Mutual Agreement of a Contract - Essay Example

Part A A contract, by definition is based on mutual agreement and in the absence of communication of acceptance to the offerer there can be no contract. In general, acceptance of a contract is said to have occurred only if the offerer “is actually told of the acceptance, face to face, by telex, by a clear telephone line, or similar means” (Roulston and O’C Horgan 1990, p. 40). The revocation of an offer becomes effective only on being communicated and in the absence of such communication; revocation is deemed to be legally invalid. Further, an offer can be withdrawn before it is accepted, irrespective of the fact as to whether the offer was stated to be open for acceptance for a given time or not. It is essential to properly communicate with drawl of an offer to the offeree. Moreover, a revocation need not be in any particular form. An offer is considered to have been revoked if communication to the effect that the property has been sold reaches the offeree. Such a communication of revocation is valid, even if it is delivered to the offeree’s residence, place of business or agent. A valid contract results if the offeree accepts the offer before its revocation. Some exceptions are first, option contracts, in which the contract has to be kept open for a specified period of time and in which the offeror receives consideration for keeping the offer open. Second, firm offers, in such contracts the offeror cannot revoke the contract till such time as the expiration date of the contract is not over (Twomey 2004, p. 266). To prevent revocation of an offer, an option can be secured by a separate contract to make the offer irrevocable for a specified period of time. In Errington v Errington and Woods (1952) 1 KB 290,1 All ER 149 CA, the Court decided that a unilateral offer could not be withdrawn once performance had commenced, even though there would be no binding contract if the performance was left incomplete. Part B Jack offered to sell a mobile phone to Cameron on the 2nd of October, stating that this offer would be valid for a week. Cameron informed his brother that he was interested in accepting Jack’s offer. On the 3rd of October, without the knowledge of Cameron, his brother gave this information to Jack. On the 4th of October, Jack, sold the mobile phone to Chad in the presence of his flatmate. This flatmate informed Cameron about this sale on the very same day of the sale. On the 5th of October, Cameron delivered a letter of acceptance to Jack but later in that day Jack informed Cameron that he had already sold the mobile phone. Moreover, acceptance constitutes a final and unqualified expression of acquiescence to the conditions of an offer. Such acceptance may be conveyed by conduct or the commencement of services in response to an offer. Further, in the event of the offeror having knowledge of acceptance it is possible for the existence of a contract, despite the absence of notice by the offeree to the offeror in this respect. However, a contract does not exist if the communication of revocation made by a third party is devoid of the authority of the offeree under circumstances that clearly show that the offeree’s decision to accept had not yet been regarded as irrevocable. In Dickinson v Dodds (1876) 2 ChD 463, the defendant communicated to the Plaintiff in writing, that he was offering to sell property for £800. In this written offer it was declared that this offer was to remain open till Friday, however, on Thursday the plaintiff ascertained from a third party that the defendant had sold the property. This fact was notified to the plaintiff, who had till that time not replied to the offer letter sent to him by the plaintiff. It was held that there was no contract because the defendant had been keen to revoke his offer and as the plaintiff had known about his intention when he tried to accept the offer. Hence, this revocation was deemed to be effective, because there was no common intention which is essential for the existence of a contract. As such in respect of the sale of the mobile phone, the offer was revoked prior to the communication of acceptance. Albeit, Cameron’s brother informed Jack that Cameron was interested in purchasing the mobile phone, nevertheless, it cannot be considered to be a proper and legally valid communication of acceptance, due to the fact that Cameron had not authorized him to convey such communication of acceptance to Jack. This aspect had been discussed in Felthouse v Bindley (1862) 11 Cb (NS) 869, wherein it was held that in contracts it is insufficient to assent inwardly. The acceptance must be communicated to the offeror or someone authorized by him to receive it or by the appointed agent. Acceptance must be communicated for two persons to agree. The offeror may waive requirement for communication of acceptance since this is solely to the offerors benefit. Waiver of a communication of acceptance can be done either expressly as in Felthouse v Bindley (1862) 11 Cb (NS) 869 or by implication as in Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256. In respect of revocation of an offer, brought about through a third party, it is necessary and sufficient if such intent is communicated. In other words, the moment a person to whom the offer was made is informed about the sale of the property, there is an implied communication of revocation and the time for indicating acceptance of the offer is deemed to have lapsed. This fact was clearly demonstrated in Dickinson v Dodds (1876) 2 ChD 463. In this case it was decided by the court that there exists an implied communication of revocation, as soon as a person to whom the offer was made, gains information that the property in question has been sold and that it is futile for such a person to accept the offer at that stage. This implies that the offer has become invalid or has been terminated from the very moment of sale of the relevant property. Since, Jack’s flatmate had informed Cameron about the sale of the mobile phone, it was no longer valid for Cameron to accept Jack’s offer to sell the mobile phone. As such legal commitment is absent until and unless there is an acceptance of an offer in order to conclude a contract. Moreover, till such time any one of the parties can withdraw from the negotiations. Furthermore, revocation of an offer is possible at any time before its acceptance. This fact was illustrated in Routledge v Grant (1828) 4 Bing 653, where an offer was made in which it was stipulated that this offer would be available for a period of six weeks. Nevertheless, it was held that the offeror was well within his rights to revoke the offer even before the expiry of this six week deadline. Acceptance must be communicated and the offeror is entitled to know whether the offer made has been accepted and such acceptance is considered to have been effectively communicated when it comes to the attention of offeror. There can be no contract until communication has been effected and the offeror can revoke the offer up to the time of communication of acceptance. The law generally insists on identifying an offer and acceptance as the basis for the existence of a contract. An offer indicates the terms on which an offeror intends to be bound. Offers must be distinguished from invitations to treat, negotiations and auctions. Offers can be made to individuals, a number or class of people or to the world at large. An offer to the world at large usually takes place in reward contracts which are a major application of the concept of unilateral contracts. This is in accordance with the ruling in Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256. In Byrne v Van Tienhoven (1880) 5 CPD 344, the defendant who was situated in Cardiff posted a letter to the plaintiff in New York. In this offer letter it was specifically stated that consent to the offer was to be made by cable. Subsequently, the defendant posted another letter revoking the offer, which was received by the plaintiff after the plaintiff’s communication of acceptance. It was held that a revocation was acceptable only if communicated and that postal rules did not apply and that the contract became binding as soon as the plaintiff conveyed acceptance. At the time of conveying acceptance, the plaintiff had not received the defendant’s revocation letter. Further, acceptance can be construed by implication on the basis of the actions of the second party, despite the lack of a formal acceptance, however, acceptance per se must be exactly compatible with the offer made and should be devoid of any new suggestions or amendments (Roulston and O’C Horgan 1990, p. 40). In Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256, it was decided that performance of the required act constitutes acceptance. An offer can be revoked before the act is performed. The facts of this case are that The Carbolic Smoke Ball Co placed an advertisement in a newspaper, which stated that a £100 reward would be paid by it to any person getting infected by influenza, colds or any disease resulting from the common cold. After having used the ball three times daily for two weeks according to the printed directions supplied with each ball, an amount of £1000 would be deposited with the Alliance Bank, Regent Street. Mrs Carlill bought the ball and duly caught flu. The company refused to pay, stating that it was not an offer, but a mere advertising publicity stunt. The Court held that the advertisement was a genuine offer that could be accepted by using the Smokeball and catching flu. Intention was demonstrated by the deposition of money in the bank. However, in unilateral contracts notification of acceptance is impliedly waived because a specific mode is expected and the offeror can stipulate an exclusive mode of acceptance. Nevertheless, the offeror cannot make it impossible to accept a waiver of requirement as in Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256. In Eliason v Henshaw (1819) 4 Wheaton 225, 4 US (L. Ed.) 556, no contract was found to exist as the defendant had delivered acceptance to a place other than that stated in the offer. "An offer of a bargain by one person to another imposes no obligation upon the former, until it is accepted by the latter, according to the terms in which the offer was made. Any qualification of, or departure from, those terms, invalidates the offer, unless the same be agreed to by the person who made it. Until the terms of the agreement have received the assent of both parties, the negotiation is open, and imposes no obligation upon either." Where there is an exclusive mode of acceptance set by the offeror any deviation from that mode invalidates the offer, unless the qualifications are agreed upon by the offeror. In Carmichael v Bank of Montreal (1972) Man QB, it was held that an offeror who sets conditions regarding exclusive modes if acceptance and deadlines cannot do so in a manner which makes acceptance impossible. In our present problem, Jack revoked the offer prior to its expiry. Moreover, acceptance was made by Cameron subsequent to the sale of the mobile phone. In view of the case law discussed above, there is no legal contract between them. Accordingly, Jack was well within his rights while revoking the offer, further, his flatmate had informed Cameron that the mobile phone had been sold to someone else. On the basis of the previous discussions, a reliable third party’s information renders such revocation legal. Cameron’s intention to communicate acceptance to Jack after the sale is futile, he contention that his brother had conveyed his acceptance to Jack, prior to the sale, is not legally valid because Cameron had not authorized his brother in this context. Hence, Jack was not required to rely on the words of Cameron’s brother. List of References Roulston, Frederick R and O’C Horgan, M 1990, The Foundations of Engineering Contracts, Spon Press (UK), ISBN: 0419149406. Twomey, David P. 2004, Anderson’s Business Law and the Legal Environment, Comprehensive Volume, Thomson West, ISBN: 0324271123. Legal Authorities Byrne v Van Tienhoven (1880) 5 CPD 344. Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256. Carmichael v Bank of Montreal (1972) Man QB. Dickinson v Dodds (1876) 2 ChD 463. Eliason v Henshaw (1819) 4 Wheaton 225, 4 US (L. Ed.) 556. Errington v Errington and Woods (1952) 1 KB 290, 1 All ER 149 CA. Felthouse v Bindley (1862) 11 Cb (NS) 869. Routledge v Grant (1828) 4 Bing 653. Read More