On 1 October Footloose Pty Ltd placed the following notice in the Daily News newspaper: Special Shoes Special Discounts
Footloose Pty Ltd is awaiting the delivery of the latest summer collection shoes from Italy.
Styles include the new slingback sandals and wedge heels. Prices start at $2000 per hundred pairs (certain styles only); big discounts may be negotiated for bulk orders. All inquiries to Ms Simone, Sales Manager, on 1400 765 432 or by fax on 06 9234 567.
On 2 October Famous Footwear sent the following fax to Ms Simone:
We accept your offer in the Daily News. We wish to order 500 pairs at $2000 per hundred. Details on delivery to follow.
On 4 October James, the owner of shoe retailer James’s Shoes, which had several regional stores throughout Australia, sent the following fax to Ms Simone at Footloose: We refer to your notice in the Daily News and would like to purchase 2000 pairs of slingback sandals. Our best price is $30,000 including GST and delivery. Please advise.
The facts of this case highlight the key issue in this matter as contractual relations being created based on the three tenders.
A promise which has legal validity in the eyes of law, due to the presence of different elements in the agreement, is deemed as a contract. It is basically a promise of doing something and paying for the work being done (Gibson and Fraser, 2013). The elements which are necessary for creating a contract include offer, acceptance, consideration, intention, consent, clarity and capacity. In case these elements are not present, a contract would not have its legal validity (Ayres and Klass, 2012).
The first step which has to be taken in order to create a contract is for the presence of an offer. This offer is the terms which offering party offers to another party and have to clearly provide what is being offered (Blum, 2007). It is of importance that the offer is differentiated from an invitation to treat. When it comes to tenders, it is considered as an invitation to treat, because the invitation is asked for prices, which when is accepted, results in an offer, which could become a contract (Lindgren, 2011).
When it comes to contract formation, the next step is for an acceptance to be given to the offer which has been made. The offer has to be accepted by the accepting party in the exact manner in which the offer had been made. There is a need for the acceptance to be properly communicated since mere mental decision is not consideration as valid acceptance. Under acceptance, the general rule is that the date of acceptance is that date where the acceptance actually reaches the party which had made the offer (Clarke and Clarke, 2016).
Postal rules are deemed as an exception to this rule regarding date of acceptance. These rules apply both on offers and acceptance sent through letter. These rules provide that the acceptance date is the date of posting of letter covering the acceptance. The actual date on which this posted letter reaches the offering party is of no relevance (Turner, 2014). The reason for this was given under Byrne v Van Tienhoven (1880) LR 5 CPD 344, where it was provided that the postal office is actually the agent of party making the offer and so the agent accepting the offer is to be taken as the principal accepting the offer.
Offer vs Invitation to Treat
A key requirement is that the postal rules would be applicable only in such cases, where this mode has been deemed as a valid mode of acceptance by the offering party (Andrews, 2015). The case of Tallerman & Co Pty Ltd v Nathan's Merchandise (1957) 98 CLR 93 provides that the postal is not to be taken as justified mode of acceptance until the offering party has been given the reasons for believing that this mode would be made use of for accepting the made offer (Jade, 2018).
The present instance proves that the tenders had been invited where a closing date of 1 June was provided. As per the rules discussed above, this is an invitation to treat. When this communicated was replied to, an offer was made at that stage, as at this stage only the clear terms being offered had been clearly provided. Now there is a requirement of analysing the offer drawn in the three varied cases. The delivery of offer of Greenland was done through hand mode. As per the rules discussed above, this would be the date of offer being made as the offer actually reached the party on that date, i.e. 29 March. When it comes to the party Enviro, this offer had been sent through postal mode and so there is a need to apply postal rules. 15 May would be deemed as the offering date here. Lastly, in the matter of Plan Forever, the posting of offer was on 30 May, making it as the offering date.
In order to decide on the position of each party, there is a need to analyse the acceptance of offers by University. For the matter of Enviro, the administrative assistant had forgotten regarding the tender having being submitted by Enviro and this is to be deemed as the error on part of University. As a result of this error, a contract was not created in between the two. When it comes to the rumours regarding the reliability of Greenland, the offer was not taken into consideration. This does not result in the law being contravened as the parties are free to accept or ignore any offer.
In case of Plant Forever offer, this was accepted by University and post was used as the mode of communicating acceptance. Applying Tallerman & Co Pty Ltd v Nathan's Merchandise, there were reasons before Plant Forever to accept the post as mode of acceptance since this mode had been used to make the offer. Applying Byrne v Van Tienhoven, the postal officer is Plant Forever’s agent and where the post was destructed by the agent, the University cannot be blamed. This led to a breach of contract by Plant Forever.
Legal Effects of Communication
Hence, it can be concluded that there had been no contract formation of University with Enviro and Greenland. A contract was only formed between University and Plant Forever, which was breached by the latter, giving the former the right of suing for damages.
The facts of this case highlight the key issue in this matter as legal effects of the communication which took place in the first ten days of October.
It has already been stated that that an offer differs from invitation to treat. The former has intent of creating legal relations. The newspaper adverts are deemed as invitation to treat since they allow for contractual terms to be bargained. In Partridge v Critenden (1968) 2 All ER 425, it was seen that the newspaper adverts are an invitation to treat (Poole, 2016).
There is a need for the offer to be accepted by party to which the offer had been made (Lambiris and Griffin, 2016). There is a need to accept it in the same manner and on the same terms it was made as the changes would result in a counter offer, resulting in end of original offer as was seen in Hyde v Wrench (1840) Beav 334 (Marson and Ferris, 2015). The other elements of contract include the intention with the parties, to create legal relations, resulting in legal rights and liabilities. The parties also need to have the capacity to enter in a contract in a legal manner. The parties also need to given their free consent to the contract for it to be binding in the eyes of law. The last requirement is for the contractual terms to be clear, so that there is no uncertainty in the contract (Latimer, 2012).
The present instance requires each communication to be separately analysed based on the discussed rules.
1 October- There was a newspaper advertisement here which would be considered as an invitation to treat based on case of Partridge v Critenden. This communication had just the interest being indicated to sell off the product and there was a lack of clear offer being made.
2 October - Upon the negotiations starting up, the offer was made. This communication would thus be deemed as an offer made by Famous Footwear.
4 October - When the terms of invitation to treat came before James, he made an offer at a price of $30,000 for 200 pairs, included in which were the delivery prices and the GST prices.
6 October - This communication covered a counter offer as there was a change in price which was originally offered, in terms of $30,000 being exclusive of delivery charges. As a result of difference in the made offer and the reply given to it, Hyde v Wrench dictates that a counter offer was made and this not an acceptance. With this, the original offer of 4 June ended.
8 October - This communication covered an acceptance being given by James to the counter offer made by Simone on 6 June. Though, in this instance, there was an absence of clarity on what the contractual terms would be, in terms of details of the delivery date, resulting in contract not being created.
10 October - The terms of contract were finalized on this date and also there was a finalization of the delivery date being 1 November. At this stage, all of the elements of contract were completed once the step by step procedure in terms of invitation to treat, followed by offer and finally an acceptance were concluded. This created the contract and the legal effect of contract started from this very instance.
Hence, it can be concluded that the contract was formed on 10 October after a number of correspondences haven taken place between the parties in discussion.
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press
Ayres, I., and Klass, G. (2012) Studies in Contract Law. 8th ed. New York: Foundation Press
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Clarke, P., and Clarke, J (2016) Contract Law: Commentaries, Cases and Perspectives. 3rd ed. South Melbourne: Oxford University Press.
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education Australia.
Jade. (2018) Tallerman and Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd. [Online] Available from: https://jade.io/j/?a=outline&id=65197 [Accessed on: 01/04/18]
Lambiris, M., and Griffin, L. (2016) First Principles of Business Law 2016. Sydney: CCH.
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