Nuances in the Law of Contract - Assignment Example

The Law of Contract – assignment Ans In order for any contractual obligations to exist between two parties, there must be a valid offer from an offerer and a valid acceptance from the person who accepts the offer. In the first instance, since Olive has advertised her car in the “For Sale” column she would be the offerer and what must be considered is whether her advertisement constitutes a valid offer in contractual terms. Normally, it has been established that an advertisement will not constitute a firm offer, it is more likely to be considered as an invitation to treat1. The advertising of goods in a newspaper, publication or other medium is only an attempt to induce an offer and cannot be considered as an offer itself, because once an advertisement is placed in the newspaper it is then up to the customer to come forward to show his/her interest in the offer. If a mere advertisement is construed to be an offer then it would place an obligation upon the vendor to supply the goods to everyone who accepts the offer, because he would be contractually bound, even when he runs out of stock2. Therefore a valid acceptance would require further qualification. Therefore, Olive’s advertisement is not an offer until someone has accepted it in a valid contractual form, till then it is only an invitation to treat. Although contracts are generally bilateral and are executed between two separate parties, her advertisement would constitute a unilateral contract or a one party contract, in which only one party is involved and only one party is bound. This unilateral contract would turn into a bilateral contract through a valid acceptance. In a bilateral contract, acceptance would be through a communication of that acceptance, agreeing to the terms that have been offered. The offer made by Olive has not been made with a particular party, rather it qualifies as an offer that she has made to the world at large, so the person who has a contract with her would be the one who accepts her offer. Acceptance to a unilateral contract is signified by a performance of the stipulated terms within the offer. According to I.M. Wormser, the justification for fixing acceptance to a unilateral contract upon completed performance of the stipulated terms is based upon symmetry3. In other words, there is no obligation upon the offerer, neither is there any obligation upon the offeree unless and until the stipulated terms of the offer have been completed. An offeree need not perform the stipulated terms, in which case no contract exists. However if the offeree does perform the stipulated terms, then it is only reasonable to accept, that the offeror must abide with the terms of his original offer. In Olive’s case, the only terms stipulated are the price she has mentioned, which serves as the qualifying condition, so that only persons who are prepared to pay that much can perform the contract. In order for a contract to exist, there must also be an acceptance of the offer that has been made. When a particular offer requires the offeree to indicate acceptance of the offer through a particular action or deed, and if an offeree executes the action required, he/she would be deemed to have accepted the contract. The exchange between two parties is based upon the principle of “consideration” which Stone defines as “what one party to an agreement is giving, or promising in exchange for what is being given or promised from the other side.”4 Without a definite sign of acceptance, contracts cannot be valid; “silence cannot be regarded as evidence of acceptance when this would involve forcing a contract upon an unwilling party.”5 It must now be considered whether the responses of Paul and Quentin could be construed to be valid acceptances of the offer. Paul has sent his acceptance by mail, therefore it reaches Olive on Monday. An offer cannot be accepted by the offeree unless and until the offer is communicated to him/her and silence cannot be construed to be acceptance.6 Paul has communicated his acceptance of the offer by posting his letter on Saturday which would be his time of acceptance of the offer, because the Courts have held that acceptance is complete when posted7. However this will still be subject to the general rule regarding acceptance, which is the requirement of actual communication8. In the case of Quentin, his acceptance of the offer can be deemed to be valid only if Olive accepts his offer over the telephone, because this is the only thing that will satisfy the requirement of actual communication. But Olive has not accepted his offer because she was out, and a message on her recording machine will not constitute an acceptance according to the requirement of communication, just as mere receipt of Paul’s letter will not. Olive will have to clearly communicate her acceptance of either Paul’s or Quentin’s offer before it can be deemed to be valid. Although Olive receives Paul’s letter on Monday, she does not respond to his acceptance either. In order for a valid contract to be formed, Olive should accept either one of the two offers, or alternatively, make a counter offer. No legal commitment will be deemed to exist until the acceptance of the offer is communicated to the offerer and up to that point, either party is free to change their minds9. Olive is therefore free to change her mind is she wants to and she decides on Tuesday that she does not want to sell the car at all. Therefore, this may be construed to be a refusal of both Paul and Quentin’s offer, hence she has in fact rejected the offer10 by changing her mind and thereby the contract has been extinguished. Hence no contract exists at all. Paul and Quentin therefore have no contractual obligations at all towards Olive. Ans 2: Trietel distinguishes the obligations arising out of a contract from other obligations, on the basis of mutual agreement between parties.11 A contract is deemed to be formed on a consensual basis, through the voluntary agreement between two parties, known as the will theory, which is founded upon the economic principle that the good of all exists in the pursuit of individual, selfish economic gain.12 In the case of John and the two ladies, since they have mutually agreed to meet at some place, it may be legitimately be assumed that this arrangement has been made through the free will of the two parties. The exchange between two parties is based upon the principle of “consideration” or a promise that is being made by one party in exchange for a favor or some promise that is made by the other party.13 Thus in this case, we may infer that Elizabeth and Joan are fulfilling their promise by coming to the hotel in exchange for some promise that John has made, which is to meet them there. However, since they are only meeting, it does not appear likely that any monetary exchanges have already been made, therefore the principle of “consideration” as spelt out in contractual law may not hold good. The question of whether or not John can be held liable will depend upon whether or not there was an intent to create legal intentions in the first place, and if this is a domestic issue, then it is likely that there will be no liability on John. In the context of a domestic arrangement and a close relationship between the parties concerned, the courts are likely to examine the issues of reimbursement of expenses and conclude that there was no intent to create legal relations in the first place and therefore no valid contract will be deemed to exist.14 However, if the meeting is being held for business purposes, the question that arises is whether this would be deemed to be a valid purpose for the establishment of a contract. A general principle that has been set out is that once an offeree has begun the performance of the terms stipulated in the offer, then there is an obligation on the part of the offeror not to revoke the terms of the offer.15 Bilateral contracts offer the facility of the counter offer, where the original terms may not be acceptable to the other party that responds with an offer of its own. However in the case of a unilateral contract, an offer that has been made can also be revoked, provided that the offer is not revoked once the performance of it has started. For example in the case of Errington v Errington16, an offer made by the father to give the house to his son and daughter in law of they paid of the mortgage was deemed to be irrevocable upon his death, since the son had already commenced payments. Elizabeth and Joan have already commenced the performance of their contract by spending money to come out to the hotel, therefore John cannot revoke whatever offer he may have made. Although the Courts may hold that there is an intent to create legal relations, if Joan and Elizabeth’s expenses are to be paid, this may have to be previously agreed upon in a contract between John and them. John has made an offer to meet the two women and the woman have accepted his offer, then the fact that John has not arrived only means that he has changed his mind about his offer or has decided not to go ahead with it, therefore he has the right to extinguish any contract and he will not have any liability for it17. If John has made any written promise to provide some tangible benefit or reward to Elizabeth and Joan, he may be held liable however there is no indication that there is any kind of written agreement between John and the two women, so it is doubtful that the two women will be able to recoup their expenses. In the case of Morrison Shipping Co Ltd v The Crown (1925), Viscount Haldane held that “when work is done and expense incurred on the faith of a conditional promise, the promisor comes under an implied obligation not to revoke his promise and if he does so, may be sued for damages….”18 Hence, if John has made the women a conditional promise, then he may be held liable, however everything will depend upon the nature of the business they were planning to transact and the level of communications between them – in other words, the stage of communication that exists between them in formulation of a contract. Ans 3: Minors are different from adults because the law classes them in the group of people who are mentally incapacitated and therefore incapable of entering into a binding contract with anyone. There are only categories of contract with a minor that would be considered valid. The first is contracts for necessities such as food, clothing and other supplies, which do not include luxury supplies19. Moreover, a minor is not obligated to pay the contract price for the supply of these items, it will suffice if he/she pays a reasonable price.20 Contracts with minors must be simple and must not include onerous terms since they cannot be deemed to possess the mental comprehension to understand those legal implications.21 In all the instances cited above a contract will be deemed to be void if it contains onerous terms or is concerned with the supply of items that are not constituted as necessities but fall into the category of luxury items. The second type of contract that will be valid in the case of a minor is that of a beneficial contract for service. Such contracts include education or apprenticeship and the purpose of these contracts should be geared towards the benefit of the minor person. This is an important qualification and if the contract is deemed to be an onerous one, it may be voided by the Courts and no contract will be deemed to exist. For example, in the case of DeFrancesco v Barnum (1890) which concerned an apprenticeship wherein the defendants were to be taught dancing and where the contract was for their benefit, an action by the Plaintiff was later deemed to be unenforceable because the contract was too onerous. This does not however mean that in every instance a contract for beneficial service to a minor may be subjected to being voided. In considering the provisions of the contract in question, the Courts will look into the contract as a whole rather than examining specific provisions. In the case of Clemens v L & NW Railway (1894), a minor enrolled for his employer’s insurance scheme, as a result of which he was not eligible for certain statutory rights to enforce Employer Liability. Therefore, when he was injured after wards and claimed damages form his employers on the grounds of his contract with them being void because he was minor and was not beneficial to him, the Courts took into account the provisions of the contract as a whole and did not grant his claim. Moreover, a minor will not be held liable for any installment or regular payments that have been undertaken on his behalf22 under a hire purchase agreement, although it may be contended that the purchase has been made on the minor’s behalf. If goods have been ordered from a minor and he does not deliver them he cannot be held liable for repayment of the amounts advanced to him.23 The implication behind this is that a minor is not fit to enter into any trading agreements. He cannot be held liable for regular installment payments because he may not be employed or in a position wherein he can successfully make such payments from a regular income. Moreover, the assumption that is made is also that the minor is not in a position into enter into business transactions with adults, being lacking in the mental capacity to fully understand the contents of an agreement and the implications of non compliance with any of the terms of the contract. Therefore any adult who enters into such businesss transactions with a minor, by contracting with him to either lend, borrow or pay money for services will not be deemed to have a valid contract. Any and all such contracts entered into with a minor will be deemed to be void and will not be honored or enforced by the Courts. However there is a distinction in terms of a minor’s obligations in contract vis a vis tort. A contract is assumed to be a consensual arrangement between two parit4s, therefore if the minor is to enter freely into a contract he must be mentally capable of doing so. Therefore a minor will not be held liable for violating any of the terms of a contract, since a contract will not be deemed to be binding upon him. But he will be held liable in tort. An action in tort results when some harm has been caused through the wrongful actions of a defendant upon a plaintiff. If the damages that are caused occur as a result of the minor’s negligence, or if the minor abuses the terms under which objects have been lent to him, he may be held liable in instances when he is capable of understanding that the harm caused was not justifiable under the terms of his agreement with a plaintiff.24 Bibliography * Ballett v Mingay (1943) 1 All ER 143 * Cowern v Nield (1912) 2 KB 419. * Fawcett v Smethurst (1914) 84 LJKB 473 * Halson R, Contract Law. Longman, 2001: * Hyde v Wrench (1840) 3 Beau 334 * Household Fire Insurance v Grant (1879) * Holwell Securities v Hughes (1974) * Julian v Furby (1982) * Mercantile Union Guarantee Corporation v Ball (1937) 2 KB 498 (CA). * Offord v Davies (1862) * Partridge v Crittenden (1968) 1 WLR 1204 QB at 1209-10 * Poole, Jill, 2004. Textbook on contract law 7th edition. Oxford: Oxford University Press. * Ryder v Wombwell (1869) Law Rep. 4 Ex. 32 * Spencer v Harding (1870) LR 5 CP 561 * Stone, R. Modern Law of Contract, 5th edn Cavendish Publishing, at page 74 * Trietal, G.H.,1999. The Law of Contract, 9th edn. Sweet and Maxwell * Wormser, I.M., The true conception of unilateral contracts. (1916) 26 Yale LJ 136 Read More