The Three Basic Elements of a Contract - Essay Example

? Contract Law and Question A contract refers to an agreement that gives rise to an obligation which is enforced and bides in the face of the law. The three basic elements key in formation of a contract includes the consideration, agreement between the transacting parties and the consideration for the contractual work. Ideally the contracting parties must have entered into an agreement which happens when one party makes an offer and the other party accepts such offer. The tenets of common law provide that a contract is binding only when supported by a consideration and not a promise. Consideration refers to something of value which is provided for a promise and must be provided to enforce the contract. An agreement not supported by a consideration is not binding An offer portrays a will to contract on the basis of the specified terms and once accepted by the other party, the offeror is bound if through the offer, the contracting party is convinced that the offeror intends to transact as per specified terms. For instance in the case of Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256, a medical firm placed an advert for its new drug called carbolic smoke ball would cure flu. The advert further stated that buyers of this drug would be paid ?100 if the drug did not cure as provided. The court held that the advertisement was actually an offer which was biding. The following section is an advice to Cleanaway Limited as to whether they are contractually bound to provide cleaning services to the Council. Evidently, Cleanaway made an offer to the Council by agreeing to provide a quotation for their service on Monday 21 September. Initially, Cleanaway had made an offer for house cleaning services on hourly basis which was placed at ?40 per hour. However, the Council seemed not satisfied with initial offer that was made on their standard form. On Monday 28th September, the Council sent a fax asking for another quote now on per unit basis, to which Cleanaway Limited responded via fax the following day at ?200 per house. The second offer stipulated that both the standard terms and conditions applied. Based on this, Cleanaway Limited had made two offers to the Council and on the part of acceptance; Cleanaway expressly stated that the council must do it in writing by Friday 2 October. This is a clear indication that the offer had a stipulate period after which it could no longer apply. According to MARSHALL (2012), acceptance to an offer represents unqualified and final expression of assent to the terms of an offer. It represents a manifestation by the recipient to be bound by the terms of the offer. Ideally, an offer has to be accepted precisely to form an agreement. Such an offer must be accepted and all terms complied with. According to ZYWICKI (2008), acceptance has no legal effect until it is communicated to the offeror since it is important for the offeror to know that his offer has been accepted. In this vein, the common law provides that postal acceptance becomes effective when the acceptance letter is posted regardless of whether the letter is delayed, destroyed on misplaced when in transit. However, the postal rule fails to apply when the offer excludes such provisions expressly. Communication via post creates some practical difficulties considering that an offeror can withdraw an acceptance before it reaches the offeree. In this regard, there is an exception to the mode of communication. In Adams v Lindsell (1818) and Household Fire Insurance v Grant (1879), the court held that the decision to treat postage as a sign of completion of an acceptance can be risky due to problems of loss and delays. As such, postal acceptance rule can only apply in circumstances where use of postage was reasonably contemplated by both transacting parties or was indeed stipulated by the offeror in the offer. Having said that and by considering technology advancement, the court is presently trying to confine the scope of postal acceptance principle. In Holwell Securities v Hughes (1974) the postal acceptance rule did not hold because the offeror did not specify as the sole means of communication. Modern courts are therefore having reservation in regard to postal acceptance rules despite the need to meet the offer terms for an acceptance to be valid. In this regard, the act of posting an acceptance letter by the Council does not contractually bide Cleanaway Limited since the said letter reached Cleanaway Limited after the offer period had expired. According to the case of Cleanaway Limited and the Council, the offeror having made it clear that acceptance had to be made in writing never specified the means through which it was to be communicated. This means that the decision by the Council to communicate their acceptance via postage was not binding on the part of the offeror. As mentioned earlier, the courts of justice are presently not only disputing the postal acceptance rule that provides that date at which a mail is postaged apply as the date of acceptance regardless of the day the mail will reach an offeror. Other modes of communication where acceptance is communicated in specialized ways can only be accepted only in that way. For instance, if communication takes place via instantaneous means such as emails, it can only take place after being received by the offeror. Based on Allianz Insurance Co-Egyptv Aigaion Insurance Co SA (2008)), a contract can be formed through instantaneous modes of communication. However, it is important to note that technologies used to facilitate communication are not entirely instantaneous since it depends on their state where at times it takes long for a message to reach the intended destination. In this vein, it should be noted that silence on part of the offeror does not amount to acceptance. In this vein, instantaneous means of communication used for this case could not have been effective in delivery of messages. In this regard, fax and emails used by the transacting parties could not be relied upon considering that they were malfunctioning at the time of communication. In this vein, acceptance communicated via emails contractually bound Cleanaway Limited since it reached the Cleanaway on Friday at 2.30 pm which was still within the offer period. Again, even though Cleanaway had sent revocation fax on Thursday at 2pm, the message had not been delivered to the Council and as such it did not communicate the intended revocation message until the following Monday which happened to be long after acceptance letter had been delivered to Cleanaway Limited. According to CALLIESS (2007), acceptance may fail to take place in the event of varying the terms of offer. In such case, it is the counter offer that an offeror can either reject or accept. For instance, when an offeror accepts to trade based on the standard terms and the offeree accepts it based on other terms, this is a counter offer which is a clear sign of rejection of the original offer and as such cannot be accepted unless the two transacting parties agree. Ideally, Cleanaway Limited had initially made an offer of ?40 per hour, but since the Council did not accept it, they in turn asked a counter offer based on unit basis which were quoted at ?200 per house. In such case, it means the initial offer was rejected and a counter offer issued. It is surprising to find that the Council went ahead and accepted the original offer which was made null and void by the counter offer. Indeed, the Council could have negotiated with Cleanaway Limited again for per hour basis of services. The council placed an acceptance on an offer that had been nullified hence not binding to Cleanaway Limited. This also supersedes the email which could have bound Cleanaway Limited since even though the Council confirmed their acceptance for house cleaning services; this was based on the initial offer which was nullified by the counter offer. An offer is subject to revocation any time prior to acceptance. Such revocation needs to be communicated to the offeree. According to MCCRACKEN (1999), an offeror specifies the mode of communication to be used. A good example is Eliason v Henshaw(1819) and Manchester Diocesan Council for Education v Commercial and General Investments (1970). In other situations the method of communication is inferred from prior methods used to facilitate communication like in the case of Quenerduaine v Cole (1883). Therefore, in the event an offeree uses a different method of communication to accept an offer and such mode does not place the offeror at a disadvantaged position, the acceptance is acceptable and the contract becomes binding. However, in the event that such a different means of communication is disadvantageous to the offeror, then the contract becomes null and void. According to HARTLIEF, (2004), offers do not hold indefinitely waiting acceptance. Unless there is a legal commitment by the contracting parties, either party is free to change its mind and withdraw from the transaction. Offord v Davies (1862) and Routledge v Grant (1828). However, the only exception to this provision is in the event that an offeror has given an offer which stipulates time that it will remain open. In such a situation, the offeror cannot withdraw from a transaction. In Byrne v van Tienhoven (1880), the court held that for an offer revocation to be valid and effective there must be a communication of such act. In Dickinson v Dodds (1876), the court held that an offeror is not obliged to communicate such revocation directly to an offeree, but can do so through any other reliable source but within reasonable time. Evidently, Cleanaway Limited was free to make a decision of revoking the offer. However, their revocation made on Thursday at 2pm could not hold since their offer to the Council had a specified time which had not lapsed. According to the case, the offer provided the Council to provide a written acceptance by Friday, 2nd October. Therefore, Cleanaway Limited could not succeed in avoiding to be contractually bound to the Council by revoking the offer. Nevertheless, the Council though provided a written acceptance as demanded by the council within the stipulated timeline; it could not hold Cleanaway contractually bound to provide cleaning services since they accepted an offer that was no longer valid following issuance of a counter offer. Question 2 The present study had significant lead to development of my legal skills. Ideally, contracts entered into at the time of purchasing both goods and services are at times tricky and not clearly understood by many. In this vein, many people end up being contractually bound to provide goods and services stipulated on the offer. Again, the offeree may hold the offeror as contractually bound to offer agreed services where the offeror is not liable. Such a situation may result into rigorous court battles which can be expensive and time consuming. Therefore, through this study, I have learnt how an offer can remain viable, and how a contract can be binding between parties. More so, I have learnt more about the time factor and communication when it comes to contracts. The study has also shed some light on revocation of contracts by stating what the offeree should do to cancel a contract that is in the process before it is finally closed. Evidently, the contracting parties must be very keen when contracting since some issues like issuance of counter offers can make a whole contract to be null and void. In this regard, it is advisable to the business people to seek legal advice in order to avoid situations that cannot only nullify already entered contractual arrangements but also end up being too costly to them and their businesses. Reference List Case Laws Adams v Lindsell (1818) and Household Fire Insurance v Grant (1879), Allianz Insurance Co-Egyptv Aigaion Insurance Co SA (2008)), Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344 Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256 Dickinson v Dodds (1876) 2 Ch D 463 Eliason v Henshaw(1819) and Manchester Diocesan Council for Education v Commercial and General Investments (1970). Holwell Securities Ltd. v Hughes, [1974] 1 WLR 155, [1974] 1 All ER 161. Offord v Davies [1862] 12 C.B. (N.S.) 748. 28. Quenerduaine v Cole (1883) 32 WR 185. Journals CALLIESS, G., 2007. The Making of Transnational Contract Law. Indiana Journal of Global Legal Studies, 14(2), pp. 469-483. HARTLIEF, T., 2004. Freedom and Protection in Contemporary Contract Law. Journal of Consumer Policy, 27(3), pp. 253-267. MARSHALL, B.A., 2012. RECONSIDERING THE PROPER LAW OF THE CONTRACT. Melbourne Journal of International Law, 13(1), pp. 505-539. MCCRACKEN, C., 1999. Hegel and the autonomy of contract law. Texas Law Review, 77(3), pp. 719-751. ZYWICKI, T.J., 2008. Spontaneous order and the common law: Gordon Tullock's critique. Public Choice, 135(1-2), pp. 35-53. Read More