Invitation to Treat, Offer, Acceptance, Revocation of Offer and the Postal Rule - Case Study Example

LAW OF CONTRACT The issue in this question relates to invitation to treat, offer, acceptance, revocation of offer and the postal rule. Each of these will be discussed in turn and a conclusion on the facts will be drawn. An offer is defined as an expression of willingness to contract or be bound on certain terms which have been made with the intention that there will be a binding agreement once the offer is accepted. In case of advertisements, the courts found that an advertisement constituted an offer on the basis that the defendant had deposited a £1000 with a bank ‘to shown their sincerity’ and thus when someone agreed to perform what had been offered an effective agreement had been formed (Carlill v Carbolic Smoke Ball Co.1). However, the situation of whether an advertisement constitutes an offer or is merely inducing others to initiate negotiation (invitation to treat) has been of scrutiny by courts. The courts look at the surrounding circumstances and the intention of the parties and may therefore not necessarily be concerned about the wording of the statement. However, advertisements have generally been considered as an invitation to treat (Partridge v Crittenden)2. Advertisements by an auctioneer stating that certain goods would be sold at a specified location and date was constituted as an invitation to treat. (Harris v. Nickerson)3 The general rule for the acceptance of an offer is that the offer should be accepted unconditionally and must be communicated to the offeror. ( Holwell Securities v. Hughes)4. However there are certain exception to this general rule and one of them is the infamous postal rule. The postal rule states that when an acceptance is sent by means of a post, it takes place as soon as the letter is validly posted. (Adams v. Lindsell)5. Instantaneous modes of communication has lately been scrutinized by the courts (Lord Wilberforce in Brinkibon Ltd. v Stahag Stahl GmbH), however the problem of when acceptance is effective has clearly not been addressed and still lies in an area of uncertainty. A revocation of offer can be done at any time before acceptance as there is no legal obligation which exists until the occurrence of acceptance (Payne v Cave)6, Further if the offeror decides to revoke an offer, he may do so (Routledge v Grant)7 provided that revocation is communicated. In the instance of a post in which the offer is accepted by post, subsequently a change of mind leads to a revocation by post, it has been found that even if the revocation is received before the acceptance, the acceptance is valid and an agreement comes into effect (Byrne v Van Tienhoven)8. If an offer is made by an advertisement, it has been found in the American case of Shuey v US9 that it can be revoked by placing a similar sized notice in the same newspaper. Further, if the offeror can show that he took all reasonable steps so as bring to notice the revocation, to all those who might have read the offer, the offer will have said to be revoked. On the facts at hand, the courts will look at the contents of the advertisements and will infer the intention of the parties as well as the surrounding circumstances. On the wordings of the advertisement, even though there is a specified price and date, a strong argument can be raised that it was an invitation to treat, however the acts of Janet to revoke the offer will be considered as well and thus an offer may be induced. If it is presumed, that the wordings and acts of Janet constituted an effective offer, then Albert’s act of posting the letter will constitute as an acceptance of the offer. However, it can be argued that the Janet had provided a phone number and so that was mode of communication to be used. Further, Janet can argue that the wordings of the advertisement clearly state that the sale would start on 23rd April and so an acceptance cannot occur before the actual offer came into force, that is on the 17th of April. It is a matter for the courts to decide upon under the circumstances of the facts as to whether an acceptance had occurred. On the facts it is likely that an acceptance will not be construed. If an acceptance is construed, the acts of revocation by Albert will not be effective even though the revocation reached before the acceptance. On the issue of Samson, it can be stated that since Janet had given her telephone number, there was likely to be an acceptance on the phone, the acceptance on 23rd April will be effective, but is a matter to be considered by courts. Finally the acts of Janet of revoking the offer on 22nd April may not stand on the grounds that she did not publish revocation in the same newspaper, however publishing it in London Times may be argued to be an effective revocation, but the problem of it being published on 27th April will allow her argument to fail and therefore an effective agreement with Samson is more than likely to be construed by the courts. 2. It has been held to be general principle of English law to allow the parties to contract to enforce them against each other. The modern approach to this is the decision of House of Lords in Dunlop Tyre Co. Ltd v Selfridge & Co. Ltd.10 where Viscount Haldane LC stated that that ‘only a person who is a party to a contract can sue on it’ and ‘if a person with whom a contract...has been made is able to enforce it consideration must have been given by him to the promissory...’. However, the above stated doctrine of privity of contract can be avoided, by bring actions in tort under the heads of negligence (Donoghue v Stevenson)11. However even though the courts have at times allowed third parties to claim (Junior Books v Veitchi Co. Ltd)12 it has been subsequently confined by courts (D & F Estates Ltd. v Church Commissioners for England)13 and the use of doctrine of negligence by third has been limited. Further, if a collateral contract is found between the third party and the promissory, who in turn may be able to enforce the contract for and against each other. However, the most important element is the provision of consideration/ (Shanklin Pier Ltd v Detel Products Ltd.)14 There are certain exceptions to the doctrine of privity of contract, which have been developed by courts (in particular Lord Denning) and the parliament. The Road Traffic Act 1998 allows third parties who have been injured to claim directly against the insurance company under s.148(7). Further, under s.11 of Married Women’s Property Act 1882, a husband can take out a policy of insurance which would allow her wife and children to benefit from it. The Companies Act 2006 (s.33) allows shareholders to sue each other. Finally under the Bills of Exchange Act 1882 a person who negotiates and is a ‘holder in due course’ can bring an action. The rule developed in Dunlop v Lambert15 affirmed in The Albazero16 provides a remedy where a breach of contract occurs and the contracting parties had contemplated that such a breach would occur causing a loss to an identified stranger. The rule does not apply where the parties who originally contract, knew that a separate contract with the third party would come into existence. (Alfred McAlpine Construction Ltd. Panatown Ltd.17) Further the Law of Property Act 1925, s.56(1) provides another exception where the third party can benefit, and therefore a general exception to the doctrine of privity of contract. Finally the implementation of the Contracts (right of Third Parties) 1999 has allowed benefitted third parties. Under s.1(!) of the Act, a person who is not a party to contract, may enforce terms of the contract if it has been expressly provided, or if the term confers a benefit upon him, which is subject to the intention of the parties to the contract (s.1(2)). Further the right is reduced by the fact that s.1(3) requires that the third party must be expressly identified that is ‘by name, as a member of a class or as a answering a particular description but need not be in existence when the contract is entered into’. The third parties must benefit from the contract and not by other means, such as will (White v. Jones)18 .Finally the rights of the third party are subject to the terms of the contract (S.1(4)). S.2(1) provides that the rights to vary or cancel a contract so as to restrict the rights of third party are limited ‘if the third party communicate his assent to the term to the prmossior’ , the promissory is aware of reliance by third party or the promissory was reasonably expected to have foreseen reliance by third party. The defences of promissory are dealt with under s.3. The list of excluded contracts is provided for in s.6(1). Finally the Act in s.7 provides that the rights under this Act do not affect any other remedy that the third party apart from the provision of this Act. The Act should have a profound impact on previous decisions and it remains to be seen how the position of third parties is dealt with after the introduction of the Act. 3. The possible problems posed by the question are part-payment of debt and its exceptions. The general English law states that if a debt is owed it must be paid in full and the debtor is no way bound to accept part payment so as to satisfy the full amount. The rule was illustrated in Pinnel’s case19 where it was said that part payment would not be sufficient consideration unless some new element is included. The new element could be a different time or change nature of consideration offered for full satisfaction of the entire debt. However, this new element must be introduced by the creditor and not the debtor (D & C Builder v Rees) In the current scenario, it was Beckham who offered Victoria and therefore part-payment will not suffice under the Pinnel’s case. However, the decision of Pinnel has posed quite a lot of unfair decisions (Foakes v Beer)20 A number of exception to the Pinnel’s case have not been developed and the most important to the facts is the doctrine of promissory estoppels. Lord Denning in Hughes v Metropolitan Railway Co. Ltd 21 stated ‘I prefer to apply that principle that a promise, intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply’. Further the doctrine has estopped plaintiffs from claiming a payment for a higher sum, where no consideration has been provided by the defendants to support the promise (Central London Property Trust Ltd. v High Trees House Ltd.)22. Further in the Comber v Combe23 it was said that where a party by his words or conduct makes a promise so as affect legal relations and acts upon it, and the other party acts upon it as, then he cannot revert back to the original legal obligation, even though no consideration had been provided. The doctrine requires satisfying certain aspects, that is, the nature of the promise, it is a ‘shield not a sword’, whether the doctrine is suspensory or extinctive, and whether the promisee must act to his prejudice. Firstly the promise must be clear and unequivocal in stating that the promissory will not enforce his legal obligations. Secondly, the doctrine can only be used as a defence. Thirdly it has been said that the doctrine is suspensory and not extinctive, that is the courts will never entirely remove the strict legal rights, however, Lord Denning stated that there could be exceptions (Brikom Investments Ltd. v Carr)24. Finally, it is evident from the case law above that the promise must have acted upon his detriment or altered his position in reliance of the promise. Finally, Williams v Roffey Brothers25 clearly puts it down that, when there is no economic duress and fraud, part-payment would be perfect transaction for creditors to enter into. On the facts it can be seen that Victoria has made a promise and it clearly seems to be unequivocal, further there has been no economic duress nor fraud. If Victoria brings claim for the money, Beckham can clearly use it as a defence. However the issue of the legal rights being suspensory is a matter of question and even though this has not been tested, it is more than likely that Victoria and Beckham’s act might just extinct the legal obligations. Finally in reliance of the promise Beckham has spent a lot of money and therefore the final test will be satisfied and therefore the doctrine of prmossory estoppels can be used by him for any claims by Victoria. BIBLIOGRAPHY POOLE, J. (2010). Textbook on contract law. Oxford, Oxford University Press. Read More