Two Antique Dealers - Coursework Example

Contract Assessed work Two antique dealers, Angela and Derek, met for lunch on Monday. Afterwards, Angela espied a brooch in Derek’s shop window and offered £400 for it. To this Derek offered a price of £650. Finally, Angela offered £500. In turn, Derek lowered his price to £600 and asked Angela to confirm her acceptance by the noon of the next day. He told her that he would be unavailable till noon, and that if she desired to purchase the brooch, she was to communicate her acceptance by facsimile in the morning. He told her that he would not sell it till that time, as she had paid for the lunch. On Monday evening, Derek’s son told Angela that the brooch had been sold for £700; which prompted her to send a facsimile to Derek stating that she accepted his offer of £600 for it. This message was destroyed by Derek’s dog. At 7. 30 am, on Tuesday, Derek left a message on Angela’s telephone that he was withdrawing his offer. Angela failed to check her messages until 2pm; and at 10am, she wrote a letter to Derek, whereby she confirmed her acceptance of his offer. At 11am she posted this letter by registered post. In order to form a contract, there should be two entities; namely, the offeror and the offeree. The offeror makes an offer to the offeree, who accepts it. As such, the offeror and the offeree have to arrive at a mutual agreement regarding the offer and its acceptance. In the absence of such mutual agreement, the contract is rendered unenforceable. Consequently, an agreement is legally binding only when there is mutual consent between the offeror and the offeree; in respect of its offer and the acceptance (Kelly & Hayward, Business Law, 2005. Pp.113-118). Angela enquired about the price of the brooch in Derek’s shop, which is not to be considered as an offer. Derek’s reply stating that he would not sell for less than £650 is also not an offer, because it is ambiguous. A valid offer should be definite and unambiguous. Angela’s suggestion to pay £500 is an offer. Derek’s response to sell it for £600 is a counter offer. Legitimate offers should be clear, firm and final in all respects; and provide important information about the contract. The parties must have the intention to make their contract legally binding. Failure to perform a contractual duty would attract legal action (Horton, 2005). In his offer, Derek stated that he would keep his offer open for Angela, until the next day; because she had paid for the lunch. Derek had not insisted upon Angela to pay for the lunch, if he were to keep the offer open. Angela paid for the lunch in the due course of her social interaction with Derek. According to the case law; past services or payments cannot be considered as valid consideration for a promise. A promise should be offset by something of value, which is termed as the consideration for the promise. As such, consideration is of great significance in making promises legally binding and enforceable. Under this rule, even nominal consideration renders economic superfluous promises legally enforceable (Chapter 3: The making of contracts (2) – consideration). The verbal statements and conduct of the parties can give rise to legally binding contracts. However, the identification of the elements that bind the parties to their agreement is extremely difficult. The courts scrutinise the history of the statements of these parties, with regard to such contracts. Thereupon, they take into consideration, the subsequent performance of the parties on the basis of these statements (Meiners, Ringleb, & Edwards, 2006. P. 243). Gratuitous promises, in the absence of consideration are not binding (Re Hudson). Similarly, a promise for an act or work, which was previously performed, cannot be binding on the parties. Past consideration cannot be consideration. For instance, in Re McArdle, the plaintiff moved into a house that had been willed to him and other family members. He made some improvement to the house, and these other family members offered to share in the expenditure incurred. Subsequently they refused to do so. The court ruled that the defendants’ promise was not supported by consideration, as the renovation was past consideration (Re McArdle). Intention is the chief criterion in deciding the legally binding nature of an agreement. In general, social and familial agreements do not constitute valid contracts. The parties to an agreement should have the intention to make it legally binding, if it is to constitute a valid contract. Consequently, Derek is not legally bound to keep his offer to Angela open till the specified time. This was illustrated, in Balfour v Balfour, wherein the Appellate Court held that the disputing parties had not intended to give effect to their agreement. Some agreements are legally unenforceable; for instance, agreements between friends and family members, which are treated as social or domestic agreements. Therefore, it was not binding upon them. Consequently, the court ruled that the wife, who was one of the parties, could not have the agreement enforced (Balfour v. Balfour). Derek’s son had informed Angela about the sale of the brooch on Monday evening. Thereupon, Angela sent a facsimile message, indicating her acceptance, to Derek. Since, the offer had been revoked due to the message conveyed by Derek’s son, on Monday evening itself; the facsimile message sent to Derek by Angela does not constitute valid acceptance. In order to keep an offer open, there must be consideration for the offeror. In Routledge v. Grant, the defendant made an offer that he would purchase the house of the plaintiff. The defendant allowed six weeks time to decide on this offer. Subsequently, the defendant decided to withdraw his offer, prior to the completion of six weeks. The plaintiff’s action for breach of agreement was dismissed by the court; because there was no consideration to keep the offer open (Uche, 1971, p 107). The offeror can revoke his offer at any point of time prior to its acceptance by the offeree. Revocation of offer disqualifies acceptance of the original offer by the offeree. However, such revocation has to be received by the offeree. Only then will the revocation will be deemed to be valid (Kelly & Hayward, Business Law, 2005. Pp.113-118). A promise to keep an offer open is also binding. However, there should be a separate contract to that effect. Such contracts are termed as option contracts. In such contracts, there should be sufficient consideration for the offeror or promisor to keep the offer open (Kelly & Hayward, Business Law, 2005. Pp.113-118). Routledge v. Grant showed that in the absence of consideration, being provided to the offeror; the offeror can withdraw the offer, whenever he pleases. There is no need for the offeror to keep the offer open, if there is no consideration (Routledge v. Grant). Communication assumes several forms and technological sophistication provides novel modes, in this context. Instances of these forms are verbal conversations, telephonic messages, letters, facsimiles and electronic mails. In contracts, the receipt of offer and its acceptance are crucial. Therefore, the communication of acceptance is very important in contracts (Stone, 2002, P 48). Certain amount of delay is inevitable in most of the communication modes. Communication is effective only when it is received and comprehended by its receiver. This is the fundamental rule that applies to offers. In some situations, acceptance may transpire, even if there is no knowledge of the offer. If the communication of the offer is mandatory, then communication connotes that the offeree has knowledge of the offer (Stone, 2002, P 48). In Byrne v. Van Tienhoven, it was held that the offeror was required to inform the offeree about the revocation of the offer. Revocation, which had not been intimated to the offeree, would not take effect. Therefore, the court held that the defendants in this care were bound by the contract. The contract had been formed due to the prior acceptance of the defendants’ offer by the plaintiff (Byrne v. Van Tienhoven). In Dickinson v. Dodds, it was held that any reliable third party can convey the revocation of an offer. An offer can be revoked even before the specified time limit for acceptance. However, under such circumstances, the revoking party must ensure that the revocation is conveyed to the offeree (Charman, 2005, P 18). As such, the purpose of a time limit is to terminate an offer that has not already been revoked. On Tuesday morning Derek sent a telephonic message to Angela, informing her about the revocation of the offer. This was not noticed by her till 2pm. She confirmed in writing her acceptance, at 10am and posted the letter of confirmation at 11am. Since the offer was revoked at the time when the major son of Derek had informed her of the sale of the brooch; there is no valid offer, in existence, that can be accepted by Angela. Thus, Derek is not liable for breach of contract. Bibliography Balfour v. Balfour, 2 KB 571 (1919). Byrne v. Van Tienhoven, 5 C.P.D. 344 (1880). Chapter 3: The making of contracts (2) – consideration. (n.d.). Retrieved March 21, 2009, from http://www.londonexternal.ac.uk/current_students/programme_resources/lse/lse_pdf/foundation_units/intro_com_law/intcomlaw_ch3.pdf Charman, M. (2005, P 18). Contract Law. Willan Publishing, ISBN 1843920999, 9781843920991. Horton, R. (2005, Apeil). Whats a Contract? Retrieved March 21, 2009, from http://www.communitylegaladvice.org.uk/media/808/FB/advicenow_contract.pdf Kelly, D., & Hayward, R. (2005. Pp.113-118). Business Law. Routledge Cavendish. ISBN: 1859419623. Meiners, R. E., Ringleb, A. H., & Edwards, F. L. (2006. P. 243). The legal environment of business. Cengage Learning. Re Hudson, (1885) 54 LJ Ch 811. Re McArdle, (1951) Ch 669. Routledge v. Grant, (1828) 4 Bing 653. Stone, R. (2002, P 48). The Modern Law of Contract. Routledge . Uche, U. U. (1971, p 107). Contractual obligations in Ghana and Nigeria. Routledge ISBN 0714626112, 9780714626116. Read More