Principles of Contract Law - Essay Example

A contract by definition is a legally binding agreement. In other words, an agreement which gives rise to a contract in law creates obligations and rights that the courts will enforce. The law of contract was developed by common law jurisdictions from the Roman law. The primary function of contract law is to determine the nature and extent of a bargain or deal if any, between the relevant parties. First and foremost the parties have to agree to the bargain and its terms. The validity of the bargain is determined on the basis of offer and acceptance.1 Offer and acceptance are the starting points for establishing a legally binding contract. Typically, an offer is required to contain a definitive promise which provides the other party to which it is addressed with an unambiguous option to accept or decline the offer.2 Once the essential elements of offer and acceptance are found to exist the courts will look to determine whether or not there is consideration. Consideration is also an essential element of the contract and will determine whether or not a legally binding contract was created and is capable of enforcement. L.J. Lush offered the following definition of consideration in the early case of Currie v Misa (1875) stating that it was: “…some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other”.3 A more simplistic approach was taken by Patterson J in Thomas v Thomas (1842) 2 QB 851 where consideration was described as: “…something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant”. 4 It is against this background that Tom’s right to claim compensation from Beatlit Ltd. will be determined. In other words if an offer was made and duly accepted and there was consideration, Tom has a valid claim for payment of the sum of 1,000 pounds. The discussion that follows identifies the actual offer and acceptance and their implications with respect to construction of the terms and conditions of the contract. The doctrine of promissory estoppel may also arise and this aspect of the law of contract will be discussed in its proper context. As previously stated all contracts begin with an offer. However, the offer is required to meet specific requirements chief among them is the requirement of clarity. The offer must be stated in terms that clearly convey the subject matter of the offer and the terms and conditions upon which the offer is made.5 Beatlit Ltd.is unambiguously offering to pay the sum of 1,000 pounds to anyone who uses their product “forever quit”pursuant to instructions for a period of four months and having done so is still unable to quit smoking. Beatlt Ltd.’s offer was made by virtue of an advertisement placed in various magazines and newspapers. In a typical case an advertisement is regarded as an “invitation to treat” since advertisements are generally lacking in speicific detail and clarity which are necessary for establishing the esistence of valid offer in the law of contract. Advertisements for the sale of goods are usually characterized by a lack of clairty and specificity and will usually be classified as an invitation to treat for that reason.6 Be that as it may, if an advertisement is specific enough it can be treated as a valid offer. The distinction between an invitation to treat and a valid offer is important since a contract is formed at the precise moment that an offer is accepted. In the Victorian case, Nunin Holdings v Tullamarine Estates Pty Ltd [1994] 1 VR 74 it was held that: “Whatever the circumstances, it is fundamental to bear in mind that the general rule is that a contract is not completed until acceptance is actually communicated to the offeror”7 The distinction between an invitation to treat and an offer has long since been established in the law of contract. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1951] 2 QB 795 the chemist shop was organized in such a way that the goods, including prescription drugs were displayed so that the customer could select from among the goods and proceed to the cashier to complete the sale. At some stage during this process a registered pharmacist inspected the goods and either denied or refused the sale. The plaintiff claimed that the sale was contrary to the current legislation which required the sale of prescription drugs under a registered pharmacist’s supervision. The question then turned on when and at what point was the offer and acceptance actually made. It was held that the display of the goods only implied that the vendor was willing to ‘treat’ and an actual offer was not made until such time as the customer took the goods to the cashier.8 It was held in Partridge v Crittenden [1968] 1 WLR 1204 that an advertisement appearing in print form which states the price for the sale of certain goods will only be considered an invitation to treat.9 Once a customer makes an offer to purchase the advertised goods and that offer is accepted by the vendor a legally binding contract is formed.10 In Carlill v Carbolic Smoke Ball Co Ltd (1893) 1 QB 256, the facts of which are similar to Tom’s it was held that if an advertisement was specific and definite enough it could constitute a valid offer. In this early case Carbolic ran an ad that promising to award the sum of 100 pounds to any individual who followed the enclosed instructions in one of the company’s products and was infected with influenza after having done so.11 Advertisement of this nature contain unilateral offers in that they contain offers to the world at large and are quite capable of forming legally binding contractual agreements.12 Lindley LJ explained that advertisements that offered a reward in exchange for the successful performance of an act: “…are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer. In point of law this advertisement is an offer to pay 100l. to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer.”13 In an earlier case, Brogden v. Metropolitan Ry. Co. 2 [1866] App. Cas. 666 Lord Blackburn held that an advertisement duly constituting a valid offer was accepted once it was acted on.14 In Carlill v Carbolic Smoke Ball Co Ltd (1893) 1 QB 256 Lindley LJ pointed out that it was widely accepted that it was a general proposition of law that an acceptance of an offer is required to be communicated to the party making the offer. However, that requirement is waived in cases involving advertisements that constitute a valid offer. In the event notification: “…of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance”.15 Based on the foregoing discussion it would appear that the advertisement placed in the newspapers and magazines by Beatlit Ltd. consititutes a valid offer. It would also appear from the forgoing discussion that Tom, by his conduct did in fact accept the offer in a manner which mirrors the offer made. It is commonly held tenet of the law of Contract that in order for the acceptance of an offer to be legally binding it must mirror the substantive form of the offer made.16 As previoulsy explained, an offer can be accepted by either word of conduct.17 When Tom responded to Beatlit ltd.’s offer he essentially accepted it by his conduct. However, a difficulty arises for Tom since Beatlit Ltd purportedly withdrew their offer altogether by the time that Tom had completed his trial of Forever Quit and contacted Beatlit Ltd. It is generally recognized and accepted in the law of Contract that both an offer and acceptabnce can be withdrawn at anytime. This is founded on the concept that either party is at liberty to change their minds before the agreement is complete.18 In an early case, R v Clarke (1927) 40 CLR 227 it was established that unless a revocation of an offer is communicated to the offeree it is not an effective communication. In R v Clarke (1927) 40 CLR 227 the offeror mailed an order by the traditional method to the offeree placing an order for the delivery of 1000 boxes of plates. Approximately one week later, the offeror mailed a second letter to the offeree revoking the initial offer. A few days later the offeree received the initial offer and subsequently replied accepting the offer. It was not until five days later that the offeree received the second letter which revoked the initial offer. At the trial the court held that the revocation was too late since the contract had already been made. The fact that the revocation was received after the offer was accepted was the determining factor19 On the facts of the case for discussion, Tom was responding to the offer in ignorance of the fact that the offer had been subsequently withdrawn. Based on the ruling in R v Clarke (1927) 40 CLR 227 much will depend on when and how the withdrawal was made by Beatlit Ltd When an offer is made to the world at large as in this case, it can be revoked by the offerer taking reasonable steps to revoke the offer.20 There is no evidence on the facts stated that Beatlik took any reasonable steps to revoke the offer. Reasonable steps would have involved a similar advertisement stated that the eaelier offer had been withdrawn. If Beatlik had taken this step and Tom simply had not seen later issues in which the offer had been withdrawn he cannot claim the 1,000 pounds. Beatlik’s revocation by way of withdrawing the advertisment was two weeks after Tom had commenced the procedure Tom can therefore insist upon payment of the 1,000 pounds. The authority for this porposition is founded on the ruling and reasoning in Byrne v Van Tienhoven, since Tom undoubtedly accepted the offer prior to its revocation and as a result the revocation came too late. Having established that based on the facts of the case for discussion and the authorities cited Beatlit Ltd.made a valid offer which was duly accepted by Tom the agreement was complete. As noted, the revocation came too late even if it Beatlit Ltd. took reasonable steps to communicate the revocation. Moreover, applying Patterson J’s formula for consideration in Thomas v Thomas, Tom as plaintiff suffered a detriment by purchasing Quit Forever and taking the product for the requisite four months. P. Atiyah, maintains that the rationale behind the doctrine of consideration is necessary for the affirmation of a meeting of the minds.21 Joseph Savirimuthu attempts to validate all contractual doctrines by the application of one single rationale. He explained that the substantive doctrines in contract law define the circumstances when commitments become binding on the parties.22 Referring to the rules of contract applicable to the valid formation of a legally binding contract, Savirimuthu explains that, the underlying rationale is designed to promote parameters for outlining responsibilities and obligations assumed voluntarily by the parties.23 In any event the doctrine of promissory espoppel may very well arise to prevent Beatlit Ltd. opting out of the contract. The doctrine of promissory estoppel is an evidential rule that does not permit an unjustifiable departure by a party to a contract from presumptions or beliefs that the other party relies on in respect of the contract.24 The party creating the deception is estopped from reliance upon the existing facts.25In other words, Beatlik is aware that Tom acted in reliance upon the promises made via their advertisement prior to their having withdrawn the offer. When a party to a contract makes a promise in furtherance of that contract and the other party acts pursuant to the promise made, the party breaking the promise should not be permitted to deny it.26 Conclusion The advertisment place by Beatlik Ltd and appearing in several newspapers and magazines was sufficiently clear and precise so as to constitute a valid offer and is not a mere invitation to treat. Tom, by acting on the offer in the manner described by the offer effectively accepted the offer. Beatlit’s withdrawal of the offer was withdrawn after Tom accepted the offer and cannot be relied on by Beatlik to escape liability to pay Tom. Moreover, the fact that Beatlit is aware that Tom acted on the offer prior to its withdrawal properly invokes the doctrine of promisorry estoppel and will prevent Beatlit opting out of their obligation to pay Tom 1,000 pounds for his performance of the terms and conditions of the contract. Bibliography Atiyah, P.(1979) Rise and Fall of Freedom of Contract Oxford: Clarendon Brogden v. Metropolitan Ry. Co. 2 [1866] App. Cas. 666 Byrne v Van Tienhoven [1880] 5 CPD 344 Carlill v Carbolic Smoke Ball Co Ltd (1893) 1 QB 256 Combe v Combe [1951] 2 KB 215 Currie v Misa (1875) LR 10 Exch 153 Furmston, M.P., Cheshire, G.G. and Fifoot, C.H.S. (2001) Cheshire, Fifoot and Furmstons Law of ContractButterworths Nunin Holdings v Tullamarine Estates Pty Ltd [1994] 1 VR 74 Offord v Davies [1862] 12 CBNS 748 Partridge v Crittenden [1968] 2 All ER 421 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1951] 2 QB 795 R v Clarke (1927) 40 CLR 227 Savirimuthu, Joseph. Code, Hybrid Models of Consent and the Electronic Commerce (EC Directive) Regulations. JILT 2004 (2) http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2004_2/savirimuthu/#_ftnref5 Viewed November 29, 2007 Read More