Acceptance Under Contract Law - Essay Example

Contract law July 5, 2005. Consideration, Offer and Acceptance under Contract law. Introduction: Roger refuses to pay Magda Contractors the extra amount of 5000 pounds that he orally agreed to pay in return for completion of the renovation of his house on time. He also refuses to pay his friend Mohammed a sum of 200 pounds that he promised to pay for decorating his front bedroom. However, Roger has sold some articles for 1000 pounds to Nature magazine, but orally agreed to accept 900 pounds instead, because he was desperate for money. Roger now seeks legal advice on the following: (a) Is he obliged to pay Magda Contractors and Mohammed? (b) Is he entitled to claim the 100 pounds from Nature Magazine? Principles of Contract law: Under the Doctrine of Consideration in the Contract law, the term “consideration” is said to refer to any promise, act or transfer of values that induces a party to enter into a contract[www.abanet.org, pp 20]. Consideration is added benefit that is bargained for and may also include a promise to compromise upon a dispute, but the important factor is that it must be a new obligation, over and above what ahs already been agreed to in the original contract. The principle of consideration determines whether an oral promise may be enforceable, since an implicit contract is formed if the person making the promise is receiving something in return – some consideration [www.abanet.org, pp 22]. This involves the exchange of “something of value” or the promise to do something in future.[www.bplans.co.uk, 2003]. The basic premise of a contract is the concept of Offer and Acceptance. When one party makes an offer and another party accepts it – either orally or in writing – then a contract is said to exist [www.bplans.co.uk, 2003]. In order for a contract to be valid, both the parties need to exchange something of value. If one party promises orally to give something to the other, but does not follow through with it, his promise is not enforceable, unless the other party agreed to do something in return for the promised gift, in which case a contract does exist and may be enforceable. Once an agreement has been made and a contract entered into, any agreement to vary the contract is likely to be based upon some consideration, especially if the pacts is increased under the doctrine of economic duress. The doctrine of consideration has however been argued as being too “blunt an instrument” since its “reasoning was such that it could make a promise invalid even though no pressure had been exerted by the promisee at all.” [Trietel, 2002, pp 14]. Application of the Law in Roger’s case: (a) In reference to Magda Contractors: In this connection, there is already in existence a written contract between the two parties, which lays out the terms of payment for services rendered, ie, three installment payments of 10,000 pounds each to be made by Roger. However, when the element of consideration is concerned, it brings us to the issue of Roger’s oral promise to Magda Contractors to pay an additional sum of 5000 pounds if the contracted work was completed on time. At the outset, this raises the issue of Magda Contractors going back on the original contract by raising new terms. But this in itself is not illegal, since every party has the right to re-negotiate the contract in the light of changed circumstances, for whatever reason. What is important is that the other party also agrees to negotiate. In Roger’s case, he did not flatly refuse to budge as far as the original terms of contract were concerned. He agreed to pay an additional 5000 pounds. In return for this additional amount, he received in exchange, the assurance of Magda Contractors to complete the renovation work in the stipulated time. This could therefore be construed as a contract although it was oral and not written. Magda Contractors have followed through on their part of the deal and completed renovations on time, therefore Roger may be obliged to pay. The case law that exists in this connection is that of Williams v. Roffey brothers1 (1990), wherein an oral agreement for additional compensation was made by Roffey Contractors to the sub-contractor Williams to complete flats on time. But after Williams delivered, additional compensation was refused. The Court in this case, held that the oral agreement between the two parties was enforceable because the Defendants had gained a practical benefit through resumption of work and avoiding of penalty for late completion. This is landmark contract case and is based on fairness [Trietel, 2002, pp 22]. This case is relevant in the case of Roger and Magda Contractors. The original written contract does not stipulate the additional amount of 5000 pounds and it may be argued that Magda Contractors is not entitled to this additional amount, because they should have factored it into their original estimate. But the fact remains that Roger was also a party to the oral re-negotiation of terms and in exchange for the promise to pay the additional amount, he has received some practical benefit – i.e, completion of renovations on time, thereby enabling him to rent out his house and make the mortgage payments that are due on his house. Thus, it is possible that Roger’s part of the deal will become enforceable in Court through the Doctrine of Consideration and he should therefore pay up the additional amount he has promised to Magda Contractors. Since the issue of financial duress exists, as Roger claims that he is some financial difficulty and is unable to pay the said amount, the two parties could work out some kind of partial or installment payment plan for payment of the additional 5000 pounds. (b) The case of Mohammed: In this case, Roger has promised to pay Mohammed the sum of 200 pounds for decorating expenses. However, the fact that must be borne in mind is that Roger did not seek after or request this gift from Mohammed. It was given by Mohammed freely on his own and he had not originally asked Roger for anything in exchange. Therefore, Roger cannot be held liable for any oral promises he has made to Mohammed, since he has not solicited Mohammed’s services for decorating. Had Mohammed offered to do the decorating and Roger had orally agreed, then he could have been held responsible for payment of the promised amount. But Mohammed made no such offer and Roger did not accept any offer that was made to him before the job was commenced. Therefore, this action would be interpreted as a gift from Mohammed and it would be left entirely up to Roger’s goodwill, as to whether he wants to go ahead and make the promised payment or not. In this case, it may also be pointed out that a contract will come into existence only when there is an offer and an acceptance aspect of the contracted work[Appleby, 2001]. In this instance, no offer has been made and the promise Roger has made is occurring only after the fact. The work of decoration taken up by Mohammed as an act of gratitude to Roger for letting him stay in his house. Therefore, it may considered that a fair exchange has already taken place, since Mohammed has received the accomodation in return for the decorating. Moreover, he did not consult Roger before embarking upon the job, therefore in a Court of law, it cannot be said to have been done with Roger’s agreement to pay for the said service. In the light of all these facts, Roger is not legally obliged to pay his friend. Morally and ethically – having made a promise, it would be decent to keep it, however this amount cannot legally be forced out of Roger in a court of law. Promissory estoppel covers the legal effects of a promise. According to Trietel (2002), “the mere fact that a person is precluded from denying the truth of something he has said does not involve him in any liability” (p 38) and whether the promise can give rise to a cause of legal action would be determined by whether the estoppel relates to facts or whether the promissory representation contains normative content.[Trietel, 2004, pp 38-39]. Therefore, Mohammed could possibly file suit for recovery of promised amounts from Roger but it is doubtful whether they could be enforced in view of the normative content of the promise. ( c ) The case of Roger’s payment from Nature Magazine: As far as the legal position on this is concerned, the policy of offer and acceptance would hold good in this case. Although Roger had originally negotiated the contract with Nature Magazine to be paid the sum of 1000 pounds, he did not stick to the original deal and accept the full payment at the designated time. Since Roger chose to re-negotiate the contract under economic duress, therefore a fresh contract came into existence taking into account the doctrine of consideration. Roger was in financial duress, therefore Nature Magazine made him an offer of early payment with a reduction of a 100 pounds. Roger was not obliged to accept this offer and could have (a) refused it (b) asked for less reduction in the amount (c) re-scheduled the time for payment, to name just a few options. However, the action Roger has pursed in this case is to accept the reduced payment that the magazine has given him because he was under economic duress. The Doctrine of Consideration will come into play in this new contract between the two parties. The terms were re-negotiated and agreed upon by both parties. Moreover, benefits have been exchanged and Roger has received the benefit of early payment in exchange for his agreement to accept a reduced amount. It could be argued that Roger has received some practical benefit from this payment Nature Magazine has sent him, because he has been able to address his financial difficulties and the magazine itself has gone against its normal policy and helped him out at a time of financial duress, instead of insisting that they will pay only at the designated time, thereby accruing same savings to itself. Therefore, both parties have received benefits and a fair exchange of valued items may be said to have taken place. This contract may be said to be complete and executed with the agreement of both parties. Therefore it is legally enforceable in a court of law and Nature Magazine will be found to have fully and adequately compensated Roger for his work. Therefore, Roger is not likely to succeed in his claim if he tries to demand the amount from Nature Magazine. He is at liberty to request it from them and it is entirely up to them whether or not they choose to accommodate his request. WORKS CITED: 1. Appleby, George.(2001). Contract law. Sweet and Maxwell Publishers. London. ISBN NO: 0421571209. 2. Chapter Two: Fundamentals of Contract law. (No Date). Retrieved July 5, 2005 from URL: www.abanet.org/publiced/practical/ books/consumer/chapter_2.pdf 3. Nolo. (2003). Simple and Enforceable Contracts. Retrieved July 5, 2005 from URL: http://www.bplans.co.uk/leu/article.cfm/132 4. Trietel, Guenter. (2002) Some landmarks of Twentieth Century Contract law. Clarendon Press, Oxford. 5. Williams vs. Roffey brothers. (1991) 1 QB 1: See generally p 18 ff Read More