Problem Question in Contract Law - Essay Example

? Contract Law Introduction O’Brien, the owner of a book salon wanted to sell a signed copy of Orwell’s 1984. In this regard, he placed an advertisement in the shop window stating that it was a rare and special offer of Orwell’s monumental book. He displayed the book in a cabinet with a price sticker that wrongly stated the price as ?500. For advising O’Brien regarding his obligation towards Julia, Parsons and Winston, the following issues have to be discussed. An offer indicates willingness to form a contract on the basis of certain terms, and with the intention that it should be legally binding on being accepted (Barry, 1992, p. 14). The acceptance of an offer results in a valid contract. The offeree makes the acceptance in response to the offer made by the offeror. Acceptance must be unqualified, and unambiguous (Barry, 1992, p. 14). The offer made by the offeror to the offeree has to be accepted by the latter, if a binding contract is to ensue. The offeror has the choice of specifying the manner in which the offeree has communicate acceptance of the offer. This makes it incumbent upon the offeree to communicate acceptance without any deviation (Kelly, et al., 2011, p. 234). As such, in certain contracts, one of the parties promises to perform some action, if the other party does some specific act, even though the other party does not promise to perform that act. Such contracts are termed as unilateral contracts. As such, acceptance may be construed from conduct and there is no necessity for it to be communicated (Marson, 2010, p. 16). The readiness to accept offers or to enter into negotiations constitutes an invitation to treat. The main issues to be considered for solving the problem are: Whether there is a valid contract between Julia and O’Brien. Whether the telephonic acceptance by O’Brien concludes a contract between Parsons and O’Brien. Whether electronic mail negotiations between O’Brien and Winston, can conclude in a legally binding contract. Main Body Julia Julia, on entering the shop asked O’Brien to sell the book for the price stipulated on the price sticker attached to the book, namely ?500. O’Brien realised the mistake made by his assistant, and disclosed the price for which he would be willing to sell the book to Julia. This enraged Julia, who left the shop. An offer must be unambiguous and can be express or implied. The display of goods in a shop does not constitute an offer. It is merely, an invitation to treat. The offer comes into being when the customer selects some goods and expresses his willingness to purchase them (Barry, 1992, p. 14). Thus, it is the customer who makes the offer, in such instances. In Fisher v Bell, it was held that the display of items with a price tag in shop windows was an invitation to treat (Young, 2010, p. 13). In Carlill v Carbolic Smoke Ball Company, the defendants were the producers of a medicinal product called the carbolic smoke ball. This company gave an advertisement in the local newspapers, wherein it promised a reward of ?100 to anyone who contacted influenza or any other disease resulting from catching a cold, after having used their product. It also prescribed the dosage of the carbolic ball to be used, in its advertisement. The company also declared that one ball would last a family for several months (O'Sullivan & Hilliard, 2010, p. 15). The plaintiff Mrs. Carlill bought a smoke ball duly believing the contents of the advertisement, and used the medicine as directed by the company. However, she was infected by influenza, despite using the smoke ball for the required period and in the prescribed manner (O'Sullivan & Hilliard, 2010, p. 16). The Court held that the newspaper advertisement, in this case constituted an offer. In addition, it was held in Grainger Son v Gough that the circulation of a catalogue by a seller of goods does not constitute an offer and that it was merely an invitation to treat. This reiterated in Fisher v Bell, wherein the display of goods in a shop window, was deemed an invitation to treat and not an offer. By making an offer, the offeror indicates willingness to be specifically bound by the terms of the offer. It should be possible for these terms to be accepted. Moreover, the offer stipulates the terms of the contract to be formed (Collins, 2003, p. 161). As such in our present problem, the book display in the shop window by O’Brien amounts to an invitation to treat and not an offer. Julia’s proposal to purchase the book for ?500 constitutes an offer that was not accepted by O’Brien. Hence, there was no legally binding contract between Julia and O’Brien. Parsons Subsequently, Parsons visited the shop and asked O’Brien to reduce the price of the book, which was shown as ?5000. He negotiated with O’Brien and offered ?4500 for the book. However, O’Brien asked Parsons to make a phone call on Wednesday, so that he would have sufficient time to make up his mind. Till Wednesday morning, O’Brien had been away and as soon as he opened the shop, he received a phone call from Parsons. As a result, O’Brien agreed to sell the book for ?4500, the price that Parsons had negotiated with him. If an acceptance includes changes to the terms of the offer, it becomes a counter – offer. Acceptance must be communicated to the offeror, either verbally or in writing. With regard to acceptance by letter, it is deemed that the acceptance has been made at the time of posting the letter of acceptance (Barry, 1992, p. 14). Acceptance has to be made by the offeree, in the manner prescribed by the offeror. If the offeror requires the acceptance to be in writing, any other mode of communicating the acceptance will not be considered as a valid acceptance. Moreover, silence will not be construed as acceptance, and in such cases, there cannot be a legally binding contract between the two parties (Barry, 1992, p. 14). As opined in R v Clarke, the acceptance of the offer should be in accordance with the terms stipulated in the offer. In addition, the acceptance should be unreserved; otherwise, the acceptance is transformed into a counter offer. This was the ruling in Masters v Cameron, and the counter offer effectively annuls the original offer. In Pharmaceutical Society of Great Britain v Boots Cash Chemists, the defendant company Boots Cash Chemist had operated a self – service system of business. The customers were required to select goods from the shelves on which they were displayed. Subsequently, they had to bring these selected goods to the cashier (Marson, 2010, p. 17). This system was considered an offer by the customers to buy the goods selected by them. This was deemed tantamount to an offer by the customers to buy the goods and not an offer by the company to sell. The goods displayed on the shelves were held to an invitation to treat and not an offer. The contract was deemed to commence when the customers presented their selections to the cashier (Marson, 2010, p. 17). In the process of forming a contract, negotiations transpire between the parties. These concern the item, price, quantity, and terms relating to a possible contract between these parties. On occasion, such negotiations could even result in disagreements regarding the moment when an offer capable of acceptance, could have been made. In such instances, the courts have to examine the statements of the parties and other evidence, in order to determine the intentions of these parties (Marson, 2010, p. 18). These features came to the fore in Harvey v Facey. A contract does not result solely from negotiations between the parties. In such cases, the courts do not accept the presence of an offer. Moreover, a request for information will not be construed to be an offer that is capable of acceptance, or a counter offer that would serve to extinguish the offer (Marson, 2010, p. 18). In our problem, since Parsons had agreed to purchase the book for a lesser price, it constitutes an offer. It cannot be deemed an acceptance, since the display of the book by O’Brien merely constitutes an invitation to treat. For a contract to emerge from the negotiations between the parties, the acceptance of the offer has to be unqualified. Acceptance has to be communicated by the offeree to the offeror, and in cases involving intricacy in conveying acceptance; the courts provide the required instruction, regarding the manner in which the acceptance is to be communicated. However, silence can never constitute acceptance (Marson, 2010, p. 20). In Entores v Miles Far East Corporation, the claimant company Entores, which was based in London, communicated its offer to buy goods from the Holland based defendants, by telex. The defendants conveyed their acceptance of this offer by telex to the claimants. Subsequently, the defendants contended that the contract had been formed in Holland, at the moment of sending the telex message of acceptance (Salzedo, et al., 2005, p. 22). The court held that this was incorrect, and that the acceptance was effective only on being received by the claimant in London. Another important feature of acceptance came to the foreground in Hyde v Wrench, wherein the defendant Wrench had offered to sell a property for ?1,000. The plaintiff agreed to purchase the property for ?950. Thus, the plaintiff had made a counter offer. The defendant sent a letter to the plaintiff declining the latter’s offer of ?950. Subsequently, the plaintiff wrote a letter to the defendant that he had accepted the original offer of ?1,000. Subsequently, the defendant declined to sell the property at the previously stated price (Rush & Ottley, 2006, p. 51). The court held that there was no contract between the parties, as the plaintiff’s counter offer had extinguished the original offer made by the defendant. Nevertheless, as held in Butler Machine Tool Co v Ex – Cell – O – Corporation, the unconditional acceptance of a counter offer would result in a binding contract that was based on the terms of this counter offer (Jalil, 2011, p. 111). In Errington v Errington & Woods, an individual, desirous of providing his son and daughter – in – law with a home, purchased a house for ?750. The conveyance was retained in the father’s name, who paid the rates. He had promised his son and the latter’s wife that he would transfer the house to them if they paid all of the mortgage instalments. When the father died, it came to light that the entire property had been bequeathed to his wife .The wife of the deceased individual brought an action against the daughter – in – law for possession of the house. The court of appeal established a unilateral contract between the father and the son and daughter – in – law (Koffman & Macdonald, 2007, p. 38). Consequently, it was held that the widow of the father could not claim the house. As held in Dickinson v Dodds, the person who makes an offer can revoke it. However, such revocation has to be prior to acceptance of the offer by the offeree (Waddams, 2011, p. 27). In Storer v Manchester City Council, the Court of Appeal determined that the contract had been completed, the moment that the plaintiff had submitted the signed agreement to the Council. This prohibited the discontinuance of the sale of the dwelling to the plaintiff by the defendant. The plaintiff, in Denton v Great Northern Railway Company, performed a manifest act, on the strength of the statement made by the defendants. The court held that there was a contract between these parties. As such, in our case, Parsons made an offer in respect of the book displayed by O’Brien. However, he made a call on Wednesday as required by O’Brien to enquire about his acceptance of the deal. When he called O’Brien, the latter accepted the offer immediately. Hence, a binding contract had been formed between O’Brien and Parsons. Winston On Monday afternoon, O’Brien received an email from Winston, enquiring about the price of the rare book. O’Brien answered that he would sell only for ?5000. Later on Winston agreed to this price and sent an electronic mail to O’Brien on the same day. After the telephonic call with Parsons was over, O’Brien checked his electronic mail and noticed the message from Winston. Thereafter, O’Brien immediately sent a mail of confirmation to Winston and then called Parsons to cancel their agreement. It is very important to establish the exact moment that an electronic contract is concluded, where the acceptance is over the Internet. The communication is devoid of geographical boundaries, as it is conveyed by means of a digitalised message. The offeror and offeree may reside in different countries. Therefore, if their contract entails communication by electronic mail, then it would be beneficial to implement the rule of actual receipt, instead of the postal rule (Jalil, 2011, p. 117). This recommendation is based on the fact that electronic mail is almost instantaneous. Since, the sender of a message is finally in a position to assess whether the electronic mail has been conveyed; it makes sense to implement the receipt rule with regard to this mode of communication. The offeree should come to know about the offer made to him by the offeree. This requires the offer to be communicated to the offeree, and if the offer is via a letter posted in the post office, it has to reach the offeree (Jalil, 2011, p. 109). Communication of the offer can be through several modes, and even a person authorised by the offeror can effect such communication. Acceptance of the offer by the offeree renders it legally valid and binding. Revocation of the acceptance of the offer, by the offeree is possible only if the communication of acceptance has not come to the knowledge of the offeror (Jalil, 2011, p. 109). In Merrick Homes v Duff, the court opined that in facsimile communications, acceptance would complete, only after its receipt by the offeror (Ibrahim , 2007, p. 51). As such, in our problem, O’Brien’s offer to Winston had been accepted via electronic mail on Monday. However, it was not seen by O’Brien till Wednesday. As such, the contract between Winston and O’Brien had not been concluded till Wednesday. Before conclusion of this contract, O’Brien accepted the deal with Parsons based on their telephonic conversation, which is an instantaneous mode of communication. Conclusion In respect of Julia, no binding contract was concluded. In respect of Parsons, an effective and binding contract had been formed, as O’Brien had accepted his offer, via telephone. Hence, O’Brien has to sell the book to Parsons; otherwise, he will be liable for breach of contract. In respect of Watson, no binding contract can be assumed as the contract had been already concluded with Parsons. References Barry, M., 1992. Law of Contract. Credit Control, 13(4), pp. 14 – 17. Butler Machine Tool v Ex – Cell – O Corporation (1979) 1 WLR 401. Carlill v Carbolic Smoke Ball Company (1893) EWCA Civ 1. Collins, H. A., 2003. The Law of Contract. 4 ed. London, United Kingdom: Cambridge University Press. Denton v Great Northern Railway Company (1856) 5 E&A 860. Entores v Miles Far East Corporation (1955) 3 WLR 48. Errington v Errington and Woods (1952) 1 KB 290. Fisher v Bell (1961) 1 QB 394. Grainger & Sons v Gough (1896) AC 325. Harvey v Facey (1893) UKPC 1. Hyde v Wrench (1840) EWHC Ch J90. Ibrahim , M. A., 2007. The Postal Acceptance Rule in the Digital Age. Jordan Journal of International Commercial Law and Technology, 2(1), pp. 47 – 53. Jalil, M. A., 2011. Clarification of Rules of Acceptance in Making Business Contracts. Journal of Politics and Law, 4(1), pp. 109 – 122. Kelly, D., Hayward, R. & Hendy, J., 2011. Business Law. 6 ed. Abingdon, Oxon, United Kingdom: Taylor & Francis. Koffman, L. & Macdonald, E., 2007. The Law of Contract. 6 ed. Oxford, United Kingdom: Oxford University Press. Marson, J., 2010. Business Law Concentrate: Law Revision and Study Guide. Oxford, United Kingdom: Oxford University Press. Masters v Cameron (1954) 91 CLR 353. Merrick Homes v Duff (1996) SC 497. O'Sullivan, J. & Hilliard, J., 2010. The Law of Contract. 4 ed. Oxford, United Kingdom: Oxford University Press. Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) 2 WLR 427. R v Clarke (1927) 40 CLR 227. Rush, J. & Ottley, M., 2006. Business law. London, United Kingdom: Thomson Learning. Salzedo, S., Brunner, P. & Ottley, M., 2005. Briefcase on Contract Law. 4 ed. London, United Kingdom: Cavendish Publishing. Storer v Manchester City Council (1974) 1 WLR 1403. Tenax Steamship Co v Owners of the Motor Vessel Brimnes (1974) EWCA Civ 15. Waddams, S., 2011. Principle and Policy in Contract Law: Competing or Complementary Concepts?. Cambridge, United Kingdom: Cambridge University Press. Young, M., 2010. Contract Law: The Basics. Oxon OX, United Kingdom: Taylor & Francis. Read More