Legally Binding Contract - Essay Example

Introduction Whether or not Kelly has a legally binding contract with Britney, John and/or Sarah will depend on whether or not she made a valid offerand whether or not the offer was validly accepted. Offer and acceptance are terms used to determine whether or not an agreement was made. Once it is determined that an agreement was made, the courts in a contract dispute will look to see if there was consideration. This is the background against which Kelly’s legal obligations in respect of Britney, John and Sarah will be determined. Offer and Acceptance In a typical case an offer will contain a definitive promise providing the other party with an unambiguous option to accept or decline the offer.1 An offer constitutes the starting point of a contract and must be stated with clarity. In other words the person receiving the offer must be able to determine from the offer exactly what it is that is being offered as well as the terms of the offer.2 Kelly’s offer is for the sale of two black limousines for the 15,000 pounds. Kelly’s offer is in the form of an advertisement and typically an advertisement is treated as an “invitation to treat”particularly since it usually lacks specificity. This is usually the case in advertisements for the sale of goods.3 In Carlill v Carbolic Smoke Ball Co Ltd (1893) 1 QB 256 however, it was held that if an advertisement was presented with sufficient clarity it could constitute a valid offer.4 Once an offer with sufficient specificity to purchase the advertised goods is made and that offer is accepted by the vendor it is possible for a legally binding contract to be formed.5 Based on these rulings Kelly’s advertisement constitutes a valid offer, acceptance of which is capable of forming a legally binding contract. The offer made to Sarah via email for the sale of the two limousines is also a valid offer. However, Sarah’s response is problematic for Sarah since it did not mirror the actual offer and by implication represented a counter-offer. Sarah’s insistence that the limousines be sprayed white functions as a rejection of Kelly’s offer. A counter-offer is made when new terms are injected and are required to be accepted.6 Sarah’s counter-offer was made via email. In circumstances where communication of an acceptance is made via an instantaneous method such as an email, the offer is effective at the time of remittance.7 It is not certain that Kelly received the email, but even if she did not receive the email it will not negate communication of the counter-offer. Kelly is deemed to have received notice of the counter-offer since it has been effectively communicated to her.8 The difficulty for Sarah is that the acceptance did not correspond to Kelly’s offer and as previously stated, in order to constitute a valid acceptance the acceptance must mirror the offer made.9 In Hyde v Wench, an offer to sell land for 1,000 pounds was responded to by a counter offer to purchase it for 950 pounds. The court ruled that the counter offer constituted a rejection of the initial offer.10 There is no evidence that Kelly accepted the counter offer. However silence will not function to constitute an acceptance of an offer. The acceptance must be clearly communicated.11In the circumstances, Sarah did not accept Kelly’s counter-offer and as a result there is no legally binding contract between them. An acceptance is validly made when it is cummunicated to the person making the offer. Where the offer makes specific requirements for the mode of communication of the offer that mode must be followed in order to constitute a valid acceptance.12 Contained in the facts of the case for discussion is the following notation: “John had seen the advert for the limousines and posted his acceptance in the correct manner.” Based on this notation it is presumed that the prescribed form for acceptance of the communication was by letter posted in the mail. Postal rules in respect of acceptance mandate that acceptance is communicated at the time the acceptance is posted.13 Therefore, John’s acceptance is deemed to have been effectively communicated to Kelly at the time of posting the acceptance to her. Although, as Lindley J pointed out in Carbolic Smoke Ball Co Ltd communcation of acceptance of on offer is required to be affected, this is not necessarily the case in circumstances where an offer is made via an advertisement.14 Of course, if the advertisement specifically requires communication of the acceptance this general rule will not apply. Aside from the notation referred to above there is no evidence that Kelly required communication of acceptance or any requirement that it be submtitted in a particular form. Lindley LJ stated that if communication: “…of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance”.15 The only means by which any of the parties responding to the offer advertised could perform any part of it would be via payment in part or in full of the sum of 15,000 pounds. No funds were paid to Kelly and the only method of acceptance was by way of communication. If the communication was required to be made via mail, Britney’s verbal acceptance is not valid and is therefore not binding on Kelly. Kelly is at liberty to withdraw or revoke her offer at anytime. The same is true for the parties accepting the offer. In other words both an offer and acceptance can be revoked at anytime prior to the completion of the agreement.16 However according to the ruling in the early case of Byrne v Van Tienhoven [1880] 5 CPD 344 it was established that in order for the revocation of an offer to be effective it must be communicated to the offeree.17 In Byrne v Van Tienhoven the offeror mailed an order for 1000 boxes of plates to the offeree. At least one week later, the offeror again mailed another letter to the offeree this time revoking the offer. As it turns out, a few days later the offeree received the initial offer placing the order for 1000 boxes of plates and subsequently replied accepting the offer. It was not until five days later that the offeree received the second letter containing the revocation. The court ruled that the revocation was too late since the contract was already made. The revocation was received after the offer was accepted.18 Based on this ruling the fact that Kelly has not communicated her revocation of the offer is tantamount to no revocation at all. It is assumed that Kelly wishes to revoke at least two of the offers since she cannot sell the package of two limousines to all three parties. It is therefore recommended that she decide which offer she wants to accept and notify the remaining parties of her revocation of the offer. Be that as it may, John, Sarah and Britney each have a more onerous task establishing that the offer made by Kelly and each of their acceptance goes beyond a mere gratuitous exchange of promises. In circumstances where an offer for the sale of goods is made with the result that individuals or entities respond with promises to purchase the goods offered for sale it is difficult to establish that these promises constitute valid contracts when there are no executed instruments or consideration in support of them. In a typical case where the contract is not partly performed, or in writing and signed by the parties or not under consideration, the courts will not enforce these kinds of agreements. It therefore follows that in order to compell Kelly to sell the vehicles to them, John, Sarah and Britney will each have to show that there was some consideration.19 Consideration The doctrine of consideration has developed around the definition provided by Lord Lush in Currie v Misa (1875) LR 10 Exch 153 where it was held that consideration was: “…some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.”20 Paterson J’s explanation of the doctrine of consideration in Thomas v Thomas (1842) 2 QB 851 is perhaps simpler. Paterson J speaks in terms of “benefit” and detriment.”21Paterson J explained that consideration is: “…something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant.”22 Based on the facts of the case for discussion John, Britney and Sarah can not reasonably claim to have suffered a detriment. Beyond notifying Kelly of their acceptance of the offer for the sale of two limousines Britney and John did nothing. The same can be said for Sarah in respect of her counter-offer. Had the parties paid a deposit or the full price or otherwise made some effort to secure the limousines, they would have a better chance of substantiating that they each had a legally binding contract with Kelly. Kelly, on the other hand did not derive any benefit from the exchange of offers and acceptance with the parties. Conclusion Basesd on the authorities discussed above and based on the facts of the case for discussion, Kelly does not have a legally binding contract with John, Britney or Sarah either seperately or jointly. Since there is no prescribed time for the termination of the offer, Kelly is at liberty to revoke or withdraw the offer. If Kelly is determined to sell the limousines as a package deal, then she might want to sell to one of the parties that accepted her offer. In that case, as previously stated she should notify the remaing two parties of her revocation of the offer. Moreover, it would be in her best interest to secure partial payment from the party to whom she intends to sell the limousines to in order to safeguard her position if that party reneges on the agreement. Works Cited Brogden v Metropolitan Rail Co (1877) 2 APP CAS 666 Byrne v Van Tienhoven [1880] 5 CPD 344 Carlill v Carbolic Smoke Ball Co Ltd (1893) 1 QB 256 Currie v Misa (1875) LR 10 Exch 153 Entores Ltd v Miles For East Corporation [1955 ] 2 QB 3 27 Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037 Furmston, M.P., Cheshire, G.G. and Fifoot, C.H.S. (2001) Cheshire, Fifoot and Furmstons Law of Contract. London: Butterworths Hyde v Wrench (1840) 3 Beav 334 Offord v Davies [1862] 12 CBNS 748 Partridge v Crittenden [1968] 2 All ER 421 Thomas v Thomas (1842) 2 QB 851 Read More