Contract Law - Offer and Acceptance - Assignment Example

Contract Law - Offer and Acceptance Contract Law - Offer and Acceptance Offer and acceptance are essential elements of every contract. Without an offer an acceptance may not arise. The offer put forward by the first party would be thoroughly analysed by the second party before he accepts or rejects the offer. Once the offer is accepted by the second party, both the parties should respect their obligations as much as possible. If any technical problems arise in between the offer and the acceptance, both the parties should resolve the issues amicably before proceeding towards signing the final agreement. In the given case, on 20 th May, David wrote to Robert and Jenny, asking each of them whether they would be interested in becoming the sole distributor for his newly developed scanner and both agreed. On 24 th, David wrote to Robert stating “I offer you the post of sole distributor of the scanner at a basic 10% commission. If I hear nothing from you by 31st May, I will assume that this is acceptable to you.” Robert responded immediately, but his letter has reached David only on June 2 nd. Meanwhile on 31st May, Jenny, posted a letter to David in which she offered to become David’s sole distributor for a 5% commission which was accepted by David since he did not receive any reply from Robert till that date. This paper analyses the above case with respect to the contract law related to offer and acceptance. Offer and Acceptance A mere statement or declaration of an offer cannot be considered as a legal offer with respect to contract law. In other words, verbal communications without documental evidences cannot be considered either as an offer or acceptance according to contract law. Both the parties should have exchanged signed documents in order to make a legal contract. The first issue to be considered is when David replied to Robert stating that he offered Robert the post of sole distributor of the scanner at basic 10% commission, it was a certain instances of an offer. It is evident when we analyse this case with respect to the case Butler v. Ex-Cell-O Coporation (1979). In this case, Butlet offered to sell a machine tool to Ex-Cell-O, affixing its standard terms of sale. In these terms was a notice the effect that the price charged would that that ruling on the day of delivery, if delivery was delayed. Ex-Cell-O replied accepting the offer, and affixing a copy of its own terms and conditions. On the bottom of the reply was a tear-off slip for signature. This was signed and returned to Ex-Cell-O. In the end, Ex-Cell-O could not take delivery for a month after that agreed, and Butler invoked its price variation clause. However, Ex-Cell-O insisted that the purchase was on its own terms, which did not allow for such a price variation. The Court of Appeal ruled that the contract was on Ex-Cell-Os terms, not Bultlers, because Ex-Cell-Os first reply to Butler was not an acceptance of Butlers offer, but a counter-offer, which Butler accepted by signing the tear-off sheet (Butler Machine Tool Co v Ex-Cell-O Corporation (1979), 2010) According to the elements of common law, a contract may become legal only if it satisfies the following conditions; A meeting of the minds (also known as an offer coupled with an acceptance) on fundamental or substantial terms; consideration (something must flow from each party); and Compliance with common law or statute law such as the subject matter of the contract must not be illegal and the parties must be "competent to contract" (corporations or adults but not the mentally disabled) (Contract definition, n. d). In the given case, the first element of contract law; the meeting of the minds took place when David wrote to Robert and Jenny. In other words, meeting of the minds; David/Robert and David/Jenny, took place when David wrote to both Robert and Jenny on 20 th May. Both Robert and Jenny accepted the offer put forward by David and hence we can safely say that an offer coupled with an acceptance has been taken place at this juncture. At the same time, David has not disclose any conditions or terms at the time of writing the first letter to Robert and Jenny and hence the meeting of minds has not been occurred fully at that time. According to American laws with respect to contract, chapter 3, section 20, “announcements made in a preliminary way, in the nature of advertisements meant to attract trade are not offers and cannot be accepted. Responses to them are the offers which the original announcer can accept or reject as he chooses” (Chapter 3. Offer And Acceptance. 1. What Constitutes. A. Necessity Of Offer And Acceptance, 2009) On 24 th, David wrote to Robert stating the conditions of the deal. In other words, the second element; consideration, of the contract law has taken place at this point of time. He has informed Robert that “I offer you the post of sole distributor of the scanner at a basic 10% commission. If I hear nothing from you by 31st May, I will assume that this is acceptable to you.” It should be noted that the consideration element of contract law took place only between David and Robert. Even though Robert replied immediately, the letter has not reached David until June 2. At the same time, it should be noted that David informed Robert already that in the absence of a reply message from Robert by 31st May, he will assume that the offer is acceptable to Robert. Under such circumstances, even if the reply letter was delayed, David should have decided that his offer was accepted by Robert. But David failed to remember that point and allotted the distributorship to Jenny after receiving a letter of acceptance from Jenny on 31 st May. In short the third element of the contract law; Compliance with common law or statute law, has been violated while David allotted the distributorship to Jenny. Since David himself put forward the clause that he will consider the offer was acceptable to Robert, if he fails to get a reply within the stipulated time, David should have contacted Robert once again to confirm his acceptance of the offer before considering Jenny’s bid. At the same time, it should be remembered that acceptance validates the contract and in the absence of acceptance without documental evidence, contract may become invalid. In the given case, Robert failed to communicate properly with David with the documental evidences of his acceptance of the offer. At the same time Robert can argue that the clause put forward by David in the offer letter itself is enough to validate his claim. Another issue which should be considered in this case is the postal acceptance rule. This rule states that; 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 (Formation of contract, 2010) The importance of postal rule in a contract is well documented in the Holwell Securities v. Hughes (1974) case. Hughes, in an agreement dated 19 Oct 1971 granted Holwell an option to purchase premises. The agreement said that the option could be exercised by notice in writing addressed to the vendor at any time within 6 months from that date. It was accepted that Holwell posted a letter to Hughes on 14 April 1972 but this was not received. Holwell sought specific performance. The action was dismissed at trial (Networked Knowledge - Contract Law Casenotes, n. d). In short, Roberts has every right to sue against David with the help of postal rule with respect to contract law. The contract laws are different in different countries. But the core principles of all the contract laws remain almost the same everywhere. Both offer and acceptance must be clear in order to make a contract law. In the given case, the offer seems to be clearer than the acceptance. But David failed to safeguard his rights or interests while he put forward his offer to Roberts. He failed to put a time-frame in his offer document to Robert and hence he should have waited for the reply of Roberts before allotting the distributorship to Jenny. Instead of putting a clause like; if I hear nothing from you by 31st May, I will assume that this is acceptable to you”, David could have modified his clause like; if I hear nothing from you by 31st May, I will assume that this is unacceptable to you”. In that case, David could have allotted the distributorship to Jenny or any other persons even without notifying Roberts further. According to American laws with respect to contract, chapter 3, section 21; “an offer must be definite enough so that a contract may be made out of it by the mere reply, "I accept." In other words it must be definite enough and complete enough to be enforceable” (Chapter 3. Offer And Acceptance. 1. What Constitutes. A. Necessity Of Offer And Acceptance, 2009). David’s offer lacked clarity and he can argue that his offer to Roberts may not exist because of the indefinite nature of it. David failed to receive a message indicating the acceptance or rejection of his offer from Roberts. Still he was forced to honour his offer because of the foolish clause he put forward in his initial letter to Robert. At the same time, here the process of acceptance lacks clarity or it is indefinite or it is against the true spirits of contract law. Another basic requirement of making a contract is the physical and mental health of the offeror and the offeree. In the given case, both the offeror and the offeree were in sound health conditions and hence the contract seems to be legal in that sense. At the same time, David failed to put definite clauses in his offer document and Roberts failed to respond in a clear manner. For Jenny, no such problems were occurred. Immediately after receiving the proposal from David, she responded with her own clauses which were accepted by David. Jenny does not want to bother about the earlier commitments David made with Robert. Conclusions In the given case, David failed to put clear and well defined clauses in the offer made to Roberts. He has given indefinite terms and unclear conditions in his offer document to Roberts. Even though, David can argue that the offer he made was illegal because of the lack of clarity in the conditions, it is a fact that he specifically mentioned that in the absence of a reply message within the stipulated time, he will consider the offer was accepted by Roberts. Under such circumstances, in order to honour that clause, David should have consulted with Roberts once again, before proceeding for the deal with Jenny. At the same time Roberts should have taken more care while preparing a reply letter of acceptance to David. He should have taken more care while writing the address, considering the importance of that letter. On the other hand, the deal between David and Jenny was clear and no controversy can be accused over that. References 1. Butler Machine Tool Co v Ex-Cell-O Corporation (1979), (2010). Retrieved from http://www.lawstudentforum.co.uk/case-law/2629-butler-machine-tool-co-v-ex-cell-o-corporation-1979-a.html 2. Chapter 3. Offer And Acceptance. 1. What Constitutes. A. Necessity Of Offer And Acceptance, (2009). Retrieved from http://chestofbooks.com/business/law/American-Commercial-Law-Series/Chapter-3-Offer-And-Acceptance-1-What-Constitutes-A-Nec.html 3. Contract definition, (n. d), Retrieved from http://www.duhaime.org/LegalDictionary/C/Contract.aspx 4. Formation of contract, (2010). Retrieved from http://www.lawteacher.net/contract-law/lecture-notes/agreement-lecture.php 5. Networked Knowledge - Contract Law Casenotes, (n. d). Retrieved from http://netk.net.au/Contract/Holwell.asp Read More