Elements of a binding contract
The key elements of a binding contract are; offer, acceptance, consideration, intentions to create legal relations, privity of contract, capacity to contract and the fact that it must not be illegal or contrary to public morals(Cross & Miller 2008, 195).
An offer is an unequivocal statement expressing intention to be bound on precise terms with the party to whom it is made once it is accepted by the said party(Beckett 2015, 139). An offer has been distinguished from invitations to treat. For instance, in Fisher v Bell, display of goods in a shop in an invitation to treat as opposed to an offer(Mulcahy 2008, 58). Moreover, actions and sale by tender constitute invitations to treat(Gillies 1988, 16).
Acceptance refers to a final and unqualified manifestation of consent to the terms of an offer. For acceptance to be effective, it has to be communicated to the offeror. The general rule is to the effect that silence does not amount to acceptance. It was so established in the case of Felthouse v Bindley. Additionally, there is established postal rule in Adams v Lindsell which holds that acceptance is deemed to have occurred at the time when the letter communicating the acceptance is lawfully in possession of postal office as agents of the offeror. Nevertheless there is no scholarly consensus as to the rule regarding acceptance by email. (Mulcahy 2008, 62-64).
Capacity demands that parties to a valid contract have to be legally competent. The general rule is that everyone is presumed competent unless it is proved that at the time they concluded the contract, they were minors, drunk, intoxicated or otherwise incompetent(Stone 2013, 179).
Consideration entails something of value exchanged between the parties to a contract(Valente 2010, 3). It is a fundamental prerequisite in English Contract Law. Essentially, it must be legally sufficient and need not be adequate(Helewitz 2010, 4).
Moreover, the parties to a contract must have had intentions to create legally binding and enforceable obligations. This prerequisite is presumed by law and intentions to the contrary have to be explicitly stipulated in a contract(Stone 2013, 153).
Legality demands that the objective and the subject matter of the contract must be for legal purposes. Moreover, the contract in question must not contravene public policy and morality(Cross & Miller 2008, 195).
John’s legal relations with Rosie, Mark and Duncan
John,
P.O. Box.,
March 16, 2016.
P.O. Box,
Dear Mr. John,
RE: LEGAL RELATIONS WITH ROSIE, MARK AND DUNCAN
Following your display of a “vase in the window of” your “shop with a sign which stated: ‘exceptional piece of 19th century pottery’ on offer for £500’” and dealings thereof with Rosie, Duncan and John, you entered into potential legal relations with them.
Duncan’s letter “agreeing to buy the vase at £500” constituted an offer by Duncan to buy the vase at the stated price. To this end, an offer has to be communicated in order for it to be valid. The rationale is that there can be no acceptance in the absence of the knowledge of the offer. It was so held in the 1927 Australian case of R v Clarke. The question as to whether the offer by Duncan was valid is immaterial since the said offer was not accepted by you expressly or by conduct. The general rule regarding acceptance is to the effect that silence does not amount to acceptance. It was established in the case of Felthouse v Bindley that silence does not amount to acceptance. More so, failure to overtly reject an offer does not constitute acceptance. Applying the rule to the facts in question, you did not respond to Duncan’s offer. The law does not impose an obligation on you to do anything to avoid acceptance either. Accordingly, there was no valid contract between you and Duncan.
With respect to Mark, he made an offer to you to pay £400 for the vase. This was a valid offer as it was properly communicated to you. However, tables turned when you made a counter offer to Mark offering to sell the vase at £450 instead. It is a counter offer properly so-called as it had the effect of introducing a new term to the original offer. Hence, it nullified the original offer and there is no legal basis upon which it can be accepted later. At first, Mark overtly rejected the counter offer by insisting that he would only pay £400 for the vase. Therefore at this point there was no meeting of the minds (consensus id idem) between you and Mark and as such, no contractual relationship arose. Besides, you can rely on the fact that Mark’s rejection to buy the vase at £450 and insisting on pay £400 amounted to a counter offer as it varied the term of your counter offer. Therefore his acceptance by post later cannot have a binding effect under the postal rule.
In the event that the aforementioned argument does not hold, Mark’s letter has to be assessed on the basis of validity of acceptance. The fact that the acceptance in question was communicated by post complicates the whole situation. However, the Courts have addressed the issue of acceptance by post and established the postal rule. There is no evidence to the effect that you had proscribed a specific means of acceptance. Therefore, it will be assumed that you anticipated communication of acceptance by post. According to the Postal Rule, Mark’s acceptance to your offer of selling the vase at £450 by post became effective at 12.30 pm on Saturday, once the letter was placed under the lawful control of the post office even without actual physical delivery to you. However, this position can be negated by the argument that Mark had made a counter offer which nullified the offer he is purporting to have accepted by post as mentioned above.
Duncan’s letter has no effect since Postal rule applies exclusively to acceptance as opposed to offers. Your acceptance to sell the vase to him at £500 will amount to a breach of contractual obligations to Rosie or Mark.
In conclusion, Rosie made an offer to purchase the vase at £400 to which you expressly agreed negating the presumption as to the point at which acceptance is deemed to have taken place as established in Fisher v Bell. This created contractual obligation on your part to sell the vase to her on Monday upon payment. However, Mark’s contractual claim may potentially prevail over Rosie’s since your potential offer is deemed to have been accepted at 12.30 pm a couple of hours prior to your acceptance of Rosie’s offer.
BIBLIOGRAPHY
Beckett, J., 2015. Public Management and the Rule of Law, M.E. Sharpe. Available at: https://books.google.com/books?id=QoObZkzAh5YC&pgis=1 [Accessed March 16, 2016].
Cross, F. & Miller, R., 2008. The Legal Environment of Business: Text and Cases -- Ethical, Regulatory, Global, and E-Commerce Issues, Cengage Learning. Available at: https://books.google.com/books?id=XexhcvMV40MC&pgis=1 [Accessed March 16, 2016].
Gillies, P., 1988. Concise Contract Law, Federation Press. Available at: https://books.google.com/books?id=H0MdPMgEMbAC&pgis=1 [Accessed March 16, 2016].
Helewitz, J.A., 2010. Basic Contract Law for Paralegals, Aspen Publishers Online. Available at: https://books.google.com/books?id=l423LTgRnJoC&pgis=1 [Accessed March 16, 2016].
Mulcahy, L., 2008. Contract Law in Perspective, Routledge. Available at: https://books.google.com/books?id=nod8AgAAQBAJ&pgis=1 [Accessed March 16, 2016].
Stone, R., 2013. The Modern Law of Contract, Routledge. Available at: https://books.google.com/books?id=UixTxuI1bxYC&pgis=1 [Accessed March 16, 2016].
Valente, D., 2010. Enforcing Promises Consideration and Intention in the Law of Contract. Available at: http://www.otago.ac.nz/law/research/journals/otago036314.pdf [Accessed March 16, 2016].
