Coursework 2 PDF

Preview

Summary

coursework draft...

Description

Contract Law 15026103

Advise Homer as to whether he has legally binding contracts with Christine and/or Louis. In evaluating whether Homer has legally binding contracts with Christine and/or Louis, this essay will discuss crucial factors within contract law to sustain a conclusion. Various legal sources will be evaluated with special significance to: Adams v Lindsell [1818], Entores v Miles Far East Corporation [1955], Household Fire & Carriage Accident Insurance Co Ltd v Grant [1878-79] and Scammell v Ouston [1941]. Through extensive analysis, it is reasonable to conclude that Homer does not have a binding contract with Christine at ‘Pet Patrol’ due to the exceptions of the Postal Rule and the lack of certainty within the agreement. Homer’s communication with the second company, ‘Terminator’, results in a binding contract as both parties were within oral agreement with one another and had full intentions to create legal relations with certainty. This essay will endeavour to advise Homer in the given scenario using mainly the rules of offer and acceptance, the postal rule, intention to create legal relations, communication and revocation. Homer’s contract with Louis is bilateral, specifying that both parties have obligations with one another – providing goods on hire conditions in exchange for money – so that no party is without a promise to the other. In the scenario between Homer and Christine there are services on offer in exchange for money; however, no contract is formed as it does not satisfy the requirements of a valid contract. In Louis’ contract, there is an unconditional acceptance as there is no counter offer or rejection by Homer. Unconditional acceptance is illustrated in Tinn v Hoffman [1873]1 where one party’s offer to sell 1,200 tons or iron and another party’s order for 800 tons of iron does not constitute as an acceptance because the original offer of 1,200 has not been unconditionally agreed to. Homer’s communication with ‘Pest Patrol’, on 4th October 2016 was to request fumigation services. In applying the requirements of a legally binding contract, it is evident that not all requirements were satisfied by both parties; thus, there is no binding contract. The requirement of the intention to create legal relations was expressed through an offer rather than an invitation to treat; portrayed in the verbal communication by Christine – “Pest Patrol will be happy to do the fumigating work” if the price of £400 for the services was agreed. An invitation to treat is where negotiations are made but not an offer, such as in Gibson v Manchester City Council [1979] where it was held that an invitation to treat “was simply to invite the making of a ‘formal application’, amounting to an offer” 2. The requirement of certainty, however, is not evident enough to result in a binding contract as there are necessary terms – such as the time and date of the services – which have not been agreed upon. A case to support this is Scammell v Ouston [1941]3 where both parties agreed on hiring a lorry on hire-purchase conditions. The House of Lords stated that, “in the absence of any other evidence of the details of the hire purchase agreement this was too vague to be enforceable,

1 Tinn v Hoffman [1873] 29 LT 271 2 Catherine Elliott and Frances Quinn, Contract Law (10th edn, Pearson 2015) 14 3 Scammell & Nephew Ltd v HJ & JG Ouston [1941] 1 AC 251

Contract Law 15026103

and there was therefore no contract”4, emphasising how uncertainty can be enough to stop a contract from being valid. Another factor which is credible in proving there is no contract is the postal rule, In applying the postal rule to the ‘Pest Patrol’ scenario it would appear as though there was a contract. The postal rule was laid out by Adams v Lindsell [1818]5. A company sent an offer to the offeree about buying some wool via post on 2nd September. Unfortunately, the letter was wrongly addressed and did not reach the recipient until 5th September. The recipient posted their acceptance on the same day they received it and it reached the offeror on 9 th September, at which point the wool had been sold to a third party. The decision was held that as the acceptance had already become valid when it was posted, the offeror was bound to the contract. In support of this case, the ruling in Henthorn v Fraser [1892] heard Lord Herschell stating that, “the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”6 Since one of Christine’s terms were that the contract be concluded by a postal acceptance, Homer filled in the form and posted it. However, under the exceptions to the postal rule, the offer which Christine had put forth required communication of acceptance – supported in her statement that it was needed “for evidence purposes” – implying that the acceptance needs to be physically present before the contract is concluded which the postal rule does not satisfy. Bramwell LJ in Household Fire Insurance v Grant [1878-9] claimed, “it is necessary, as a rule, to constitute the contract that there should be a communication of that acceptance to the proposer”7, in this case receiving the acceptance. Therefore, if Christine had not received the acceptance via post then the contract is not legally binding. Furthermore, if Christine did receive communication of acceptance from Homer the contract is still not valid as there is not enough certainty for the acceptance to amount to a contract as most of the crucial terms were left unclear. The contract could only have become legally binding if Christine had received the communication of acceptance and there were more certain terms – specifically the date of the service being carried out which would have eradicated any doubts which Homer had about the fumigation while Christine was on holiday. Additionally, as Christine specified that “all contracts must be concluded by filling out and signing document”, Homer’s oral acceptance would not have been justifiable in amounting to a valid contract. Therefore, there is no contract between Homer and Christine. The second company which Homer approached, on 11th October 2016, ‘Terminator’, resulted in a bilateral contract as they both agreed on certain obligations which each other would perform. Unlike Homer’s first contract with Christine, Homer’s contract with Louis meets all five requirements of a valid contract such as the capacity to engage in legal relations. There is an equal agreement between the two parties which is illustrated when the offeror, Louis, highlighted the price as “£350 to hire, including the cost of chemicals” to which Homer orally 4 ‘Offer and Acceptance in Contract Law’ (In Brief) accessed 4 December 2016 5 Adams v Lindsell [1818] 1 B & Ald 681 6 Henthorn v Fraser [1892] 2 Ch 27 7 Household Fire & Carriage Accident Insurance Co Ltd v Grant [1878-79] LR 4 Ex D 216

Contract Law 15026103

agreed to. In terms of the validity of an oral acceptance, “the contract is just as legally binding as a written contract”8. To extend this point further, acceptance must be communicated under the receipt rule, illustrated in the case of Entores Ltd v Miles Far East Corporation [1955]9 which concluded that “A must be able to hear B’s acceptance before it can take effect”10, highlighting that because Louis and Homer fully understand each other over telephone, there is a valid contract. As Louis uses the term “hire” when discussing the terms of the contract, it would be unreasonable to understand Louis’ proposal as anything but an offer to hire out the equipment. To the officious bystander, the argument is in Louis’ favour as the contract was, indeed, for hiring out the equipment and was not, therefore, a service contract. The misunderstanding from Homer is the main reason for him wanting to cancel the contract after it had become legally binding. This can be compared to Homer’s contract with Christine as she explicitly says “Pest Patrol would be happy to do the fumigating work”, making the fact that the company would carry out the work a specific term of the contract; just as Louis specified his intentions to hire out the equipment. Thus, as Louis did not mention anything about his company completing out the work, he cannot be held accountable by Homer. In support of this, the case of Bear Stearns Bank plc v Forum Global Equality Ltd [2007]11 dealt with a contract between two parties where “much of the detail of the agreement was left to be finalised at a later stage”12. Forum Global decided not to go ahead with the sale and Bear Stearns brought civil proceedings. The High Court found that, as the price and product had been agreed – like how the price and goods had been agreed to in Homer and Louis’ situation – the certainty requirement of the agreement had been fulfilled and was enough to bind both parties to a legal contract. On 20th October, Homer received a letter from Louis demanding that Homer abides by the contract and accepts the equipment and chemicals or he will sue for breach of contract. This is a valid claim as if Homer did not accept the equipment, he would have committed actual breach as he would not be fulfilling his obligations within the contract. Homer cannot cancel the contract on the grounds that Louis had not fulfilled his obligations because Louis had completed the terms which were agreed: bringing the correct equipment for Homer to hire and use in completing the fumigation himself. Therefore, Homer is bound by law into a contract with Louis and must appreciate the obligations which he agreed to with the intention to create legal relations after the initial offer from Louis. In conclusion, Homer’s communication with Christine has not amounted to a valid contract because of the lack of certain terms and the insignificance of Homer’s oral acceptance. Even if Christine had received Homer’s postal acceptance it is not enough to bind them in a legal contract as the certainty requirement of the contract must be fulfilled. Homer does, however, have a contract with Louis as all the prerequisites of a contract have been satisfied. It cannot 8 Bhavini Kalaria, ‘How to Enforce a Verbal Contract’ (The London Law Practice, 15 September 2015) accessed 1 December 2016 9 Entores Ltd v Far Miles East Corporation [1955] 2 QB 327 10 Catherine Elliott and Frances Quinn, Contract Law (10th edn, Pearson 2015) 29 11 Bear Stearns Bank plc v Forum Global Equality Ltd [2007] EWHC 1576 (Comm) 12 Catherine Elliott and Frances Quinn, Contract Law (10th edn, Pearson 2015) 54

Contract Law 15026103

be argued that there is not enough certainty within their agreement as, to the officious bystander, Louis was explicit in his terms to which Homer agreed to.

Bibliography:

Contract Law 15026103

Books: Catherine Elliott and Frances Quinn, Contract Law (10th edn, Pearson 2015) 14, 29, 54

Cases: Bear Stearns Bank plc v Forum Global Equality Ltd [2007] EWHC 1576 (Comm) Entores Ltd v Far Miles East Corporation [1955] 2 QB 327 Adams v Lindsell [1818] 1 B & Ald 681 Henthorn v Fraser [1892] 2 Ch 27 Household Fire & Carriage Accident Insurance Co Ltd v Grant [1878-79] LR 4 Ex D 216 Tinn v Hoffman [1873] 29 LT 271 Catherine Elliott and Frances Quinn, Contract Law (10th edn, Pearson 2015) 14 Scammell & Nephew Ltd v HJ & JG Ouston [1941] 1 AC 251

Websites and blogs: Bhavini Kalaria, ‘How to Enforce a Verbal Contract’ (The London Law Practice, 15 September 2015) accessed 1 December 2016 Offer and Acceptance in Contract Law’ (In Brief) accessed 4 December 2016...