The Actions of Watertankz - Case Study Example

Question Issues The main pointers in this case are the fact that Watertankz offered Harry a quote valid till June 30 and Harrys signing and postingof a cheque. The issue in this matter is whether the transactions between Harry and Watertankz constituted a valid contract or not and whether the decision of Watertankz to revoke the contract is legitimate or not. Rules A contract is a legal agreement between two parties for their mutual benefit. For a contract to be binding, there is the need for one party (offeror) to give an indication to another party (offeree) that he intends to form a legal relationship that will entail the exchange of consideration. The indication is known as offer. An offer is an explicit or implied conduct by the offeror which indicates his willingness to commence a legal relationship with the offeree (Smith V Hughes). For a contract to be valid , the offeree must know of the offer made by the offeror (R V Clarke 1927). An offer is therefore different from an invitation to treat which is the willingness to negotiate a contract and not an intention (Harvey V Facey). An offer must be accepted by the offeree. Acceptance creates a consensus ad idem which is the meeting of two minds and a binding contract is formed. The acceptance of an offer must be communicated by the offeree to the offeror. Communication of an acceptance is in different forms. However, acceptance through post comes with distinct rules. In Adams V Lindsell (1818), it was established that once an acceptance is posted by the offeree, there is a binding contract. Between the period of the offer and the acceptance by the offeree, an offeror can revoke the offer. Application to Case In this case, Watertankz appears to be a business that deals with items Harry was interested in. After the contact between Harry and Watertankz, Watertankz made an explicit offer by telling Harry that they had the tanks he wanted and showed him how to make the purchase. This is a valid offer and Harry had the right to follow it up with an acceptance or not. Making such an offer in itself is an intention to create a legal relationship. Harry accepted the offer on June 2 and communicated it through post. On June 3, Watertankz revoked the contract. According the the elements of contract law, Harry accepted the contract and this created a binding contract which effectively prevents Watertankz from revoking the contract without penalties. This is because according to the postal rule, an acceptance is made hence a binding contract is formed the moment an offeree posts his acceptance to the offeror. This therefore means that Harry gained legal rights the moment he mailed his acceptance to Watertankz. Conclusion The offer made by Watertankz was accepted by Harry. This means that it is not legal for Watertankz to revoke the contract or opt out without incurring damages. The fact that prices are rising is not material in this sense. This is because Watertankz made the offer as an informed party and in this case, the concept of caveat emptor which requires them to be careful before making an offer can be invoked. This therefore means that Watertankz is binding and all connected facts, once it was not disclosed as a clause in the offer cannot be used as a justification for the revocation of the offer after it is accepted by Harry. Also, when Watertankz receives Harrys posted acceptance is not material in this situation. This is because the postal rule from Adams V Lindsell states that once an acceptance is posted, there is a binding contract. Question 2 Issue The issue in this section is whether Harry has any rights under Australian contract law in this case that Watertankz has decided to return his cheque and opt out of the contract. Secondly, what are the details of the legal actions that Harry can take against Watertankz in this case. Rules A breach of contract is where the agreements of a contract are honoured by one party but there are interferences in the performance of another party. This therefore shows that a breach of contract occurs when one party fails to abide by the terms of the contract at hand. An anticipatory breach is a declaration of one party in a contract that s/he will not adhere to the terms of the contract (Hochster V De La Torr). This implies that when one party comes out to state that due to some reasons, s/he cannot discharge the terms of the contract, the affected party has a legal right to some remedies that will compensate him or her for the breach. There are common law remedies and equitable remedies in the event of a breach of contract. The main common law remedies for a breach of contract are damages. Damages are meant to restore the affected party to the position he would have been if the contract had been discharged. Usually, damages are monetary in nature. It is assessed on the basis of the remoteness of the loss and the consequences of the breach. It is awarded based on what happened naturally and what the parties lost due to the frustrated contract. There are also equitable remedies like orders of specific performance and injunctions that are granted by the courts. An order of specific performance requires the aggrieved person to do a specific thing whilst an injunction prevents him from harming the affected party further. Application to the Case at hand Harry has the rights to all the terms stated in the offer. This therefore means that the attempt by Watertankz to return Harrys cheque can be construed as an expression of Watertankzs refusal to abide by the terms of the contract. Harry can sue for damages. The damages could be given to him on the basis of the loss he has incurred due to the fact that Watertankz did not fix the tanks in his home although there was a binding contract. In this case, the court will have to examine how much the loss affected Harry and what he could have figured out reasonably before the contract was frustrated. This is likely to end up in financial compensation for the losses and failures of Watertankz to honour its obligations to him. Alternatively, Harry could get an order for specific performance. This order would require Watertankz to go ahead to fix the tanks in Harrys home. It will be the best option if it is established by the court that financial compensation will not be able to fulfill the needs of Harry in this matter. Another option, which is not likely in this case could be the injunction. This could probably be invoked if Watertankz has other plans that would potentially harm Harry. Thus for example, the court could give an injunction to prevent Watertankz from taking more money from Harry if that is applicable. Conclusion The actions of Watertankz is tantamount to a breach of contract. This implies that Harry has the right to go to court to get remedies in the form of monetary compensation. Harry could also sue for an order of specific performance. If there is a sign that the failure of Watertankz would harm Harry, he could sue for an injunction that would prevent Watertankz from harming him further. Read More