Essential Elements of Contract Law - Essay Example

?Contract Law Introduction For a contract to be valid, there should be an intention to create a legal obligation through offer and acceptance. The other essential elements of a valid contract are free consent of the parties, competency or capacity of the parties to enter into contract, lawful consideration and lawful object as the subject matter of the contract. In the cases given, one of the important points for consideration is the legal status of the advertisement. Also, there are questions related to offer, acceptance, competency to contract and lawful object. The validity of the contract should be ascertained with reference to these questions involved. Legal Status of the Advertisement The advertisement has been issued to public at large. Akono has given his email address and telephone number in the advertisement for this purpose. Generally, advertisements are invitations to treat. In Patridge v Crittenden [1968], Lord C. J. Parker said, ‘when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale’. Also, consideration is an important constituent in a valid contract. The expression ‘willing to pay ?100 or more’ in the advertisement shows that the consideration is undetermined. In Harvey and Anor v Facey and Ors [1893], it was held that the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the inquiry. Similarly, in this case Akono is not bound to buy at any particular price. The advertisement is given with the intention to induce people to respond with their offers. Any response to the advertisement cannot be treated as an acceptance, though it is stated as ‘Please phone or email to accept’ in the advertisement. The advertisement is an invitation to offers in this case. Akono v Ju The statement of Ju ‘I’ll sell you my Dumbledore costume for ?200’ on Tuesday 2 October constitutes an offer made by Ju to Akono. This has not been accepted by Akono when he says ‘I’ll only pay ?100’. On receiving an offer, if the offeree, instead of accepting it, imposes conditions or varies the offer, it is called a counteroffer. In Hyde v Wrench (1840), it was held that the counteroffer rejected the offer previously made, and it was not competent afterwards to revive the original proposal. In this case, Akono states, ‘If you want to sell it to me, I need to receive your response on paper by the morning of Friday 5 October’, which is a counteroffer. This should be treated as rejection of the original offer. On Tuesday evening, Ju posts a letter to Akono, agreeing to take the ?100 for her Dumbledore costume. Her letter does not arrive until Saturday, 6 October. Akono did not receive any valid acceptance from Ju within the stipulated time. In Carlill v Carbolic Smoke Ball Co [1893],  L. J. Bowen said, ‘where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance...’ If the statement ‘I’ll only pay ? 100’ by Akono is treated as an offer, it is a conditional offer, the condition being receipt of Ju’s acceptance on paper by the morning of Friday, 5 October. It was held in Holwell Securities v Hughes [1974] that the words ‘notice in writing’ mean notice received by the offeror. Since the conditionality with regard to ‘acceptance on paper’ is not met by Ju, the acceptance is not valid. On Wednesday, 3 October, Akono posted a letter to Ju, stating that he no longer wanted her costume. The offeror can revoke his offer any time before its acceptance (Ramsgate Victoria Hotel Co v Montefiore 1866) and hence, this revocation is valid. Akono v Bob Ju gets her friend Bob to telephone on 4 October to ascertain the receipt of the letter posted by Ju. In Powell v Lee (1908), it was established that the acceptance should be communicated to the offeree personally or through an agent; otherwise, it is not authorized. Bob can, therefore, be reasonably treated as Ju’s agent. However, his call to Akono does not alter the situation as it does not meet the condition ‘acceptance on paper’. Akono v Lionel On Wednesday, 3 October, Lionel emails to Akono, saying, ‘I’ve got the perfect Dumbledore costume for you for ?150 – it even comes with a hat! Please post me your response.’ That afternoon, Akono posts a cheque and a letter to Lionel which states: ‘Please find enclosed a cheque for ?150. I look forward to receiving the costume!’ In acceptance, a person signifies his assent to the proposal. An offer becomes a contract as soon as it is accepted. The acceptance must be absolute and unqualified. The acceptance must be communicated. When the mode of acceptance is not prescribed, it could be accepted in a reasonable manner. In Smith v Hughes (1871), J. Blackburn upheld that if a person ‘conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, it amounts to proper acceptance and he is bound by the contract. If a person reacts in a way intended by the proposer by way of performance as in this case, the performance of the act constitutes acceptance as there is an “acceptance by conduct”’. On Friday, 5 October, Akono telephones Lionel and says that he no longer wants to buy Lionel’s costume. In the words of Sir William Anson, ‘Acceptance is to offer what a lighted match is to a train of gun powder’. Once a contract is formed, it cannot be recalled. The offer made by Lionel has been certain and definite and made with the intention of creating a legal relationship. When it has been accepted by Akono, it has resulted in a valid contract. When an acceptance letter is sent by post, the contract is concluded and complete as against the proposer. The validity of the contract is not affected even if the post does not reach the proposer. In this case, it is assumed that the letter along with the cheque posted by Akono has reached Lionel. When Akono telephones Lionel and says that he no longer wants to buy Lionel’s costume, it amounts to refusal of performance. Refusal to perform is a breach of contract. The claimant can seek damages for putting him in the position had the contract been performed. An acceptance communicated to the offeror through post or telegram makes the contract complete when the letter is posted or message is telegraphed. Withdrawal of offer, even if it is posted previously, cannot alter the position (Henthorn v Fraser 1892). The acceptance is complete and the non-receipt of the letter or telegram by the offeror has no effect and the contract is concluded (Household Fire and Carriage Accident Insurance Co Ltd v Grant 1879), except in the case where the loss or delay was the fault of the offeree (Adams v Lindsell 1818). Unless a party performs its obligations under a contract, it is not discharged from the liabilities. Breach of contract is a non-performance which is not excused. Akono v Yvette On Friday, 5 October, Yvette telephones Akono and offers to sell her Dumbledore costume to him for ?80. Just as Akono says ‘OK’, he drops the phone. Yvette does not hear Akono’s answer. Yvette in this case does not hear Akono’s answer. In that case, since the conversation over phone gets disconnected, either she or Akono must contact the other again and confirm his acceptance to the proposal. If there is a problem in communication, one should wait for the problem to clear and communicate his acceptance (Entores Ltd v Miles Far East Corp 1955). This is to ensure that the communication has served the purposes. As there is no valid acceptance, the contract is not complete. Akono v Tyson Akono says to Tyson, ‘If you can make Martha, my girlfriend, jump, I’ll give you ?10’. Tyson creeps up behind Martha and shouts, ‘Boo!’ Martha jumps. Going by the facts of the case, Tyson is assumed to be a minor who has no competency or capacity to enter into contract. Under English law, the obligations are limited to promises, contracts and deeds relating to necessaries. The involvement of Martha suggests that even if Tyson is not a minor, the agreement is opposed to public policy, illegitimate and unenforceable in law, such agreements are void. There should be an intention to create a legal obligation in offer and acceptance for a contract to be valid. If the acts are harmful to the state or other citizens, the object of an agreement can be considered as unlawful, as it cannot be enforceable by law. No reasonable person would construe it as a valid offer, as it is against public policy. The meaning of the agreement must be certain or capable of being made certain. ‘Making Martha jump’ cannot be defined with any certainty. Akono v Ben Akono says to Ben, ‘I’ll pay you ?15 or ?20, if you clean the windows form’. Ben says, ‘I’ll take ?20.’ Akono agrees. When Ben modified Akono’s offer of ‘?15 or ?20’ to ?20, it could be treated as a firm counteroffer. This was accepted by Akono unconditionally. Ben discharges his obligation arising out of the contract by cleaning the windows. Between Akono and Ben, there exists a contractual relationship due to validity of the offer by Ben for a lawful consideration duly accepted by Akono for cleaning the windows. Akono is liable to pay ?20 as per the contract. Martha v Ben When Martha asked Ben, ‘Could you help clean Akono’s Windows please?’ Ben nods. However, it was only a request lacking an important element – consideration – to be treated as an offer. Though Ben has not rejected the proposal, as a general rule silence cannot be treated as acceptance (Felthouse v Bindley 1862). After finishing the job, as a token of appreciation without knowing the preexisting agreement between Akono and Ben, Martha offered Ben ?10 on finding her purse. However, between Martha and Ben, there was no intention to create any legal obligation through offer and acceptance. An agreement without consideration is construed as a void contract. In addition, the promise made, such as rewarding someone in connection with a past performance or act, is not binding since the performance was not connected to or activated by the promise. This is based on the principle ‘past consideration is no consideration’ (Re McArdle 1951). Therefore, legally Martha is entitled to avoid performance. Rights and Liabilities of the Parties Akono v Ju Since no valid contract exists between Akono and Ju, there is no question of enforcing the rights or liabilities arising out of a contract. Bob’s follow-up with Akono does not alter the situation. Akono v Lionel Between Akono and Lionel, there is a valid contract and Akono cannot revoke the contract. Akono is liable for breach of contract, i.e. putting Lionel in the position he would have been in had the contract been performed, in case the cheque issued by him in performance of his obligation is not honoured. Akono v Yvetee There is no valid contract between Akono and Yvette. Therefore, there is no question of rights and liabilities arising out of a contract. Akono v Tyson There is no lawful contract between Akono and Tyson, which could give rise to any right or obligation in this case. Akono v Ben Ben has finished the performance of cleaning the window on his part as per the contract and is entitled to the consideration agreed by Akono. Martha v Ben Martha is not liable as there is no valid contract between Martha and Ben. References Adams v Lindsell (1818) 1 B & Ald 681 Carlill v Carbolic Smoke Ball co [1893] 1 QB 256 Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3 Felthouse v Bindley [1862] EWHC CP J35  Harvey & Anor v Facey & Ors [1893] UKPC 1  Henthorn v Fraser [1892] 2 Ch. 27, C.A. Holwell Securities Ltd v Hughes [1974] 1 WLR 155 Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D. 216 Hyde v Wrench (1840) 49 ER 132 Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 Partridge v Crittenden [1968] 2 All ER 421 Powell v Lee (1908) 99 L.T. 284 Re McArdle (1951) Ch 669 C.A. Smith v Hughes (1871) LR 6 QB 597 Read More