Agreement - formative feedback PDF

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TUTORIAL FEEDBACK ESSAYYou should answer this question after your second Contract tutorial. You should submit your answer by email attachment to your tutor by the date of your third tutorial. It will then be marked by your tutor and returned with feedback by the end of term (unless your tutor tells ...

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Law of Contract

TUTORIAL FEEDBACK ESSAY You should answer this question after your second Contract tutorial. You should submit your answer by email attachment to your tutor by the date of your third tutorial. It will then be marked by your tutor and returned with feedback by the end of term (unless your tutor tells you otherwise). If on receiving your essay and considering the feedback provided, you have further questions, please contact your tutor or, if there are issues relating to essay writing generally, you might want to contact one of the Legal Skills Advisers. Word limit: 1,500 words covering both (a) and (b) in aggregate. This does not mean that you need to write close to 1,500 words, but an answer of, for example, 800 words is unlikely to contain the depth of legal analysis required to gain a good mark. Ultimately, what is important is the quality of your answer rather than its length, but a good quality of analysis of all the relevant issues raised by examination questions will require a certain quantity of writing. Cases need not be referenced, ie you should of course provide authority but you need not provide law report citations for the cases you cite.

Answer BOTH (a) AND (b) (a) Seller Ltd on Monday faxes to Buyer Ltd an offer to sell 1,000 widgets for £10,000, stating that the offer is open until 5 pm on Friday. On Tuesday Buyer posts a letter accepting the offer. On Wednesday morning at 9 am Buyer receives news that the Dutch company to which it intended to resell the widgets is in financial difficulty and therefore immediately sends a fax message to Seller countermanding the order. When this fax is received, Seller’s machine is out of paper and the message is received into memory. Buyer’s letter of acceptance is received and read at 2 pm. At 3 pm Seller turns down an offer from Tertius Ltd to buy 1,000 widgets at £11,000 since Seller has insufficient stock to cover both orders. Seller only becomes aware of Buyer’s fax when the machine is refilled with paper on Thursday. Advise Seller. (b) Railway Ltd invites tenders for the supply of all brake blocks required for its trains for a two year period. The price for the goods is to be £500 per unit for the first six months and thereafter at a price to be agreed between the parties or, in default of agreement, that set by the Transport Mediation Board. The tender of Arret Ltd is accepted. During the first six months Arret fulfils several orders by Railway and is paid £500 per unit. In the seventh month Railway puts in an order for 100 units which is fulfilled by Arret, though nothing is said about price at the time. In the eighth month Arret’s response to another order by Railway is that its price will be £600 per unit and that it wants that sum for the order in the seventh month, too; but Railway is only willing to pay £550. The parties then discover that the Transport Mediation Board had in fact been dissolved before the tender was accepted. Discuss. NB:

When an examination questions says ‘Discuss’, that is shorthand for ‘Analyse, in a logical order and in detail, each and every legal issue arising from the above facts, and apply the law to the facts.’ Most of the marks are gained, or not, by the quality of your discussion of the relevant legal principles. If the question says, ‘Advise X’, it means do exactly the same thing

Law of Contract

concentrating on X’s position. Ultimately, it may produce precisely the same answer. Furthermore, while it is possible to address all relevant legal principles before saying anything about how the law on any of the issues applies on the facts, that is often an approach that leads to confusion, irrelevance and omission. It is far safer to analyse the law on whatever you consider logically the issue with which to start, apply that law to the facts, and then move to the next issue, and repeat until you reach the end of the question.

(a) An agreement comprises of an offer and acceptance which generates consensual obligations to which parties are bound. An offer exists when there is an expression of willingness to contract on certain terms made with the intention that it shall become binding on the party making it, as soon as it is accepted by the party that it is addressed to. Acceptance occurs when there is final and unqualified assent to the terms of the offer by the other party (Treitel). Once these conditions have been satisfied, there is an agreement as set out in Gibson v Manchester City Council. In the facts of this case, the Seller makes an offer to the Buyer by fax, to which the Buyer accepts by post. The general rule of acceptance is that acceptance must be communicated to the offeror i.e the Seller must be made aware that the Buyer has assented to the terms of the offer. Furthermore, there is an implied restriction on the means of expressing this assent - it is expected that acceptance would be communicated via the same means that the offer was initially made - Quenerduaine v Cole. So, since the Seller made the offer by fax, it is implied that the Buyer’s acceptance must be communicated in the same way. Even if one was to argue that the Seller’s offer by fax was only an indication as to how fast the Buyer should accept and other means of instantaneous communication were permissible, it can be assumed from the facts of the case that this was a business transaction. In the world of business, if an offer is transmitted by instantaneous communication, it is highly likely that acceptance by postal service would be inadmissible because it is not a permitted method of acceptance – post is not a form of instantaneous communication. Therefore, if one is to assume that fax or other means of instantaneous communication are the only permitted means of communicating acceptance, given that the Buyer communicated acceptance via post, the acceptance would be invalid, there would be no agreement and hence no contract. (or simply that PAR wouldn’t apply and general rule on acceptance would apply instead?) However, there is an alternative interpretation. In Manchester Diocesan Council for Education v Commercial & General Investment Ltd, the court established that unless a mandatory means of acceptance was specified and made clear to the offeree, the offeree could use an alternative method of acceptance. Applied to the facts of this case, that would mean that since the Seller did not explicitly state that acceptance must be communicated by fax, it is acceptable that the Buyer communicated their acceptance using the post. It must now be established whether the Postal Acceptance Rule can be applied to this scenario. In this scenario, the Seller gave no expression of dissent to the postal service being used a means of communicating acceptance and thus it can be assumed that the postal service was a permitted method of acceptance; the postal rule applies. Unless there is an exception, acceptance communicated by post takes effect as soon as the letter is posted: Adams

Law of Contract

v Lindsell. Therefore, on Tuesday when the Buyer posted the letter of acceptance, the Buyer and Seller were legally bound. ( ok) With respect to the Buyer trying to countermand the offer, this is not possible as a legally binding contract has already been made. In order for a revocation to be effective, it must be communicated to the offeree before a contract has been concluded. Therefore, as the Buyer’s acceptance arrived before the revocation on Wednesday, the Buyer’s subsequent revocation would be ineffective: Byrne v Van Tienhoven. This is irrespective of whether it was read immediately or at a later date during the week. An acceptance cannot be withdrawn after contractual relations have commenced.(yes, but also need to explain in more detail that there is a view that revocation of acceptance can be effective if sent by faster means of communication, no English law authority on this, but case law from other legal systems can be used to explain arguments for and against allowing such revocation ) All this considered, the seller should act as if the parties are in a legally binding contract and is therefore obligated to provide the goods to the Buyer as stipulated in the terms of the contract – 1,000 widgets for £10,000. This is because the Buyer accepted the Seller’s terms and failure to comply with the terms set out in the contract would give rise to liability for breach of contract on the part of the Seller. (b) Considering the facts of the case, the invitation to tender is to be treated as an invitation to treat, with the tender being an offer, which could be accepted or rejected by the offeror (there is no obligation to accept): Spencer v Harding. Based on the facts of the case, Railway invited tenders for the sale of a good which was then accepted by Arret, putting both parties in a legally binding contractual agreement with one another. The stipulation in the contract that the price of the goods will be sold ‘thereafter at a price to be agreed between the parties’ is an agreement to agree. Generally, agreements to agree are unenforceable as they lack legal certainty, and it is not within the right of the courts to decipher what they think the parties intended – that is down to the parties in the principle of freedom of contract. In this particular scenario, as the price is fundamental to the contract, a mere agreement to agree on the price at a date in the future is insufficient to constitute a legally binding contract. This is set out in the case of Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd per Lord Denning in paragraph 301 where he states that the price ‘is so essential a term that there is no contract unless the price is agreed or there is an agreed method of ascertaining it, not dependent on the negotiations of the parties themselves.’ However, the contract gives an alternative method of price determination: ‘that set by the Transport Mediation Board.’ This coincides with section 8(1) of the Sale of Goods Act 1979: ‘The price in a contract of sale… may be left to be fixed in a manner agreed by the contract.’ This stipulation allows for the price to be determined by a third party, as is the case in this set of facts. During the first six months, contractual relations commence as set out in the terms

Law of Contract

agreed to by both parties. However, by the seventh month there is a legal problem because the parties continued to transact with one another without agreeing on a price after the lapse of six months as agreed under the contract. Railway’s order of 100 units, presumably at a price to be determined later, if treated as an offer was accepted by conduct when Arret fulfilled the order: Stevens v Bromley. In the eighth month when Arret asks for £600 per unit for the seventh month, but Railway is only willing to pay £550, they should have defaulted to the Transport Mediation Board. However, the parties discover the board was dissolved before the contract was concluded. Since Arret made no statement, misrepresentation is not relevant here. Instead, the parties should default to section 8(2) and (3) of the Sale of Goods Act 1979: (2) Where the price is not determined as mentioned in sub-section (1) above the buyer must pay a reasonable price’. (3) What is a reasonable price is a question of fact dependent on the circumstances of each particular case. Based on the facts of this case, there are not enough facts to determine a ‘reasonable price’ so this should be left for the parties to determine on their own terms. (would s 8(2) apply here?note that parties did provide for how the price should be agreed upon , so s8(2) doesn’t apply and reasonable price on the basis of s8(3) cannot be implied)However, if the parties are still unable to reach an agreement as to the price to be paid for the goods in the seventh month, it would be within reason for them to take the matter to court and allow the courts to use all the financial history and transaction history between parties to determine a ‘reasonable price’ to be paid. One could argue that since the parties contracted for six months at the price of £500, it is not unreasonable for the price in the seventh month to be the £550 that Railway is willing to pay. Asking Railway to pay £600 may be too much of a large sum to pay as it could have adverse effects on the financial situation of Railway, if we are to assume that Railway is a small company. However, given that no information is provided as to the size of the companies, the price determined could go either way. What about s 9 – dissolution of TP mechanism has the effect of rendering the c/t void. So no c/t here, but on the basis of same s9, reasonable price must still be paid for goods delivered in 7th month. Basis – restitution (as no c/t/) Mark: 57...