Legally Enforceable Offer and Acceptance in Commercial Contracts - Essay Example

Legally Enforceable Offer & Acceptance., in Commercial Contracts Offer An offer includes any ment which if objectively construed, should containan unequivocal indication of a desire or willingness to be legally binding if its conditions are accepted. In commercial contracts, whether a specific statement amount to an offer or not will depend upon the facts of each case and price lists, estimates, advertisements and circulars are not an offer and do not have any contractual binding. Acceptance In commercial contracts, an acceptance of an offer must agree to all the terms of the offer unconditionally. An acceptance with a new condition or qualifies any of the conditions of the offer is not a valid acceptance but amounts to a counter offer which cancels the original offer. A contract is said to be formed only if such counter-offer is accepted. Commercial Contracts –Does it truly mirror the intention of the parties? The common practice is that until acceptance is conveyed to the offeror, it is not valid. Some exceptions in this regard are a) if the offeror has waived the requisite for communication b) when acceptance is communicated by post, it will be effective on posting. Communication sent through fax, telephone, computer, telex or fax is not effective until received by the offeror. Moreover, it is arduous to find when exactly a telex, fax, a message left on a telephone answering machine or e-mail message is actually “received.” Decided case laws on the subject indicate that the time when such a message becomes effective relies on a number of issues including customary business practices, the anticipations of the contracting parties and the court’s evaluation of which of them should bear the onus as decided in Brinkbon Ltd v Stahag Stad Gmbh1. In case of acceptance through the e-mail, the time when it will be effective has not yet been considered by the courts. It has been recommended that in case of e-mail acceptance, the postal rule can be applied as an intermediate is involved. Conversely, it is argued that general rule will be applicable, since e-mail messages are delivered instantaneous and there is no facility to find out when the e-mail message is actually delivered. Further, an offer might be accepted by inferences or conduct. For example, if A places an order for some products and B may acknowledge it by conduct by sending the products. Any uncertainty provisions in the commercial contracts may make the contract non -binding. For instance, an agreement that a contract is to have a ‘regular force majeure stipulations ‘is not binding as the same is uncertain, since there are no ‘customary force majeure stipulations ‘as decided in the case “British Electrical and Associated Industries (Cardiff) Ltd v Patley Processing Ltd2. “ In “G Scammell and Nephew Ltd v Ouston3, “it was viewed that an arrangement or agreement to supply goods on “hire purchase terms” was similarly fuzzy and held that there was no valid contract. However, in Lambert v HTV Cymru4, it was held that an agreement in which one party agrees to employ best or reasonable endeavours to accomplish a result is enforceable and held that it was not uncertain.5 Though an agreement to negotiate in general is not a valid contract but a “lock-out agreement ‘under which X agrees with Y that he will not enter into the discussion with any other party other than Y for a limited period, may be a valid contract as held in “ Walford v Miles6 “ and in “ Pitt v PMH Asset Management Ltd7.” In case of business acquisition, the lock-out agreement will be much useful to the proposed buyer as he has to spend some legal and other expenses to make a due diligence or investigation on the business to be acquired.8 In Smith v Hughes, a land mark case, it was held that vendor of the products who is under no commitment to rectify an erroneous faith conceived by the buyer about the product sold to him. In this case, the buyer argued that he was under the impression that old oats were sold to him but instead, new oats were delivered. Thus, inconsistent narrations were given at trial stage as to whether the term ‘old’ was employed during the conclusion of the contract. Finally, it was held by Queen’s Bench for a retrial pointing to whether the parties to contract had conversed with one another. Reiterating the maxim “Buyer Be Aware”, the court held that contract cannot be rescinded on the background of the instant litigation. In this case, the both the parties failed to include in the term of the contract, the age of the oat. Thus, the maxim laid down in this case is still holding good for almost all business transactions in UK and elsewhere in the world. Thus, in commercial contracts, it is wise to define all the terms to avoid any discrepancy later and mere offer and acceptance alone will not suffice to make an enforceable contract in business.9 In business contracts, a mere furnishing of information may not constitute a contract. In Harvey v Facey 10the plaintiffs through telegraph enquired about the price of Bumper Hall pen. The defendant replied through telegraph the price as £ 900. Then, the plaintiff replied through telegraph that he agreed to buy the same at £ 900. Later, the defendant refused to fulfil his obligation under the contract. The court held that the telegram sent by defendants was not to be considered as an offer which was competent of acknowledged by the petitioner. The fax message was only a mere expression of information. This was similar to the query being made in a retail outlet for a product. Thus, in a business contract, there should be an offer and that offer should be accepted and there cannot be a valid contract by mere expression of price of a product by one party In “Fisher v Bell”11, it was viewed that mere display of the flick –knives in a sale counter of a shop would not be tantamount to offering of offensive weapons as exhibition in the shop display-counter could not be construed as an offer for sale and is to be construed as an entice to treat. In “Pharmaceutical Society of Great Britain v Boots Cash Chemists “12, the defendants were accused of selling some drugs that could be dealt only under the command of a competent chemist. The defendant argued that though they displayed the drugs in the shelves of their shop, a qualified person was available at the cash counter. It was contended by the plaintiff that contract was made when the drug was taken out of shelf by a consumer and the display being an offer to sell. However, it was held by the court that it was only an invitation to treat and hence the defendant was declared not guilty. In “Partridge v Crittenden”13 , defendant was accused of making an offer to sell a wild bird by placing a commercial advertisement in a magazine which was an infringement to the provisions of the Protection of Birds Act 1954. In this case, he had been not found guilty and the advertisement was held to be an invitation to treat. However, in “Carlill v Carbolic Smoke Ball Co”14, the commercial advertisement was held to be not an invitation to treat but an offer since it demanded the performance of the task of employing the smoke ball as instructed and contracting influenza for a reward of £100. Further, in this type of advertisement, there was no facility to make negotiation on conditions unlike the usual advertisements like what had been discussed in “Partridge v Crittenden “15. In “Thornton v Shoe Lane Parking Ltd “16, a car owner availed car parking ticket from the automatic machine by inserting a coin. The Court of Appeal held in this case that acceptance of money by machine was an offer and insertion of money by car owner was an acceptance. The ticket received later by car owner contained standard terms of the contract. Since the terms arrived only after the contract had been concluded and hence the contract did not integrate those terms17. In” SHV Gas Supply & Trading SAS v Naftomar Shipping & Trading Co Ltd Inc (The ‘ Azur Gas ‘) “ 18it was held that where the agreement was silent about the time for deliverance, then delivery should be effected within a reasonable time as provided in s.29 (3). Circumstances of the each case will depend what constituted a reasonable time. For instance, where sea cargo is delivered, the relevant background will comprise the effect of inclement climate on the capability to discharge from the ship. The court will consider the main question, whether the delivery has been effected with reasonable speed by looking into the appropriate circumstances. The case “CIT Group Inc v Transclear“19 dealt with inability to deliver cement as promised on free on board basis (fob) as per contract terms. T’s seller declined to fulfil the promise to supply cement which T proposed to distribute under the agreement after force exerted by a Mexican government company which found that CTI planned to market cement in Mexico. T contended that the contract was frustrated since he was unable to find out alternate suppliers. His main contention was that contract could not be fulfilled due to the grounds of unfeasibility. However, the” Court of Appeal” viewed that a supplier under such agreement did enter into a private commitment to deliver the cement and assumed the jeopardy that it might be not able to accomplish his commitment. The Court of Appeal further viewed that frustration clause could have been much helpful only if there was a ban on export of cement. This case reveals the necessity for traders to incorporate provisions envisaging the future scenarios in which T found handicapped by not including a force majeure clause in the contract.20 Thus , a commercial contract do not offer any safeguard rules but offer the party a wide freedom of contract, specifying only directory rules . In commercial contracts, though there is a valid offer and acceptance, one has to look into other terms and conditions as detailed above to make a valid contract and to avoid any misunderstanding later. Bibliography Bradgate, Robert & White, Fidelma, Commercial Law, Oxford University Press, Oxford: 2007. Contracts & Agreements Co, Smith Vs Hughes: Offer & Acceptance, Contracts & Agreements, 2009, retrieved 20 February 2010http://www.contractsandagreements.co.uk/smith-vs-hughes-offer-acceptance.html Kelly, David & Holmes, E.M, Business Law, Routledge, London, 2002. London External, Ac, Recent Developments 2009 Commercial Law, Duke Education, 2009, retrieved 20 February 2010 http://www.londonexternal.ac.uk/current_students/programme_resources/laws/llb_diplaw/recent_dev/commercial_law.pdf Thorpe, C.P, Thorpe, Chris P & Bailey John C.L, Commercial Contracts: A Practical Guide to Deals, Contracts and Agreements, Gogan Page Publishers, London, 1999. . . Read More