- Whether contract is made amid Josie and Wendy or Sam?
- If there is a contract amid Sam and Josie, then, what are the consequences for the breach of contract?
The two main elements in the contract formation are offer and acceptance.
An offeror makes an offer to an offeree and expects that the terms that are stated in the offer must be confirmed by the offeree and is held in Carlill v Carbolic Smoke Ball Co (1892). An offeror must be made by an offeror to an offeree. When the person does not make offer but invites offer then it is called invitation to offer, wherein, an invitation is made in the form of advertisements, display of goods, and any person who is interested in the invitation can make offer and the inviter must approve the same to make a valid contract. In Fisher v Bell (1961) the display of goods was held to be invitation.
The offeree to whom the offer is made must give his assurance to abide by the offer and is called an acceptance. An acceptance must be made by an offeree and must be received by an offeror to make it valid and is held in Latec Finance Pty Ltd v Knight . If the offeree needs to revoke the acceptance then the same must be made before the acceptance is complete against the offeror. If the acceptance is made by post then the acceptance is complete when the post is put in transit.
Also, when the contract is made then the most important term which are the soul of the contract are called conditions and without which no contract can be performed. If the condition is breached, then, the contract is considered to be violated and the plaintiff can cancel the contract and ask for damages. If less important terms are breached then they are called warranties and only damages can be sought from the defendant.
The law is now applied to the facts of the case.
Application of Law
Josie makes painting for her living and sells them from her home studio.
On 19 February (Saturday) Sam visited the studio of Josie. He really likes a painting of a sunflower. The price tag that is placed along with the painting is $ 900.
Now, in the law of contract and as per Fisher v Bell display of goods for sale are not considered as offers. Such display of articles is considered as invitation to treat. So, Josie is an offeree and whosoever is interested must make an offer. Thus, a valid offer is made by Sam to Josie for the purchase of painting @ $700.
However, the offer that is made by Sam is not accepted by Josie. Rather, a counter offer is made by her and she offered that she can sell the painting @ $800 only.
So, the only offer that is valid now is of Josie @ $800.
But, the offer that is made by Josie is not accepted by Sam, rather, he took time so that her wife also had a look at the painting. He submitted that he needs time till 21st February.
Josie also provide him with a form which submits that an offer is made by Josie to Sam for the sale of painting @ $800 and the offer is valid up to 21st February (midnight)
Thus, at this point, there is no valid acceptance to the offer of Josie, rather, the offer is open till 21st April.
On 20th April, Josie does not want to continue with the offer so she called Sam and leaves a message on his answering machine.
On 21st April (10 AM, that is much before midnight, till the time the offer was open for acceptance) Sam called up Josie and wanted to accept the offer of Josie, but, before the acceptance can be made the phone got dead.
Thus, as per Latec Finance Pty Ltd an acceptance is complete only when the same is communicated to an offeror. If the offeror is not aware of the acceptance then such acceptance has no value in law.
Thus, the acceptance that us made by Sam has no relevance as the same is not communicated to Josie.
Later Sam posted a letter accepting the offer of Josie which is received by her on 23rd April.
But, it is submitted that the acceptance by Sam has no relevance as revocation of offer took place much before the acceptance of the offer is made by Sam.
Thus, there is no concluding contract amid the two.
Josie and Wendy
On 20th April, Wendy visited the store of Josie and is willing to purchase the painting that Sam is interested in buying. Wendy made an offer to Josie for the purchase of the [email protected] $ 00. The offer that is made by Wendy is accepted by Josie.
Thus, there is valid offer and acceptance that is made amid the parties and so there is a valid contract amid the two.
Since it is assumed that if a valid contract is made amid Josie and Sam, then, it is necessary tat Josie must provide the painting to Sam. However, the pointing was sold by Josie to Wendy. The sale and purchaser of the painting was the main essence of the contract. If the painting is not sold to Sam, thus, the main purpose for which the contract is entered is shattered. So a condition is breached. Thus, Sam can sue Josie for breach of contract and can sue her for damages.
Thus, a valid contract is established amid Josie and Wendy. There is no contract between Josie and Sam. However, if it is assumed that a contract is established but is breached amid Sam and Josie, then, Sam can sue Josie for breach and claim damages as the purse of the painting is the essential term (condition) of the contract and selling the same to Wendy has destroyed the very essence of the contract.
Ann, S, ‘Offer – Invitation to treat’ Academia.
Graw, S, ‘An Introduction to the Law of Contract’ (2012) Thomson Reuters (Professional) Australia Limited.
Hodges, S, ‘Cases and Materials on Marine Insurance Law’ (2012) Routledge.
Hill, S. W. B, ‘Email Contracts - When is the Contract Formed?"  Jl Law Info Sci 4
Bressan v Squires  2 NSWLR 460
Carlill v Carbolic Smoke Ball Co (1892).
Daulia Ltd v Four Millbank Nominees Ltd  2 All ER 557
Fisher v Bell (1961).
Latec Finance Pty Ltd v Knight  2 NSWR 79