Further, Bob also refused to fulfill the condition that Mollie mentioned in her offer regarding the payment of the booking amount.

As a rule, an offer can be terminated on the ground of failure of condition of the offer (Stone and Devenney 2017). The condition of an offer is considered as essential provided breach of such condition shall necessarily result in termination of the contract as was held in Tramways Advertising v Luna Park case. In the given scenario, Bob did not pay the booking amount, which formed an essential condition as Mollie stated only if the booking amount is paid, she would hold the offer for till Friday.

Therefore, the failure to satisfy the essential condition of the offer, which was so important that it would have determined the legal intention of both the parties to form the contract, resulted in termination of the offer that Mollie made to Bob.

Conclusion

There was no valid contract formed between Mollie and Bob.

References

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309.

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; [1892] EWCA Civ 1.

Carr v JA Berriman [1953] HCA 31 [1953] 89 CLR 327.

Coulls v Bagots Executor & Trustee Co Ltd [1967] 119 CLR 460.

Crown v Clarke [1927] 40 CLR 227

Gibons v Right [1954] 91 CLR 423.

Hyde v Wrench [1840] Beav 334.

McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).

Poole, J., 2016. Textbook on contract law. Oxford University Press.

Smith v Hughes [1871] LR 6 QB 597

Stone, R. and Devenney, J., 2017. The modern law of contract. Routledge.

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [1938] 38SR NSW 632 at p.641-2.