The US Uniform Commercial Code - Assignment Example

Question Andrew sent out a letter of offer, through the normal post, to Jane, offering to sell his car to her. When he did not hear from her after7 days, he thought that she was not interested in his offer, and so he immediately sold his car to Mr Smith instead. In fact, Jane had received Andrews letter of offer a day after Andrew had sent it out. The very next day, Jane had posted out her letter of acceptance to Andrew through the normal post. However, her letter of acceptance was delayed in the post, and it did not reach Andrew until 2 weeks later. Would it make any difference to your answer in each of these situations (each of these to be considered separately on its own). a) Jane had underpaid the amount of stamp postage needed for her letter of acceptance. b) There was a postal strike at the time when Jane sent out her letter of acceptance to Andrew. c) Andrew had sent his offer to Jane by email, and Jane had accepted his offer using the normal post. (50marks) Question 2 a) State and explain the kind of contracts that are binding on a minor. b) Betty, who is seventeen years old and a college student, borrowed $1000 from Peter so that she could go for a boat cruise during her school holidays after her school examinations. She later refused to pay back this sum of money to Peter. Can he sue her? Would it make any difference to your answer if, instead of borrowing this sum of money to go for a boat cruise, she had actually borrowed this sum of money to go for a study tour of China organized by her school? Answer approach. In answering these questions, the major source of support was Article 2 of the US Uniform Commercial Code, which broadly covers the law governing sales contracts. Meanwhile the examples of cases cited were taken from English cases. Q1. According to section 2-205 of the US Uniform Commercial Code, in every sales contract, there must be an object on offer, an offer made, an acceptance made, and an exchange. The person making the offer is called the offeror and the person making the acceptance is called the offeree. Even if the offeree has made up his mind to a final acceptance, the agreement is not yet complete. There must be an external manifestation of his assent. This can be some word spoken or act done by the offeree or by his authorised agent, which a court of law can regard as the communication of the acceptance to the offeror. What constitutes communication varies with the nature of the case and has provoked many difficult problems. a) The first scenario makes a lot of difference in the interpretation and analysis of the case. Going by the facts of the case, Jane’s acceptance was sent within a reasonable time, such that even though Andrew received the letter ‘late’, the court could still deem the contract enforceable. This view has support from section 2-207(1) of the Uniform Commercial Code, which states that ‘A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance…’ Jane could rightly evoke the provisions of this article to rightfully sue Andrew for a breach of contract. Carrying out the stipulated task is enough to constitute acceptance of the offer. However, by making an underpayment for the postage stamp, Jane indirectly failed to communicate to Andrew her acceptance of the offer. This was contrary to the general rule that an acceptance must be communicated to the offeror. The case of Jane and Andrew is typical of one where the postal rule can not be applied because the letter of acceptance was not properly posted (Simpson, 1987). As an academic problem, the postal rule in the work of Wald & Williston (1906) could be evoked to give three possible answers to this scenario in the following light: an offer made through the post might be regarded as accepted in the eyes of the law: i) as soon as the letter of acceptance is put into the post; or ii) when the letter of acceptance is delivered to the offeror’s address; or iii) when the letter of acceptance is brought to the actual notice of the offeror. As the law is now understood, Jane could have prevailed in a suit by basing her arguments on any of these theories. For example, as in Re London and Northern Bank (Blackstone, 1979), the letter of acceptance was handed to a postman only authorised to deliver mail and not to collect it. So, until and unless the acceptance is so communicated, no contract comes into existence. This was the ruling in a landmark case by Lord Denning in Entores v Miles Far East Corp. [1955] 2 All ER 4931. Whether such action of Jane to underpay the postage stamp was out of negligence or intentional, the reply cannot amount to an acceptance. In other words, it could be treated as an acceptance without communication. Simpson (1987) regarded such action as a "counter offer", which the original offeror is free to accept or reject. A counter-offer also amounts to a rejection of the original offer which cannot then be subsequently accepted. But on the other hand, there exist a number of landmark rulings on inappropriate postage that could determine whether Jane or Andrew would prevail in a law suit. The earliest of such rulings could be seen in the case of Adams v Lindsell 1 B & Ald 681, 106 ER 2502. The plaintiffs were wool manufacturers in Bromsgrove, Worcestershire. The defendants were wool-dealers at St Ives in Huntingdon. On 2 September 1817, the defendants wrote to the plaintiffs, offering a quantity of wool on certain terms, one of which was an ‘acceptance by post’. The defendants misdirected their letter by posting to an inappropriate address. This letter didn’t reach the plaintiffs until late in the evening of 5 September. In an instant reply that same evening the plaintiffs posted a letter of acceptance, which was delivered to the defendants on 9 September. If the initial (original) offer had been properly addressed, a reply from the plaintiffs could have been expected by 7 September, and meanwhile, on 8 September, not having received such a reply, the defendants had sold the wool to third parties. The trial judge directed a verdict for the plaintiffs on the ground that the delay was due to the defendants’ negligence. In the situation of Jane and Andrew an act of negligence could be seen in the fact that the postage stamp was underpaid. On the other hand, the answer to this question could take a different twist if it could be determined that the offer was open for acceptance until a certain date. In this case, a later acceptance by Jane would by all standards be ineffective for a contract to be enforced. Even if there is no express time limit (as we are not told in the case), Gordley, (in Newman, 1997) contended that an offer is normally open only for a reasonable time. In this case, therefore, Andrew might have never expressly stated whether the offer was left open or not. But by selling the car to a third party, one could infer that according to him a reasonable time had elapsed for Jane’s acceptance to be effective. Yet still, it could well be argued that before selling the car to a third party, Andrew would have been well off to communicate his revocation or termination of the offer to Jane. On the whole, the chances of Jane prevailing in a suit against Andrew would depend on whether an element of negligence in underpaying for the postage could be attributed to her or to the post office. As long as the post office could be held liable for having sold the wrong postage stamp (interms of price) to Jane then she could enforce the contract and file a suit against Andrew for a breach. On the other hand, if the blame for the postage underpayment could be solely attributed to Jane, then she would not prevail to enforce the contract by filing a suit against Andrew for a breach. b) Section 2-206 of the US Uniform Commercial Code holds that a contract is not complete unless an offer is accepted. But what exactly constitutes the acceptance of an offer has always been a subject of debate. According to the article 2-206 of the Uniform Commercial Code, an acceptance is the offerees voluntary, communicated agreement or assent to the terms and conditions of the offer. Assent is some act or promise of agreement which is duly communicated. A contract, therefore, usually is in effect as soon as the offeree transmits or communicates the acceptance (Holmes, 1881); unless the offer has expired or the offeror has specified that the acceptance must be received before it is effective, or before an option expires. In these situations, theres no contract until the offeror receives the answer, and in the way specified, if any. But this rule requiring that the offeror receives the acceptance from the offeree for there to be a contract has always been a source of controversy. To resolve this issue, the mail box rule (Blackstone, 1979) has often been evoked. By this rule, where acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete as soon as the letter of acceptance is posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror. It was this rule that was applied in the famous case of Adams v Lindsell previously seen. c) Powell (1790) found that an offeror may prescribe the method of communicating acceptance, and that whether some particular mode has been prescribed depends upon the inference to be drawn from the circumstances. There is authority for the view that an offer by an expedient mode of communication such as email is evidence of a desire for a prompt reply, so that an acceptance sent by any slower means including post may be treated as nugatory-see Quenerduaine v Cole (1883) 32 WR 185 (see Blackstone). In this case an offer was made by telegram, and the judge ruled that there was an implied requirement that the acceptance should be made by an equally speedy method. Therefore a posted acceptance was not valid. Adhering to the mode prescribed obviously suffices to complete the agreement. Whether precise observance is necessary is, however, a matter of some doubt. Suppose, for instance, that a Glasgow baker sends a note by his lorry driver to an Edinburgh merchant, making an offer. Should the merchant reply through the baker’s lorry driver, then this would be the most expedient way to communicate acceptance or rejection. But one would be tempted to ask the question as to whether an acceptance communicated in any other manner is ineffective. If the offeree instead posts an acceptance in the hope that it will get to Glasgow before the lorry and it turns out not to be the case, a better opinion is that the offeror may repudiate the acceptance as seen in Eliason v Henshaw 4 Wheat 225 (1819) (see Blackstone). But in the ruling of the Manchester Diocesan Council for Education v Commercial and General Investments [1969] 3 ALL ER 1593 (ChD) (see Blackstone), it was held that although an offeror is entitled to insist on acceptance in a particular way, where a method of acceptance is merely prescribed, any equally efficient method of acceptance will suffice. If the offeror wants to be bound only if the offer is accepted in some particular way, he must make this clear. Such details are not given in the case of Jane and Andrew. For the case of Jane and Andrew, a response by email on the part of Jane was unarguably the best mode through which she would have communicated her acceptance. But we are not told in the facts of the case whether Andrew requested for a reply by email. The assumption to be made here is that by including his postal address in the email, Andrew left open two reply modes (options) to Jane. These options were respectively a reply by email or a reply by post. Jane therefore opted for the mode that was probably most convenient to her. Even if Andrew had requested a reply by email, the ruling in the case of Tinn v Hoffman (1873) (see Wald & Williston) set a remarkable precedence. In the famous ruling acceptance was requested by return of post. But in his ruling Honeyman J. said: "… a reply by post does not exclusively mean a reply by letter or return of post, but you may reply by telegram or by verbal message or by any other means not later than a letter written by return of post."Going by this logic, Jane could prevail if she sues for a breach of contract on the grounds that Andrew would have notified her by email the revocation or termination of the offer. Such claims would have sufficient support, given that revocation is possible and effective at anytime before acceptance and Andrew failed to inform Jane of his decision to sell the car to a third party. This action was in contrary to legal provisions that a revocation must be communicated by the offeror to the offeree (section 2-207, UCC). Therefore it is not enough for the offeror to change his or her mind for an offer to be considered revoked. The offeror, therefore, if he relies on a revocation, must prove, not only that he has done some act which manifests his intention, but that the offeree has knowledge of that act. Q2. Blackstone (1979) established in his book that at common law persons referred to as minors are persons under the age of 18. Therefore the capacity of a minor to contract is still regulated by the common law, modified by the Minors Contracts Act 1987 which repealed a troublesome statute, the Infants Relief Act 1874. In view of the above, any person under the age of 18 hasn’t the full capacity to get into any kind of contract. However, there exists a number of contracts that a binding on a minor; as seen in the next paragraphs. a) ‘Contract’ on Necessities. A minor is bound to pay for necessaries supplied to him under a contract. According to Blackstone, the Sale of Goods Act 1979 s.3, re-enacting the Act of 1893, provides that where necessaries are sold and delivered to a minor he must pay a reasonable price for the goods or services. Necessities here denote goods and services required for the condition of life of such minor and to his actual requirements at the time of sales and delivery. Such necessities include specific items without which an individual would not reasonably exist, like food, clothing, lodging, education or professional training. Beneficial Contracts of Service. An employment contract is just one of the contracts that can be binding on a minor. This is because no one can make a binding employment contract on his or her behalf. The law allows him to do so, provided that the contract, taken as a whole, is manifestly for his benefit. A case to support this view could be seen in the ruling of Clements v London & North Western Railway [1894] 2 QB 482, (see Blackstone) where a young railway porter agreed to join an insurance scheme and to forgo any claims he might have under the Employers Liability Act. He forfeited his rights under the Act, the contract as a whole being for his benefit. Example of employment contracts binding minors abound; like a minor contracting to pursue a career as a professional football player , boxer, or musician with the proceeds being for their benefit. b) The general principle as seen in the work of Wald & Williston (1906) is that a contract made by a minor with an adult is binding on the adult but not on the minor. If, after attaining his majority (above 18 years), he ratifies it by an act confirming the promise he made when a minor, he is bound. In the case of Betty, Peter can not sue her because she is a minor and automatically considered to lack the capacity to contract on borrowing money. If however she attains 18 and acknowledges the debt owed Peter, she could then be sued for a claim of the money. This would be the case if she borrowed the money to go for a holiday cruise. There would be a difference to my answer if instead of borrowing this sum of money to go for a boat cruise, she had actually borrowed this sum of money to go for a study tour of China organized by her school The Minors Contracts Act 1987, s3, now affords a limited measure of redress in cases like the one between Betty and Peter (Wilson & Forte, 1995). According to this Act, where a contract made after the commencement of the Act is unenforceable against a defendant because he was a minor when it was made, the court may require the defendant (the minor) to transfer to the plaintiff any property acquired by the defendant under the contract or any property representing it. Such a measure may assist the plaintiff where the property is identifiable but where the plaintiff has loaned the money it will usually not be (as seen above). The only exception to this rule is that the plaintiff will be able to recover in equity only if he can prove that he loaned the money for the express purpose of enabling the minor to buy necessaries and that he in fact did so-see Lewis v Alleyne (1888) 4 TLR 560. So back to Betty and Peter, Betty could not be sued if she got the money to fund a boat cruise. But if Peter can prove that she got the money to fund a necessity, such as her education and training, there would be substantial grounds for him to sue her. Reference A.W.B. Simpson, A History of the Common Law of Contract: the Rise of the Action of Assumpsit (1987 F. Pollock in G.H. Wald and S. Williston (eds), Principles of Contract, 3rd American edn (1906, 650 n. 1. J. Gordley, ‘Contract in Pre-Commercial Socities and in Western History‘, Int. Enc. Comp. L. 7 (1997) J. Gordley, ‘Just Price‘, in Peter Newman (ed), The New Palgrave Dictionary of Economics and Law, vol. II (1998) J. Powell, Contracts and Agreements, vol I (London, 1790) O.W. Holmes, Jr, The Common Law (1881) S. Williston, ‘Consideration in Bilateral Contracts‘, Harvard Law Rev. 27 (1914), 503. W. Blackstone, Commentaries on the laws of England, vol. II (London, 1766, repr. Chicago, 1979) W.M. Gloag and R.C. Henderson, The Law of Scotland, 10th edn, ed. W.A. Wilson and A. Forte(1995) Weblinks http://www.lawteacher.net http://law2.biz.uwa.edu.au http://vantech.vsb.bc.ca/ss/pm/law Read More