Contract: Definition and Elements - Essay Example

?Write an individual report to Acorn Antiques advising on the company's possible legal liability for the injuries sustained by Erica in the shop, andwhilst travelling to hospital in the ambulance. Introduction To establish a contract requires fulfilment of the elements of contract (Frey, 2001). If any of the elements is not fulfilled, contract cannot be established. It is establishment of contract that would facilitate to determine legal liabilities. So, the establishment of contract is a pre-requisite. Offer and acceptance are the significant parts of contract. A person who makes an offer is called as an offeror; and a person who receives that offer is called as an offeree. It is utterly important that offeror must make an offer to offeree. This would start a process of contract. Before going to reach a point of a valid contract, the valid contract may come across points like invitation to treat, counter-offer, query, time to consider, they may not make the contract valid; rather they may create other types of contracts. And some of them may revoke the valid contract. But, some scholars do not agree on one theory of contract; rather, there are two theories of contract-Will Theory and Declaration Theory (Beever, 2009). The main purpose of this report is to advice Acorn Antiques Ltd whether it should be ready to pay for legal liabilities for the injuries sustained by one of its customer, Erica, in the shop and whilst travelling to the hospital. To give a piece of advice, it is important to understand some basic information about the company and its employees. Acorn Antiques Ltd is run by two directors: Mr Clifford and Miss Babs; they have employed two people, Miss Berta, a sales person, and Mrs Overall, who provides the cleaning and catering services in the company. In order to give a piece of advice to Acorn Antiques, it is utterly significant to understand whether any contract exist between the injured party and the company. If a contract is established between Erica and Acorn Antiques Ltd, this would clearly require Acorn Antiques to pay for legal liabilities. If the contract is not established between Erica and the Acorn Antiques, no legal liabilities could be established or advised to the company. In the subsequent parts of this report, all the elements of contract are discussed for the purpose of determining whether they exist between the customer and the company. On the basis of this discussion, a piece of advice is given to the company. Contract: Definition and elements A contract encompasses offer and acceptance. According to Sir Frederick Pollock contract is defined as “a promise or set of promises which law will enforce,” (Keenan et al., 2009, p.204). This means, if a contract is established between the contracting parties, and it is legally bonding as well, in this case, it becomes a responsibility of law to enforce the elements of contract. Additionally, to enter into a contact, offeror must make an offer to an offeree. And in return, the offeree must accept the offer. These are the fundamental elements of the contract. The establishment of offer and acceptance creates a contract. If offer is made but acceptance is not made by the offeree, in this case, legally contract cannot be established. To establish the contract, both, offer and acceptance, must exist. Offer Offer contains fundamental ingredients of the contract (Emerson, 2009). An offer is an expression of willingness to the specific terms of contract, these terms are established with the intention that they would become binding as soon as these terms are accepted by the offeree (Treitel, 2003). An offer determines the terms on which an individual shows his willingness to enter into a legally enforceable contractual relationship with another person. An offer must be capable of acceptance; it must be understandable and it must not be vague or unclear (McKendrick 2010, p136). Offer, once accepted, may become legally enforceable but many times all statements would not be amount to an offer. It is significantly important to make a distinction between an offer and other statements. And this distinction must be understood in the light of law. An offer must be capable of acceptance; therefore, it must not be too vague (Scammel v Outson (1941)) (Lawstudent forum, 2011). In the case law of Carlill v Carbolic Smoke Ball Co (1893)(Leeds,2011). it was held that an offer could be made to the whole world and offer could be accepted and it could be made binding through the conduct of offeree. The case of Harvey v Facey (1893) ( Beatson, 2002, p 32) is similar to this case study, Berta, who is a sales person, provides lowest price and she is willing to accept. By allowing time to consider about buying the bowl, Miss Berta makes an offer to Erica. Time to consider is given to buyer to think through the offer and make a decision whether to accept or not (Smith and Keenan, 2000, p 181).In this situation; an offer is established from the side of offeror, Berta. But, acceptance is not expressed by Erica; she has asked for a time to consider. Here, it is important to note that both parties have not discussed how acceptance would be communicated between them in order to fulfilling the requirements of a valid and enforceable contract. However, Erica gives her phone number and a note of 5 pound to Miss Berta. But, the intention of giving a note of 5 pound and the phone number is still vague and unclear. On the 2nd of March, Erica telephones Acorn Antiques at 5.10.pm, but she confronts with the answering machine; she leaves a message stating that she has accepted the offer but asked if she could pay by two separate instalments over one month, additionally, she clarifies that she would call in on Friday to complete things. Revocation The withdrawal of offer by the offeror is revocation (Meiners, 2009).Revocation is a cancellation of an agreement by the offeror. By performing an act of revocation, the offer can come to end and as a result, offeror withdraws from the offer, which was made to the offeree. Furthermore, revocation can be made at any before acceptance (Routledge v Grant (1828)(Corporate and business law, 2007/08). Additionally, offeree must be communicated about the revocation of the offer in order to make an effective revocation. For that purpose, offeror must make sure that the offeree is informed about the revocation of the offer. Otherwise, it might still remain open to the offeree to accept the offer. This is also applicable to when the offeror uses the mode of post to withdraw the offer, as the postal rule does not apply in the revocations of the offer (Byrne V Tienhoven (1890) (Corporate and business law, 2007/08). Also, revocation can be done in the cases where offeror promises to keep an offer open for a particular period of time; still, revocation can be done before that period is up. Such a promise is only binding where there exists a separate contract, known as an option contract and this is completed with separate consideration. In an option contract, if the offeree pays the offeror to keep the offer open. If the offeror revokes the offer in this sort of contract, it will amount to a breach of that collateral contract. Consequently, the offeree could claim for damages for the loss of the opportunity to accept the offer. In the case of unilateral contract, revocation of offer cannot be carried out by the offeror once the offeree initiated to perform the acts which would lead to acceptance (Errington v Errington (1953) (Corporate and business law, 2007/08). In this case study, Miss Berta has given a time to consider to Erica. And she has separated the bowl for Erica. However, Miss Berta revokes the offer by selling the bowl to Carol on 3rd March. This revocation is legally appropriate as she has texted Erica about the sale of bowl. Additionally, between Miss Berta and Erica, there is no option contract which is necessary to keep an offer open for a certain period of time. Acceptance Acceptance is the final step to establishing an enforceable contract. Acceptance is defined as a final and unqualified expression of assent to the terms of an offer (McKendrick, 2011, p11). Acceptance can be oral, written or conduct. Any of these three ways can be used to accept an offer. Additionally, offeror can stipulate a particular mode of acceptance. However, the communication of acceptance must be determined and established in order to enter into a contract. As a general rule, acceptance would not become effective until it is communicated to the offeror (Entores V Miles Far East Corporation (1955) (Corporate and business law, 2007/08). Some latest means of communication can be used for the purpose of sending acceptance to the offeror. For instance, if a fax, telephone, or telex message is received during the normal business hours that is when it is deemed as communicated to even though it might not be read until later. Second, if the fax, telephone or telex message is arrived outside business hours, it is considered to be communicated when the business next opens. The offeror can impliedly or expressly dispense with the need for communication; however, offeror cannot express that silence is acceptance- Felthouse v Bindley (1863) (Corporate and business law, 2007/08). In the current case, Erica has accepted the offer by using her message on the answering machine. It looks similar to the case law of Brinkibon V Stahag Stahl and Stahlwarenhandels GmbH (1982) (Westlaw, 2011). Some facts require further clarity; for instance, Erica has phoned after 5:00 pm, it is unclear from the case study what business timings are implemented by the company. Second, it is also questionable to term acceptance of Erica as a valid acceptance since she is asking for two instalments; this could be termed as a counter-offer. Advice for Acorn Antique Establishment of the contract may require the company to prepare for possible legal liabilities for the injuries sustained by Erica in the shop and in whilst travelling to hospital in the ambulance. Offer is made by Miss Berta to Erica when she allows her time to consider for the purchase of the bowl. One element of contract is made when it is communicated and agreed by the parties at the contract. Subsequently, Erica accepts the offer by using the means of telephone. But, important thing is that she has telephoned and left her message at the answering machine after 5:00 pm; normally business hours end at this time. But, this point is vague and unclear about the precise time of closing the shop. This creates some doubts over the establishment of the contract. Additionally, Miss Berta has revoked the offer by selling the bowl to Carol. This sale of the bowl is tantamount to end the offer; additionally, Miss Berta has also left a text message to Miss Erica about the sale of the bowl. Here, Miss Erica looks unaware of the sent text and she comes to shop for the purpose of buying the bowl. Entering into the shop; she fails over and receives some serious injuries. In this case study, some facts are ambiguous, hidden and some require further interpretation. For example, Why Miss Berta did not check the answering machine before going to sell the bowl? Was it Berta’s responsibility to check the answering machine? Why did not Erica read the message sent by Miss Berta? Most importantly, what were the business hours for the Acorn Antique limited? Was the message left on the answering machine during the office hours? Furthermore, was it a counter offer when Erica asked for the instalment based payment? These are fundamental facts that are left hidden, vague and open to interpretation. It is difficult to determine the precise answers for the queries which are left unanswered. Additionally, the method of communicating acceptance was not made clear during the initial talk between Miss Berta and Miss Erica. It is significantly important to determine a mode of communication. This determined mode of communication must be agreed between the parties. After agreeing the mode of communication, the communication of acceptance must be made by using that. On the basis of these facts, it is difficult to advise Acorn Antique about the possibility of legal liabilities for injuries sustained by Erica. Furthermore, most importantly, when Erica was coming to the shop, a warning sign was there, she should have seen that sign and must have proceeded accordingly. References 1. Beatson, J 2002, Anson’s Law of Contract, 28th edition, New York: Oxford University Press 2. Beever, A2009 “Agreements, Mistakes, and Contract Formation”, King's Law Journal, Vol. 20 Issue 1, p21-51 3. ‘Corporate and Business Law-2007/08’, ACCA Text book, Kaplan: Berkshire 4. Emerson, R, 2009, Business law 5th ed., Hauppauge  N.Y, Barron’s Educational Series. 5. Frey, M, 2001, Essentials of contract law, Albany NY: West/Thomson Learning. 6. Keenan, M, Riches, S and Allen, V 2009, Business Law, 9th edition, Harlow: Pearson Education Limited 7. Treitel. GH 2003, The Law of Contract, 11th Edition, London: Sweet and Maxwell Limited 8. McKendrick,E, 2010, Contract Law, Text, Cases and Materials, 4th Edition, New York: Oxford University Press, Inc., 9. Moor, A D 1990, “Intention in the law of contract: elusive or illusory?” Law Quarterly Review, Issue 632 10. Lawstudent forum, 2011,’ Scammell v Ouston [1941] [Available at: http://www.lawstudentforum.co.uk/case-law/4325-scammell-v-ouston-%5B1941%5D-ac-251-a.html ] [Accessed on:22 March, 2011]. 11. Leeds, 2011, ‘Carlill v Carbolic smoke Ball company’ [Available at: http://www.leeds.ac.uk/law/hamlyn/carlill.htm ] [Accessed on: 22 March, 2011]. 12. Law.jrank.orf, 2011, Routledge v Grant (1828), [Available at: http://law.jrank.org/pages/17304/revocation-offer.html ] [Accessed on: 22 March, 2011]. 13. Meiners, R, 2009 The legal environment of business 10th ed., Mason  OH: South-Western Cengage Learning. 14. Smith, Keenan 2000, Advanced Business Law (11th ed.) Longman. Essex 15. Westlaw (2011c) “Brinkibon v Stahag Stahl und Stahlwarenhandels GmbH“. House of Lords, 21 January 1982 [Online]Retrieved from: http://login.westlaw.co.uk/maf/wluk/app/document?&src=rl&srguid=ia744cc630000012e7812e8e940669e56&docguid=I7A838CB0E42711DA8FC2A0F0355337E9&hitguid=I7A838CB0E42711DA8FC2A0F0355337E9&spos=14&epos=14&td=33&crumb-action=append&context=16 Read More