Offer, Invitation to Treat, Acceptance, Counter-offer and the Postal Rule - Case Study Example

Business Law On May Angela posts a letter to Boris offering to sell her caravan to him for £2000. Discuss if and when a contract is formed between them in each of the following alternative situations: (a) Boris receives the letter on 2 May. On 4 May he posts a reply accepting the offer. This reaches Angela on 5 May but on 3 May she had sold the caravan to Celine" (b) Boris receives the lefter on 2 May and posts a reply on that day saying "l accept your offer but £2000 is rather expensive. Would you consider £1,500?" The letter arrives on 3 May. (c) Boris receives the letter on 2 May and the same day posts a reply accepting the offer. This reply, although correctly addressed, goes astray in the post and does not reach Angela until 12 May. On I May Angela had posted a letter to Boris stating that she had decided to keep the caravan for her own use. The issue in this question relates to offer, invitation to treat, acceptance, counter-offer and the postal rule. Each of these would be discussed first, then an application of these to the facts would be made and finally an evaluation of the position of the parties would be made. Invitation to treat has been defined as an expression of willingness of a party to enter into negotiations with another with the hope that a contract would be reached at the end of such negotiations. (Fisher v Bell)1. An offer on the other hand has been defined as an expression of willingness by a party to enter into a contract on stated terms (offeror) and provided that such terms would be accepted by the person to whom the offer is made (offeree) a contract would come into existence(Carlill v Carbolic Smoke Ball Co.)2. An offer should be differentiated from a mere statement of price that is an enquiry as to the price. (Harvey v. Facey)3 In the current scenario it can be seen from the facts that Angela has shown her intent of selling the caravan and stated a price. Even though the term ‘offering’ has been used, it is generally not to be held conclusive and the overall facts of the situation are taken into account when deciding whether an offer or an invitation of treat was present. In the case of Angela it can be seen that she Angela has posted a letter and has stated a price of £2000 for which she would sell the caravan, therefore it can be deduced that an unequivocal willingness on her part was present. The next issue that would be looked into is acceptance which is defined an unequivocal assent to the terms that has been proposed by the offeror. The acceptance of certain terms and conditions which had been stated by the offeror and which tend to introduce new terms would be treated as counter-offer, that is a new offer comes into existence which can either be rejected or accepted by the person who was originally the offeror (and now becomes the offeree). (Hyde v. Wrench)4. Acceptance is generally held to be valid only when it has been validly communicated and the offeror comes to know of such acceptance. (illustration of the fact was made by Denning LJ in Entores v Miles Far East Corporation). However, there are a number of exceptions to the rule of communication of acceptance and one of them is the highly criticised postal rule. The rule has been criticised because of the adoption it took despite the various option that were available to it. In Adams v Lindsell5 it was held that the acceptance takes place when the offeree posts the letter of acceptance. There were however, cases where it was said that the postal rule would apply to situation where it was reasonable to post. One of the reason that can justify the use of post is where the offeror made his offer by using post as a medium to convey such an offer. Thus a contract is concluded when the letter is posted (Household Fire Insurance v Grant)6. Thus even if the letter of acceptance is lost, the acceptance would take place. However, there have been arguments by Professsor Treitel (2003) that where the letter is lost because of the fact that it was wrongly addressed, then no acceptance has taken place. Another issue with the postal rule is that if there has been an acceptance by post and rejection or revocation of offer is also done which one will prevail. There has been no definitive authority in this regard. Thus the difficulties in postal rule has led to limitations being placed on the rule, that is it must have been reasonable for the offeree to use the post, the offeror could expressly state the postal rule would not apply and acceptance would only take when the letter reaches the offeror. Finally the widest exception of the postal rule can be found in the case of Holwell Securities v. Hughes7 where it was stated that the rule ought not to apply ‘where it would lead to manifest inconvenience and absurdity’. As for termination of an offer, there have been five different methods that have been illustrated. Only two of them would be discussed, as they are of relevance to the facts. The first one being that the offeror can withdraw the offer at any time before the offer has been accepted and the fact that such withdrawal must be brought to the notice of the offeree. Such a notice need not be provided by the offeror, that is someone else can also inform the offeree of revocation. (Dickinson v. Dodds)8. However, the fact that this rule requires the withdrawal to be brought to the attention of the offeree, this has had odd inferences on the offers that have been sent by the use of post. An illustration of such instances can be made by looking at the case of Byrne v. Van Tienhoven9 where an offer was sent by the defendants to the claimants on 1 October , which in turn was received by the claimant on 11 October and as soon as the offer was received an immediate acceptance was sent. On the other side the defendants changed their mind and sent a letter revoking the offer, on 8 October which reached the claimants on 20 October. The courts held that that the fact that the revocation was posted on 8 October was not relevant as the postal rule did not apply to revocation and so revocation only took place when it was brought to the attention of the claimant and by that time a valid contract had come into existence and so the offer could not be revoked. The next way of rejection of offer is that of a counter-offer whereby the offeree rejects the offer, because the counter-offer has a killing off effect on the original offer and a new offer comes into existence. As it has already been established that an offer had been made by Angela, the next issue that is of acceptance would be looked into. The use of Boris of post can be said to be reasonable and justified because the negotiation had started by post and it can be presumed that both the parties live at a reasonable distance. In the first instance, the offer from Angela was received by Boris on 2 May and acceptance took place on the date when Boris accepted the offer that is 4 May. The only argument that can be made by Angela is that of the exception of Holwell Securities whereby she can state that if a contract is found it would cause inconvenience and absurdity and so the postal rule should not be applied. However, the overall situation tend to justify the use of postal rule. Another issue in this part that requires consideration is that even though the letter reached Angela on May 5, the acceptance had taken place on 4 May that is the date when acceptance was posted. Thus even though she sold the caravan to Celine on 3 May when acceptance from Boris had not taken place, the original offer to Boris was never terminated and so it could be accepted and so Angela is in breach of contract. In the second scenario, Boris receives the offer from Angela on 2 May, but the words that he has used are of a counter-offer which have destroyed the original offer that was sent by Angela and have created a new offer which now is entirely dependent upon Angela to accept (Hyde v Wrench). The fact that a counter offer exists is due to disagreement on the terms of price which is asked by Boris to be lowered. Thus the letter received by Angela on 3 May is a new offer altogether and acceptance has not taken place. Therefore no contract has as yet been formed. In the third instance Boris receives the offer on 2 May and acceptance in accordance with the postal rule is made on the same. Thus a valid a contract has come into existence on that day if the rules even though the post goes astray. The fact that Angela decided to terminate the offer on 8 May would not be valid as acceptance has already taken place and a validly formed contract has come into existence as per the rules stated in respect of termination in the case of Byrne v. Van Tienhoven. The argument of Professor Treitel would not be helpful as the post had been correctly addressed and so this had not been the cause of the post goinf astray. The argument made in Holwell Securities would not be of use as inconvenience and absurdity would be way lower than it would have been had the caravan been sold. References POOLE, J. (2010). Textbook on contract law. Oxford, Oxford University Press MCKENDRICK, E. (2009). Contract law. Basingstoke, Palgrave Macmillan PEEL, E., & TREITEL, G. H. (2007). Treitel on the law of contract. London, Sweet & Maxwell. FURMSTON, M. P., CHESHIRE, G. C., FIFOOT, C. H., & SIMPSON, A. W. B. (2007). Cheshire, Fifoot and Furmstons law of contract. Historical introduction / A. W. B. Simpson. Oxford [u.a.], Oxford Univ. Press. Read More