Contract formative - Grade: 2:1 PDF

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Summary

The issue, in this case, is whether Abigail formed a binding contract with each of Celista, Denzel and Edwin. To form a binding contract, there must be an offer, acceptance, an intention to create legal relations and consideration. If all of these elements are present, then Abigail will have formed ...

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1. The issue, in this case, is whether Abigail formed a binding contract with each of Celista, Denzel and Edwin. To form a binding contract, there must be an offer, acceptance, an intention to create legal relations and consideration. If all of these elements are present, then Abigail will have formed a legally binding contract with each person. Abigail placed an advert in the local newspaper. In general, adverts would not be classed as an offer, but as an invitation to treat. An invitation to treat is simply an indication of a willingness to enter into negotiations (Partridge v Crittenden). On the other hand, the advert may be considered a unilateral offer. An offer can be described as “an expression, by words or conduct, of a willingness to be bound by specified terms.” It must illustrate that the offeror intends to be legally bound and layout what the offeree must do in return. In the case of Carlill v Carbolic Smoke Ball Co [1893] the court held that the company’s advert which stated they would pay £100 to anyone who contracted the flu after using their smoke ball, was a unilateral offer. It was stated that there was no need for Mrs Carlill to communicate her acceptance before performing the act. However, in this instance, communication is required as Abigail’s offer is to sell the vase to a person who is willing to pay a reasonable price for it. As Abigail states that the vase is “for sale for £600,” it suggests an intention to be legally bound and lays out what the offeree needs to do in return. Thus, it could still be considered an offer. The courts will judge Abigail’s intentions according to what the ‘reasonable man’ would believe she meant by her words, her actual intentions being irrelevant. Thus, if the reasonable man would consider Abigail’s advert an offer, she could still be legally bound by it. Celista’s email Celista emailing Abigail and offering her £550 for the vase could be an offer; however, if Abigail’s advert is considered an offer, then Celista’s email could be an acceptance. An acceptance is described as “offeree has to accept the offer on the terms stated by the offeror.” Any suggestions for change would result in counteroffer (Hyde v Wrench). As Celista’s offer is different from the initial selling price Abigail provided (she offers £550, not the £600 Abigail asked for), this could be considered a counteroffer. She sought to vary the terms of the original offer; thus, this is a counteroffer thereby terminating the original offer. Abigail’s email Abigail responded to Celista’s email and said she would consider £570, as £550 is too low. Her response seeks to vary the offer from Celista, which is another counteroffer and terminates Celista’s offer. Celista’s second email Celista responded to Abigail’s counteroffer with “sounds like a deal!” This is a clear agreement to the terms of Abigail’s last offer. Therefore, this is an acceptance and would (in general) constitute a binding contract. However, acceptances must be communicated to the offeror. Although, Celista emails Abigail in an attempt to communicate with her, there is no guarantee that Abigail receives this acceptance. The postal rule (which was established in Adams v Lindsell) states that an offer is accepted when the acceptance is posted, rather than when it is received. This might

suggest that it is irrelevant whether Abigail receives the email or not. However, the postal rule does not apply to instantaneous forms of communication. An email can be considered an instantaneous form of communication as it can be sent and received immediately (replicating face-to-face communication). There is not a case which says what should happen if the acceptance is sent outside of office hours and not received at once. Here, it appears that Celista’s acceptance was sent after office hours as Abigail only responded to her initial email “at the end of the working day.” Thus, the acceptance may only take effect the following morning, when it would be reasonable for Abigail to check her emails. Denzel’s voicemail Denzel leaves a voicemail offering £560 for the vase. As previously stated, Denzel is offering to vary the contract (offering £40 less than what Abigail asks for), thus, his voicemail could be considered a counteroffer. Abigail’s voicemail The following morning, Abigail leaves a voicemail for Denzel, accepting his counteroffer of £560, on the condition that he comes “into the shop that morning to pay.” Thus, Denzel had until 12pm that day to come into the shop and buy the vase. However, by this point, Celista’s acceptance may have taken effect, as the reasonable time for Abigail to check her emails has come to pass. Thus, Abigail may have been in a legally binding contract with Celista before she responded to Denzel. Edwin’s note Edwin left a note through Abigail’s letterbox to offer £600 for the vase. This could be considered an acceptance, as Edwin did not seek to vary the contract. Here, the postal rule would come into force, meaning Edwin communicated his acceptance immediately, irrespective of when Abigail receives the note. Thus, a legally binding contract may have been formed as soon as Edwin posted the note through the shop’s letterbox. However, a letter is only regarded as “posted” when it is in the possession of the Post Office. This was established in Re London & Northern Bank [1900]. This only means that Edwin’s acceptance does not come into force immediately; instead, when Abigail receives and acts on it, it would become legally binding. Abigail’s phone call and email Abigail, upon receipt of Edwin’s note, calls him immediately saying “it’s [his].” This completes the formation of her contract with Edwin. She responds to Celista’s email without seeing her acceptance. This, however, does not mean that Celista’s acceptance is disregarded. As per the postal rule, Celista’s acceptance still stands even if Abigail does not see it. Abigail has also formed a legally binding contract with Denzel, as long as he arrives in the morning to pay for the vase.

The intention to create legal relations is often presumed to apply in commercial agreements unless the contract states otherwise (as established in Rose & Frank Co v Crompton Bros [1925]). As Abigail places the advert in a newspaper available to the public, this is a commercial agreement, and the presumption applies.

Consideration requires each party to promise to do something in return for the other party’s promise. Here, Abigail is offering her vase in exchange for money from either Celista, Denzel or Edwin. As both sides are promising to do something, there is sufficient consideration. Conclusion Abigail’s advert could be either an invitation to treat or a unilateral offer. Celista emails a counteroffer, to which Abigail responds with another counteroffer, which Celista accepts (forming a binding contract on receipt of the email when it is considered appropriate for Abigail to have checked her emails). Denzel makes a counteroffer, which Abigail also accepts as long as he pays for the vase the following morning. If these conditions are met, Abigail has a binding contract with Denzel also. Edwin accepts Abigail’s offer, and she tells him that the vase is his (no conditions are placed on this acceptance). If Abigail could have reasonably checked her emails before contacting either Denzel or Edwin, then Celista could sue Abigail for breaching their contract. As Denzel arrives to pay for the vase “before lunchtime,” he can also sue Abigail for breaching their contract, as he has met the conditions laid out by Abigail....