The Law of Contract and Remedies for Breach and Postal Rule in Communicating Acceptance - Case Study Example

Foundations of law The law of contract and remedies for breach Introduction Collins (2003) asserts that a contract is an agreement that creates obligations and is enforceable by the law and some essential elements include offer and acceptance, consideration, legality, consent, intention of creating legal relations. Paul’s Antiques has a rare Klick clock in its shop window marked £2,000. This is an invitation to treat that requires the customers to make an offer. Goods displayed in shops with price tags or advertisements invites customers to make offers. According to the case of Pharmaceutical Society of Great Britain v. Boots (1953) 1 QB 401, display of goods is a willingness to conduct business or commence negotiations thus is considered as an invitation to make an offer (Mulcahy 2008). Mulcahy (2008) points out that the law of contract requires a valid offer and acceptance. An offer is an expression of willingness to enter in to a contract with the intention of creating legal obligations upon acceptance. An offer has to be communicated since there can be no ‘meeting of the minds’ the offer is not communicated. In this case, Harry has made an offer of £1,000. According to mirror image’ rule, the acceptance by Paul must be done according to the terms of the offer. The case of Day Morris Associates v. Voyce (2003) clarified that acceptance by either words or conduct of the other party gives rise to the inference that the offeree assents to the offeror’s terms thus a valid acceptance must be done according to the terms of the offer for a legally binding contract to be formed (Mulcahy 2008). In this case, Paul has not accepted the offer from Harry since he asserts that he will accept £1,500 thus he has made a counter-offer that extinguishes the original offer by Harry. In this case, Harry is required to make a valid acceptance that mirrors the terms of the offer from Paul. According to the court of appeal in the case of Butler machine v. Ex-cell-o (1979) 1 WLR 401, the ‘last shot’ or last offer wins the ‘battle of forms’ in instances where one party makes an offer and the other makes a counter-offer (Stone and Quinn 2007). Generally, silence is not deemed an acceptance, and thus Harry requests for three days to think about the acceptance. Although Harry has requested for three days to think about the offer, Paul has not cancelled the offer. Accordingly, the power of acceptance does not terminate if it is qualified in form, but not in substance. Paul’s offer can only be terminated through acceptance, rejection, lapse of time, counter offer and revocation. According to contract law, a valid contract is formed after a valid acceptance that is communicated to the other party, and done according to the terms of the offer (Collins, 2003). Although Paul has not made an express statement to keep the offer open within the three days, he has not communicated his intention to revoke the offer to Harry. According to the reliance rule, Harry has relied on Paul to keep the offer open within three days and will suffer damages from revocation of the offer. According to the decision in Cooke v. Oxley 100 ER 785, the court held that promises to sell the good and subsequent asking of duration of period in order to respond does not amount to a binding contract since no consideration is exchanged. However, the advent of postal service changed the law on valid acceptance, since traditionally a binding contract occurred after receipt of acceptance. The postal rule aimed at addressing the problem of people denying the receipt of letters by making a contract binding after properly posting of the letters of acceptance in the postal mail service (Poole 2012). Postal rule in communicating acceptance According to the case of Entorres v. Miles Far East (1955) 2 QB 327, the court ruled that effective acceptance must be communicated to the offeree. However, the postal rule creates some exceptions in acceptance of an offer and outlines that effective communication of the offer will occur after posting. The rule originated from the case of Adams v. Lindsell (1818) 106 ER 250 that revolved around when a binding contract was formed since acceptance by post was delayed and the offer of wool sold to a third party. Lord Law J was of the opinion that it was impossible to form a contract through communicating acceptance by post if the offeror were free to enter in to another contract for the same subject matter with a third party before acceptance of the initial offer was communicated (Stone and Quinn 2007). In this case, Harry had made it clear that he will respond within three days. Harry searches for information on the actual price of the Klick clock from one of his specialist books and finds the clock is worth £3,000. Harry responded within the first day and agreed to purchase the clock for the price of £1,500. Although it is unclear whether the letter was posted, the case of Re London and Northern Bank, ex parte Jones (1990) clarified that acceptance by letter is deemed valid if the letter is either placed in a Royal Mail post box or handed to employee of the General Post Office. This implies that proper posting requires the letter to be properly stamped, addressed and posted (McKendrick 2010). The case of Henthorne v. Fraser (1892) outlined that acceptance is complete when the offeree posts the letter in circumstances that must be within the contemplation of the parties and in line with ordinary usages of mankind. A valid contract existed between Paul and Harry after he had written the letter of acceptance, even though he might not have received the letter before selling the Klick Clock to Anna. From the case analysis, Paul sold the Clock to Anna on the second day, but a valid contract was already existing. The postal rule provides for certainty for the acceptor since he is aware of a binding contract immediately after posting the letter and thus offeror is expected to create certainty for himself or herself by stipulating that the contract will become binding immediately after receiving the acceptance or set other limits or remain subjected to the limitations of postal communication. A case example is Holwell Securities Ltd v. Hughes (1974) 1 WLR 155 whereby a clause stipulating that ‘option must be exercised by notice in writing to the intending vendor’ within six months and subsequent loss of the letter through post extinguished the application of the postal rule (Poole 2012). Lord Lawton LJ held that the postal rule could not apply since ‘the said option could only be exercised in writing to the intending vendor’ thus implying that acceptance could not be made by post as the acceptance had to be communicated or notified to the offeror. By applying the same thinking in the case of Harry, the nature of the negotiations indicate that there may be a binding agreement after three days and thus Paul must have waited for the lapse of the three days which is reasonable period before selling the clock to Anna. The postal rule is applicable only to acceptance of the contract and has certain limitations in situations of instantaneous communication via telegram and fax. The case of Quenerduaine v. Cole (1883) 32 ER 185 held that postal rule is applicable in case where an offer is made by instantaneous communication (telegram) since it is implied that a equally instantaneous mode of communication must be used in acceptance (McKendrick 2010). In this case, communicating the acceptance of an offer through post is valid acceptance and a binding contract is formed once the letter has been posted. Rights and remedies available to Harry Harry has various rights and remedies that he can exercise from the breach of the contract by Paul. The sale of goods Act 1979 and the law of contract provides for remedies for the breach of a contract. Section 51 (1) of the sale of goods Act 1979 asserts that consumers are entitled to be awarded damages. Harry has the right to sue for damages suffered from the breach of the contract and injury suffered due to breach of the contract. From this case, Paul has sold the clock to Anna, but Harry had not paid for the clock thus he has not incurred any actual monetary losses from the sale to third party. Harry has a right to sue for damages from disappointment suffered from the loss of enjoyment of having purchased the clock as evidenced in the case of Bailey v. Bullock (1950 ) 2 All ER 1167 (Stone and Quinn 2007). The courts can decide to issue gain-based damages since Paul has sold the clock to Anna at a higher price of five hundred pounds thus the profits can be paid to Harry. Harry has a right to sue for specific performance of the contract and the courts will direct Paul to perform his obligations under the contract and sell another clock to Harry. However, this is an equitable remedy that is available if there is no any other remedy that is available under the common law (Stone and Quinn 2007). Conclusion The English law of contract requires a binding contract to have an offer and acceptance and both parties must aim at creating legal obligations. Accordingly, the acceptance must mirror the terms of the offer and must be done within a reasonable time. The postal rule provides for valid acceptance on proper posting of the letter of acceptance thus leading to binding contract. The aggrieved party can sue for damages or specific performance from the breach of the contract by the other party. In this case, Harry must rely on a valid contract and sue for damages from Paul. Reference list Collins, H. 2003. The law of contract. London: Cambridge University Press. McKendrick, E. 2010. Contract law: text, cases, and materials. Oxford: Oxford University Press. Mulcahy, L. 2008. Contract law in perspective. London: Routledge. Poole, J. 2012. Textbook on contract law. Oxford: Oxford University Press. Stone, C and Quinn, F. 2007. Contract law. London: Pearson Longman. Case laws Adams V. Lindsell (1818) 106 ER 250. Butler machine v. Ex-cell-o (1979) 1 WLR 401 Entorres v. Miles Far East (1955) 2 QB 327. Pharmaceutical Society of Great Britain v. Boots (1953) 1 QB 401. . Read More