Fundamentals of Contract Law - Essay Example

 Fundamentals of Contract Law Ans 1: The term contract refers to an “agreement between two or more persons – not emerly a shared belief, but a common understanding as to something that is to be done in the future by one or both of them” (Kanpp et al, 2003, p 2). A contract may be said to exist when one party makes an offer which is accepted by another and there is a consideration paid for the provision of that service. 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]. In the case of Betty, the MD of CC, an offer was first made by Able, MD of MSC. The consideration was the sum of 1000 HK$ for every monitor that was to be supplied by Able’s company. This letter also stipulated the precedence of MSC company terms and provision was made for increase in price. Betty’s reply to this offer on the order form of CC, incorporating a change that the price was to be 900 pounds per unit could be construed to be the counter offer. Therefore Betty has not agreed to the original terms of Able’s contract, she has only accepted conditionally1. Therefore, this is a counter offer which is in effect a rejection of the original offer that Able has made. Therefore, it is now Betty’s offer that is up for negotiation and Able has indicated his acceptance of Betty’s offer by signing on the tear off slip that is attached to her company’s order form. Since there is no further communication from Betty, this would be deemed to be the final agreement between the two parties with Able having consented to Betty’s terms. A valid contract between two parties may be said to exist only when the parties “assent to the same thing in the same sense, and their minds meet as to all terms.”2 Able was free to reject Betty’s counter offer, since a counter offer in effect, frees the offerer Able from any liability.3 But he signed on Betty’s order form, which means he has accepted the terms of Betty’s counter offer and the original offer has been rejected. However, this raises the issue of the clause that he has entered in the tear off slip that he has signed, which states that the offer was accepted based on the terms of the original offer. This belies the agreement implied through Abel’s signature on the tear off slip, because in indicates that Able is still not ready to accede to Betty’s terms but is intent on enforcing the original terms. Therefore there is no clear assent that has been provided by Able in complete agreement to Betty’s terms. According to Olievr Wendall Holmes (1899): “In the case of contracts….it is obvious that they express the wishes not of one person but of two,…if it turns out one meant one thing and the other another, generally the only choice possible….is to either hold both parties to the judge’s interpretation….or to allow the contract to be avoided because there has been no meeting of minds.”(419). In the case of these two firms therefore, there has been an exchange of incompatible forms and no clear agreement can be said to exist between the two parties. Furthermore, Able then proposes to raise the price of the individual units, according to the terms of the original offer which was in effect, killed by Betty’s counter offer. In the case of Butler v Ex Cell-O Corporation4, the same circumstances were encountered, wherein Party A made an offer, which B reacted to with a counter offer and A then returned the tear off slip together with a letter stating that they would adhere to certain provision in the original offer. But the Court rejected this argument, stating that B’s counter offer had negated A’s offer and that A, by signing on the form had accepted B’s terms and conditions and the additional letter did not count as a clause in the agreement. Therefore, in this case, Betty would be well advised not to go ahead with this contract. A contract can validly be said to exist only when there is a complete agreement between the parties. Able has signed Betty’s company order form at the tear off acceptance receipt and this indicates that he agrees to the terms and conditions that are present in Betty’s contract. Betty’s counter offer will be deemed to be the final offer and none of the provisions of the original offer can apply in this case because Betty has already rejected all of them, including Clause no: 10 of Able’s contract. Although Able has returned Betty’s contract with an additional clause penned in, this would need to be initialed by both parties before it would be construed to be a valid clause. Since Betty has signed her company’s order form before sending it to Able, any further corrections by Able would have to be endorsed by Betty, in order to become fully actionable, which is not the case. Moreover, the fact that Able is still trying to operate according to the provisions of his original contract are not an indication of bona fide intentions to cooperate with a customer and accept her terms. If this is happening right at the start and Able is insistent on operating according to the terms of an offer which Betty has rejected, then there is no agreement between the parties and no contract can be said to exist. Betty has offered to pay 900 HK dollars/unit, now she’s being held to 1200 HK$. Therefore it is best for Betty to cancel her contract and in the event this case goes to Court, Betty also has a strong legal precedent to stand upon, in the case of Butler v Ex cell-O Corporation and therefore, she should reject the goods from Able’s company on the grounds of incompatibility and lack of assent in the terms of the contract. (1007 words) Ans 2: When an offerer has made an offer on a piece of real property, he is not bound by his offer in any way, unless and until his offer is accepted by the offeree. In fact, no offer will be construed to have been made until the offerer also communicates his intention to be bound by the terms of the offer. But an initial offer such as this is only considered to be an expression of the offerer’s intention to buy the property. The offerree on the other hand did not provide any indication on acceptance or rejection of the offer. Therefore, there is no communication that can be said to be binding on either of the parties. The offer is only an indication of the willingness to negotiate and the offeree by not replying to the offer has not indicated whether he is willing to negotiate or not. Therefore, he is free to sell the party to any third person since he has made no commitment to sell the house to the offerer. In order for any offer or counter offer to be legally enforceable, there must be an intention to be bound by the agreement that must be displayed in the terms of offer or counter offer. For example in the case of Gibson v Manchester City Council (1979), Gibson was interested in buying a Council House and the city of Manchester sent him forms which he was asked to sign and return, as an indication of his willingness to purchase. However, the Council failed to return the forms back to him. But since the City of Manchester had indicated its willingness to be bound by the offer if Gibson return the signed forms they had requested, they were held to be liable to sell the house to Gibson. However in this case, offerree has made no response at all to the original offer, but has instead sold or proposes to sell the property to a third person. Therefore, in this case, the offerer is not bound to his offer in any way, since it is still only an expression of willingness to negotiate. He cannot now revoke his offer merely on the basis of news from a third party that the offeree is negotiating with another party. The Offeree has not responded to him one way or the other, so his offer is still the conclusive document between them. Most offers are time bound, therefore, there will be a time frame to this offer as well and the time limit must expire before the Offerer can revoke his offer. Unless the Offeree has signaled his definite intention to sell the property to another party, the first offer will not stand revoked till the time frame of the offer expires. However, should the offerer now be intent on revoking his offer, and offeree replies accepting his offer, he can do so by putting forward new conditions or by canceling his offer once the time period has expired. (500 words) References: Chapter Two: Fundamentals of Contract law. (No Date). Retrieved Nov 19, 2005 from URL: www.abanet.org/publiced/practical/ books/consumer/chapter_2.pdf Knapp, Charles L, Crystal, Nathan M and Prince Harry G. (2003). “Problems in Contract Law” New York: Aspen Publishers Holmes, Oliver Wendall. (1899). “The Theory of legal Interpretation” 12 Harvard Law Review 417, 419 Read More