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Principles of Contract Law

Principles of Contract Law

 

 

 

 

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Principles of Contract Law

Introduction

The premise of offer and acceptance remains a fundamental tool in assessing contract formation in the contemporary English society. Since the inception of the doctrine in the 19th century, offer and acceptance have undergone tremendous changes to become essential components of any contracts that are formulated in the modern-day society, including online contracts and seeking to protect the consumer. Based on the doctrine of offer and acceptance as outlined in the English contract law, this essay analyses the case of Simon v. Huddersford Bookshop to determine whether a binding contract did exist and the most suitable remedies to the situation.

Formation of a Contract

In the English law, a contract refers to an agreement that gives rise to duties and responsibilities that are recognized and enforced by law. There are three fundamental components that are required in the formation of a contract in common law. The components include an agreement, contractual intent, and consideration[1]. The basic requisite is that the parties involves should come to an agreement before a contract can be established. Simply put, an agreement can only be reached once an individual or a party makes an offer that is accepted by another. Thus, a contract occurs after an offer has been made and has been accepted by the other party.

Offer

An offer is a vital element in any contract. An offer refers to an expression of the preparedness to contract on specific terms, which are often made with the objective of becoming binding once they are accepted by the individual to whom they are addressed[2]. Therefore, there need to be a clear indication of intent by the offeror to be legally bound by the offer once it has been accepted by the other party. This means that the offeror will be held accountable if his words or actions are such as to imply to a reasonable third party to be certain of his intents to be bound even if he does not intent to uphold the terms that have been agreed upon with the other party. Secondly, the offer that is made should only be addressed to one person, a specified group of individuals, or the entire global population at large. In this case, Jenny and Ben of the Huddersford Bookshop made a special offer of a rare first edition of the book “Fly Fishing in the Wye” at only £625 to all their customers. Thirdly, an offer can be made either through words or by action. Fourthly, it is important to make a distinction between an offer and an invitation to treat. In an invitation to treat, one does not make an offer but bids the other side interested in the contract to do so. The distinction on whether a statement is meant to be an invitation to treat or an offer is solely dependent on the premise upon which it is made. Unlike an offer, an invitation to treat is not meant to be binding as soon as the other party to whom it is addressed states that he agrees to its terms[3]. Some common examples of an invitation to treat include items displayed on a store’s window and advertisements. In Carlill v Carbolic Smoke Ball Company, a pharmaceutical company advertised its new drug that had the ability to cure flu[4]. The company promised to pay £100 to any consumer that would use the carbolic smoke ball and did not receive a full recovery. Once the company was sued by its consumers, it argued that the advertisement should not be considered as a legally binding offer as it was a mere gimmick or an invitation to treat. On the other hand, the Court of Appeal argued that the advertisement was an offer and that the company’s intention to be bound to the advertisement could be inferred following the claim that the company had made a deposit of £1,000 in their bank account as a show of their “sincerity”. In the case of the Huddersford Bookshop, the presence of the rare first edition in their monthly catalogue could be perceived as an advertisement, hence, an invitation to treat.

Acceptance

One the other party consents to terms given by the offeror, then they are said to have accepted the offer. An acceptance is considered to be the final and definite expression of approbation to the terms outlined in an offer[5]. For an acceptance to be considered viable, there ought to be an objective manifestation that that the recipient is willing to be bound by the terms of the offer. Thus, an offer can only be accepted if it is perceived to be have been done in accordance with its specific terms for it to be considered as an agreement. It needs to exactly match the offer that has been made and all its terms must be accepted by the recipient. At the same time, there are instances in which the offer might be accepted through action or conduct, such as in the case where an online store accepts an offer by a customer too buy goods by shipping them to the offeror.

It is important to take into consideration the fact that an acceptance can only be legally binding once it has been communicated to the offeror. Absence of proper communication between the offeror and the offeree could lead to legal hardships since it may result in the offeror being bound to a contract without being aware that the recipient had accepted the offer. According to the English common law, a postal acceptance becomes binding as soon as the letter of acceptance is mailed by the recipient, whether the letter gets lost, destroyed, or delayed[6]. The only occasions in which the postal rule is not applicable is when it is omitted by the direct terms defined in the offer. Nonetheless, any offer that entails communication of the acceptance through a letter or any other specified manner can only be acknowledged if it is done in a similar method. In instances where the offeree chooses to accept the offer through an instantaneous medium, such as an email, it is only enforceable at the exact time and place where the message was sent from. An offeror cannot demand that silence by the offeree means that he or she has accepted the offer[7]. In the case of Simon v Huddersford Bookshop, Simon made an offer through post and the telephone on the 4th of April stating that he was willing to pay £500 for the book. In the letter, he stated that if he did not hear anything from the offeree by the 8th of the same month then he would assume that the bookshop had accepted his offer. Even though the answering machine was not working at the time the Simon his message, Jenny received the letter and discussed it with her business partner, Ben, on the 6th of April and agreed that they would accept Simon’s offer. However, Jenny did not get to respond or post their acceptance to Simon’s letter. Given that the bookshop did not communicate its acceptance through post, Simon cannot claim that an agreement was made between them. Further, he cannot claim that silence from the bookshop meant that Jenny and Ben had accepted his offer to purchase the book at £500.

A counteroffer occurs in instances where a failure in communication about an acceptance results in another offer to vary the terms of the initial agreement[8]. In such instances, the original offeror is given the opportunity to either accept or reject the new offer. However, a counteroffer means that the offeree has rejected the original offer, which can no longer be accepted or restored unless the two parties reach a mutual agreement. It is legally possible to revoke an offer at any time before it has been accepted. However, the offeror must ensure that the rejection is communicated to the recipient even if the revocation is made through a third party. In instances where the revocation is not communicated, then it is deemed ineffective[9]. An agreement can only be reached once the offer made has been accepted by both parties. While such an agreement is considered to be among the fundamental principles of a contract, it is not sufficient to establish legal obligations.

Consideration

In accordance with the English common law, a promise cannot be regarded as a binding contract unless it is accompanied by a consideration. In this case, consideration is a term that is used to refer to something of value that is offered for a promise, and which is need to turn the promise into an enforceable contract. Habitually, consideration could be injurious if it is made to the promise that is projected to give value, or an advantage that is made to the promisor that he might receive something of value. Thus, a promise that is founded on nothing other than a gratuitous promise cannot be perceived as a contract.

Even though it is important to ensure that there is enough consideration, it does not essentially need to be sufficient. While there is no contractual force that is allied to a promise unless there is some value that is directly linked with it, it is not compulsory for the consideration to be satisfactory. Thus, courts do not consider whether adequate value was given or something of economic correspondence between the value of the goods received and the consideration given since they do not interfere with the bargain that is made between the parties. Consequently, nominal consideration is considered as sufficient consideration. However, consideration should not be based on promises that were made in the past. The consideration that is made in the case of a promise ought to be offered as a form of response to the promise. It is also important to ensure that consideration is provided by the promise. Thus, an individual to whom a promise was made is capable of enforcing it if he or she provided a consideration. However, such a person has no claim on the promise if the consideration was made by a third party. According to the Rights of Third Parties, as outlines in the Contract Act of 1991, a third party is allowed to enforce the conditions contained in a contract that he did not participate in his favor. At the same time, although consideration should be made by the promise, it is not mandatory for it to move to the promisor. To begin with, consideration may be made in instances where the promisee endures some form of disadvantage at the request made by the promisor but which does not correspond to the benefit that is made to the promisor[10]. For instance, an individual that has promised to move out of an apartment at the end of the month may be considered as adequate consideration even if the promisor will not receive any direct benefits from the move. Secondly, it is conceivable that consideration can begin from the promisee without necessarily moving to the promisor in circumstances where the promisee organizes a benefit on an external party at the invitation to the promisor. For example, when a consumer purchases a product through an online store, the store expects that the credit card company will make the payment on the consumer’s behalf. Thus, the store offers consideration to the request by giving the desired products to the consumer.

Terms of a Contract

A contract can be based on either express or implied terms. Express terms refer to those which the parties have outlines in their agreement. On the other hand, implied contracts refer to those which are comprised of terms that are not openly outlined in the contract but which are implied by the intent of the parties involved, the law, or custom[11]. Thus, they may be described as the terms that are not indicated in a contract but which both parties intended to include. Implied contractual terms can be determined by the officious bystander test whereby if an officious bystander asked the two parties if the term were included in contract, then both the parties would agree in the affirmative. This mean that implied terms are obvious and can be readily accepted by the parties involved[12]. The second test is based on business efficacy whereby the contract would be unworkable if the term in question did not exist.

In the case of Simon, there were no express terms as there was no agreement between him and the bookshop. Rather, the only premise upon which he may base his argument is on implied terms whereby stating that lack of communication from the firm would imply that they had accepted his offer. However, the fact that Huddersford Bookshop did not communicate with him in any way means that he cannot claim to have a contract with them. Despite the fact that he posted a letter and sent a voice message to Jenny and Ben, they did not respond in a manner set to indicate that they had accepted his offer. Furthermore, while the voice message would have provided a more immediate form of communication between him and the book store, the answering machine was faulty and the respondents only got to listen to the message 11 days after Simon sent it. Thus, even if a court of law orders for an officious bystander test to establish if there exists any implied terms of contract, there will be no obvious terms between the two Simon and the bookstore.

Conclusion

Based on the principles of contract law discussed in this essay, it is clear that Simon did not have a binding contract with the Huddersford Bookshop. While he made a written offer and an oral promise to purchase the rare first edition of “Fly Fishing in the Wye” by J.R. Maple at £500, Jenny and Ben did not legally accept his offer. If Jenny would have sent the letter of acceptance, then there would be a binding contract between Simon and the bookshop effective from the date when the letter was posted. Therefore, the fact that the letter was not sent means that there was no contract between them and Jenny has the legal rights to receive the £600 from Ahmed as a counteroffer. However, in the event that the court finds that there was a binding contract between Simon and Huddersford Bookshop, then they would be in breach of contract. As such, Simon would be compensated for the loss that he incurred as a result of the breach based on the principle that damages are meant to reimburse the defendant and not to cause losses to the claimant. Since there was no actual loss that he experienced from failing to purchase the book, then he is entitled to nominal damages.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

Adams v Lindsell (1818) 106 ER 250

Andrews N, Contract Law (Cambridge University Press 2015)

Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256

Cartwright J, An Introduction to the English Law of Contract for the Civil Lawyer (3rd edn, Hart Publishing 2016)

Cartwright J, Formation and Variation of Contracts (Hart Publishing 2012)

Felthouse v Bindley [1862] EWHC CP J35

Hugh B and Denis T and Stefan Vand Jacobien R and Fauvarque-Cosson B, Cases, materials and text on contract law (Hart Publishing 2010)

Hyde v Wrench (1840) 49 ER 132

Kötz H, European contract law (Oxford University Press 2017)

McKendrick E, Contract law: Text, Cases, and Materials (Oxford University Press 2014)

Partridge v Critenden (1968) 2 All ER 425

Poole J, Textbook on Contract Law (Oxford University Press 2016)

Stover v Manchester City Council [1974] 1 WLR 1403

Treitel G, The law of contract (Sweet & Maxwell 2003)

 

 

 

[1] Neil Andrews, Contract law (Cambridge University Press 2015)

[2] John Cartwright, An Introduction to the English Law of Contract for the Civil Lawyer (3rd edn, Hart Publishing 2016)

[3] Partridge v Critenden (1968) 2 All ER 425

[4] [1893] 2 QB 256

[5] Geunter Heinz Treitel, The law of contract (Sweet & Maxwell 2003)

[6] Adams v Lindsell (1818) 106 ER 250

[7] Felthouse v Bindley [1862] EWHC CP J35

 

[8] Hyde v Wrench [1840] 49 ER 132

[9] Hugh Beale and Denis Tallon and Stefan Vogenauer and Jacobien Rutgers and Benedicte Fauvarque-Cosson, Cases, materials and text on contract law (Hart Publishing 2010)

[10] Ewan McKendrick, Contract law: Text, cases, and materials (Oxford University Press 2014)

[11] Jill Poole, Textbook on contract law (Oxford University Press 2016)

[12] Neil Andrews, Contract law (Cambridge University Press 2015)

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