Enforceable Contract Formation: Ann And Jack's Essay.

In a letter, dated 1 March and posted the same day Ann wrote to Jack offering to sell him her car for $12,000. She wrote,” I will give you until 7 March to make up your mind”. However, soon after posting the letter Ann changed her mind and on the morning of 2 March posted Jack a second letter advising him that the car was no longer for sale. Jack received Ann’s first letter at 10.00 am on 3 March. At 2.00 pm on the same day, Jack posted the following reply to Ann:

‘I like your offer very much but due to my present financial position will you accept payment of $1000 per month over a year? This letter reached Ann on the morning of 4 March. On the afternoon of 4 March Jack received an unexpected cheque for $16,000 from his uncle, and at 4.00pm he posted a second letter to Ann which said: ‘Forget my last letter; I accept your offer made in your letter dated 1 March and can pay you immediately I receive the car’. An hour after posting that letter Jack received Ann’s second letter advising that the car was no longer for sale. On 5 March, Ann received Jack’s second letter.

Ann seeks your advice on whether there is a contract between her and Jack.

Legal requirements for contract formation

The central issue in this case is to find whether the parties Ann and Jack have enacted an enforceable contract based on the relevant case law.

An enforceable contract would be executed between two parties when there is lawful offer, acceptance, consideration, intention to enter into contract and position or capacity of the parties to create contract (Carter, 2017). The main aspects are valid offer and valid acceptance. For the enactment of the contract, it is essential that offeror extends offer to the offeree that the offeree would accept and execute a contract. An offer would be said to be binding on the offeree only when the offer is being received by the respective offeree (Gibson and Fraser, 2016). The enforceability of the acceptance differs because it depends on the method of communication used by the offeree to send his/her acceptance for the offer. This is an imperative aspect because non-communicated acceptance, silence or mere acceptance at mental level would not amount to a valid acceptance for the execution of a valid contract as is evident from the verdict of Felthouse v Bindley [1862] EWHC J35. Hence, it is essential to communicate the acceptance to the offeror before the time that the offer is revoked. There two primary modes  for sending the acceptance towards the offer which are through electronic or post media (Latimer, 2016).

In electronic (instantaneous) method, the acceptance is sent by the offeree either by fax, email or phone messages which become enforceable for contract formation when the respective offeror has opened the respective fax, mail or phone message. If the message is received successfully by the offeror but he/she has not checked it, then the acceptance would not be binding even though the message has been received by the offeror (Davenport and Parker, 2014).

In postal (traditional) method, the acceptance is sent by the offeree via post which becomes enforceable when the offeree has placed the acceptance letter into the post box. As per the verdict announced in Adams v Lindsell(1818) 106 ER 250 case, the acceptance letter sent through post would be considered le for contract enactment even though the letter has not been physically received by the respective offeror(Andrews, 2014). Further, the case when the offeror wants to revoke the offer, then it is essential that revocation of the offer must be done before the initial offer get accepted by the offeree. It means if the offeree has accepted the offer and sent the acceptance letter via post before receiving the revocation letter of the offer, then also an enforceable contract would be formed between the parties (Pendleton and Vickery, 2016). The testimony of the above understanding can be seen in Stevenson, Jacques & Co v McLean (1880) QBD 346 case, where contract was enacted between the parties because the letter highlighting offer revocation was received by the concerned offeree after he had already communicated the acceptance letter to offeree via post(Gibson and Fraser, 2016). The main factor in this regards is actual timing of posting the acceptance letter by offeree because once the offeree has posted the acceptance letter into post box then, offeror cannot terminate or alter the offer letter.

Different methods of communication for acceptance

Further, as per Hyde v Wrench (1840) 3 Bea 334 case, when offeree has sent acceptance with some additional conditions, then the initial offer would be cancelled and offeree cannot accept the initial offer because he/she has sent conditional acceptance letter against the initial offer (Latimer, 2016). However, if the offeree wants some extra information regarding the offer and sends a letter for “request on information” to the offeror, then this is not a counter offer and is a mere letter for information. The initial offer of the offeror does not terminate because of request on information letter (Edlin 2014). The verdict of Stevenson v McLean (1880) 5 QBD 346 case is the witness of the above understanding, where the offeree has asked information from offeror regarding the existing offer, which  is not termed as counter offer and later on the offeree has sent the acceptance towards the initial offer and enacted a contract with offeror (Andrews, 2014).

On March 1, Ann (offeror) has sent a letter addressed to Jack (offeree) in order to offer him her car for a consideration of $12,000. Also, she has specified the offer validation period till March 7. It means the offer would remain valid for acceptance until March 7. The offer of Ann would be valid under contract law once the offeree Jack has received the offer letter. However, on March 2, she again sent a letter to Jack that the car was no longer available for sale because she had changed her mind about the car sale. The original offer letter has reached Jack on March 3 and hence, the offer from Ann become enforceable.

Further, the financial position of Jack is not good and hence, he has posted a letter to Ann that he is keen to purchase the car but if he can pay the consideration amount of $12,000 in terms of monthly instalments which means $1,000 monthly for a year. It represents that Jack has not made any counter offer to Ann and has requested for the information regarding the payment aspect. It is also evident that Jack has not changed the initial consideration amount of $12,000. It indicates that Jack is not sending any counter offer to her and wants her affirmation about the request of taking the payment on monthly basis. It also implies absence of counter offer on the part of Jack which would indicate that Ann’s offer is still valid for the acceptance. Further, on March 4, Jack has got a cheque of $16,000 from his uncle. As a result he has sent an acceptance letter through post to Ann stating his acceptance to buy the car for $12,000.  It is apparent that as he has placed the acceptance letter into the post mailbox, the acceptance becomes valid on Ann and hence both the parties (Ann and Jack) have entered into legal relationship through an enforceable contract.

Further, Jack has obtained the letter of offer revocation of Ann on March 4. However, Ann cannot cancel her offer because the revocation letter was received by Jack one hour after Jack has sent acceptance letter towards the offer of Ann. Further, on Maech 5, the acceptance letter of Jack has been received by Ann which does not make any difference in the executed contract because the offer was well valid till 7^th and Jack has sent acceptance towards the offer within the given time period and before the offer was revoked by Ann. Thus, Ann and Jack are bounded with the contractual relation and have to satisfy the contractual obligations. If Ann disagree to complete the contractual duty of offering the car to him for $12,000, then Jack has legal rights to sue her and claim for damages.

Conclusion

The final conclusion can be drawn that Ann and Jack have enacted an enforceable contract because Jack has accepted the offer given by Ann and posted the acceptance letter to her well before the cancellation of offer by Ann. Hence, Ann has to complete the obligations of the contract and has to sell the car for $12,000 to Jack.

References

Andrews, N. (2014) Contract Law 3rd ed. Cambridge: Cambridge University Press.

Carter, J. (2017) Contract Act in Australia. 3rd ed. Sydney: LexisNexis Publications.

Davenport, S. and Parker, D. (2014) Business and Law in Australia 2nd ed. Sydney:LexisNexis Publications.

Edlin, D. (2014) Common law theory 4th ed. Cambridge: University Press Cambridge.

Gibson, A. and Fraser, D. (2016) Business Law. 8th ed. Sydney: Pearson Publications.

Latimer, P. (2016) Australian Business Law CC. 5th ed. Sydney: LexisNexis Study Guide.

Pendleton, W. and Vickery, N. (2016) Australian business law:  principles and applications 5th ed. Sydney: Pearson Publications.