Legal Essentials for Formulation of a Contract - Case Study Example

1 UK Case Law Study Legal Essentials for Formulation of a Contract To establish its validity a contract must possess three essential items; (1) an agreement, there must also be (2) an intention to create legal relations and (3) consideration. Whilst the three aforementioned entities will ultimately receive individual attention in formulating the agreement, they must also receive a collective assessment, and each must be present and in sync to enable the inherent balance of a contract. If either one or more of the three requirements are not present, then the contract, whether oral, written or implied, will be deemed invalid. The establishment of a contract is a simple methodical process, which precludes the omission of any one of its ingredients; Lord Denning in Entores v. Miles Far East Corp (1955) stated,”…if a man shouts an offer to a man across a river but the reply is not heard because a plane flying overhead, there is no contract. The offeree must wait and then shout back his acceptance so that the offeror can hear it”1 On the other hand in PSGB v. Boots (1953), we can get a conceptual understanding of what a contract entails, as stated by Somerell LJ, “…in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract is completed”.2 When we dissect the opinion of Somerell LJ, we find; consideration- 1 Entores v. Miles Far East Corp (1955) 2 PSGB v. Boots (1953 2 (customers should go and choose), agreement (customer having indicated the articles he needs, and create legal relations (the shopkeeper or someone on his behalf, accepts the offer.). The opinion is an extremely common sense explanation of what constitutes a binding legal contract, the essentials are oftentimes omitted, or perceived to be present, which is the cause of considerable review. In Jones v. Padaratton (1969), the issue of establishing of legal relations was heard by the court.. ”… In 1962 Mrs. Jones offered a monthly allowance to her daughter if she would quit her job in America and come to England to study to become a barrister. Because of accommodation problems Mrs. Jones bought a house in London where the daughter lived and received rents from the other tenants. In 1967 they fell out and Mrs. Jones claimed the house even though her daughter had not even passed half of her exams. It was held that the first agreement to study was a family arrangement and not intended to be binding. Even if it was, it could only be for a reasonable time, in this case five years. The second agreement was only a family agreement and there was no intention to create legal relations. Therefore the mother was not liable on the maintenance agreement and could also claim the house”3. The court did not say that binding legal agreements can not be established between family members, but what it did say was that there was “no intent” to establish a legally binding agreement, leaving it within the purview of family, which gave either party the leverage to terminate either part or all of 3 Jones v. Padaratton (1969), 3 the agreement, upon their discreation. Moreover, with either party responding as desired, there could not be any perceived or actual liability. I would provide the following advice in regards to the situation with Doug; Our point of law reference will be the Principles of European Contract Law Article 2.103 section 2 (ex art 5.103) Sufficient Agreement, which states; “…if one of the parties refuses to conclude a contract unless the parties have agreed on some specific matter, there is no contract unless agreement on that matter has been reached”4 Additionally, in Fisher v. Bell (1960), in the Queens Bench Court, regarding a shopkeeper who displayed a flick knife with a price tag in the window, Lord Parker SJ stated; “…It is perfectly clear that according to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract”.5 I would advise that the presentation by Lee of 700 pounds be turned down on the basis of failure of agreement to agree on a specific matter (price), and that the treat offered was in fact insufficient. Even if, Lee insists that the price was posted at 700 pounds, reliance could be placed on the courts finding in Fisher v. Bell. In that the posting in and of itself, does not constitute an agreement, nor does it imply or explicitly create any legal relations or considerations, it can be withdrawn at any time. Wajid, is not bound to entertain the offer made by Lee. There was no contract. 4 Principles of European Contract Law Article2.103 section 2 (ex art 5.103) Sufficient Agreement 5 Fisher v. Bell (1960), 4 In the case of Sheraz I would advise Wajid in the following manner; It was established that Wajid and Sharez did have an agreement, but whether it involved a consideration, could very well be of issue. Additionally, there was not an intent to create legal relations.. We find in Price V. Easton (1833), “…Easton made a contract with X that in return for doing work for him, Easton would pay Price 19 pounds. X did the work but Easton did not pay, so Price sued. It was held that Prices claim must fail, as he did not provide consideration”6 Also in PSGB v. Boots (1953)7, while there was an agreement between mother and daughter, it was within the perimeters of family, therefore not binding.Additionally, as was the case of Sharez and Wajid, it is understood that Wajid made the offer because Sharez was family, and there was absolutely no intent to create legal relations. The absence of consideration and the non-intent to create legal relations, would render the exchange between the brothers as a non enforceable contract. There is no basis for legal liability on behalf of Wajid. I would advise Wajid in the following manner, as it relates to Doug. In Gibson v. MCC(1979), Lord Denning said that one must look at the correspondence as a whole and the conduct of the parties to see if they have come to an agreement:8. A letter was sent via the post in an attempt to adhere with the stipulation of the expiry date of the offer for 7500 pounds. Unfortunately, due to a problem with the post, the notice which was sent to Wajid arrived one day beyond the expiry date. When 6 Price V. Easton (1833) 7 PSGB v. Boots (1953 8 Gibson v. MCC(1979), 5 we view the Principles of European Contract law Article 2.207 (ex art 5.208) acceptance, which states; “…If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if the transmission had been normal it would have reached the offeror in due time, the late acceptance if effective as an acceptance unless, without delay, the offeror informs the offeree that it considers its offer as having lapsed”9. This option could very well be exercised by Wajid because the offer which was received by him was 500 pounds short of his asking price. And as stipulated by Lord Denning in Gibson v. MCC(1979),10 a total look at the offer letter would raise an issue as presented in “Hyde v. Wrench (1840); “…6 June W offered to sell his estate to H for 1,000, H offered 950 27 June W rejected his offer 29 June H offered 1000. W refused to sell and H sued for breach of contract. “…Lord Langdale MR held that if the defendants offer to sell for 1,000 had been unconditionally accepted, there would have been a binding contract, instead the plaintiff made an offer of his own of 950, and thereby rejected the offer previously made by the defendant. It was not afterwards competent for the plaintiff to revive the proposal of the defendant, by tendering an acceptance of it, and that therefore, there existed no obligation of any sort between the parties”11 9 Principles of European Contract law Article 2.207 (ex art 5.208) 10 Gibson v. MCC(1979) 11“Hyde v. Wrench (1840) 6 Conclusion On the basis of the law and the statutes of each individual involved, I would advise Wajid to unconditionally reject the offer of Lee, because as far as he and Lee were concerned, there was not an offer and no contract existed. It is as if there was a considerable amount of distance between the two of them, and the ambient noises were so intense, until neither did they hear each other, nor did either understand, what the other was saying. He does not have any obligation to Lee The situation as it relates to Sharez is one in which there was no intent to create a legal relation. Sharez has absolutely no ground to stand on..While he may be compelled to endure bad sibling relations with Sharez, there was no contract. He is not under any legally binding agreement with Doug to accept his offer. Because Doug submitted to him a referential bid, albeit through the post, it is entirely up to him whether he wants to accept (7,000 pounds), or wait and attempt the process all over again. References 1 Entores v. Miles Far East Corp (1955) 2 PSGB v. Boots (1953 3 Jones v. Padaratton (1969), 4 Principles of European Contract Law Article2.103 section 2 (ex art 5.103) Sufficient Agreement 5 Fisher v. Bell (1960), 6 Price V. Easton (1833) 7 PSGB v. Boots (1953 8 Gibson v. MCC(1979), 9 Principles of European Contract law Article 2.207 (ex art 5.208) 10 Gibson v. MCC(1979) 11“Hyde v. Wrench (1840) Read More