Contractual rights in the case study
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Title of Work: Contractual rights in the case study
Table of Contents
Rules of Offer, Acceptance, and Revocation. 6
Law application in the case. 10
Introduction
Studying and exercising the law is an essential aspect in the running of society. One of the most vital parts of the law is the law of contract[1]. A contract is a legal agreement between two or more parties which is in binding with the law. At any point that two parties intend to enter into such an agreement, offer and acceptance must be present ensuring that the contract is formed. The parties involved are expected to create legal relations that create room for negotiations. Negotiations are essential in ensuring that both parties come to a binding agreement and eventually form a contract. Subsequently, the parties must provide valuable considerations contributing towards the success of the contract. These considerations may include express and implied terms, duress and undue influence among others.
The legal issues
In this case, the legal issues arising revolve around making an offer, acceptance of the offer and revocation. It is important to note that Jenny who is a collector of classic cars makes an offer to her friend Lewis enquiring if he was in a position to purchase a certain car. Although Lewis is interested in buying the car, he is not in a position to purchase it at the moment neither does he state a specific time that he will be able to purchase the automobile. Instead, Lewis makes a general promise that he will need time to gather some extra cash. At this point, it is clear that there was no acceptance of the offer by Jenny. Therefore, the legal situation allowed Jenny to make the same offer on Lewis to any other available buyer. However, Jenny made a promise of leaving the offer open for Lewis till the following week on Thursday at 10 pm. According to Grant, he had already reached an agreement with Jenny to make a purchase of the car from Jenny. In this case, Grant had accepted the offer from Jenny and had reached an agreement to buy the car. Jenny later explains that she sold the car to Grant who was ready to make the payment before Lewis. The situation disappointed Lewis who felt that Jenny did not follow the right legal paths considering that she had a made a promise to sell the car to him before Grant. The situation raises issues on whether Jenny made an offer to Lewis or it was an invitation to treat. Additionally, considering that Lewis had not made the payment questions arises on whether Jenny broke the law by deciding to enter into a contract with Grant. The explanation by Jenny on why she chose to sell the car to Grant illustrate that she does not feel like she has broken any law. Therefore, if at any point Lewis presented the case in a court of law Jenny would be forced to justify that she did not make an offer to Lewis.
Offer
An offer is a form of communication by one party to the other in an attempt to be legally bound by a contract. For the communication to be an offer, it has to be specific, complete and acceptable by the second party[2]. The offer contains the basic and important terms of the anticipated agreement with the intention of no extra negotiations between the two parties. There exist various types of offers. A general offer is subjected towards the society at large. A specific offer is made towards a particular person. In a case where the parties to a contract accept each other’s offer and turn down an original offer, this is considered as a counter offer. A standing offer is one that is made public and remains standing for acceptance for a specified period. It is important to note that it is possible to make a conditional offer. This form of an offer includes terms of conditions that the other party must meet if an agreement is to be reached. An offer differs with an invitation to treat in that the latter involves a mere offer invitation and the parties being offered have the choice to either accept or reject the offer. An advert is a suitable example of an invitation of treat whereby the audience could decide to buy the product being advertised or not buy.
Acceptance
A contract is considered fully binding after the acceptance of the offer. Acceptance can be defined as an unconditional assent communicated to the offeror by the offeree regarding all terms indicated in the offer and the ultimate intention of accepting them. In most cases, the acceptance is final. The acceptance of an offer is ascertained by the behaviors if the parties involved. Any correspondence passed between the two parties help in offering the ascertainment for the acceptance of the offer. For the acceptance stage to be successful with ease, the offeror should not introduce new terms on top of the original ones making the offer[3]. This condition allows the party receiving the offer to make a communication to the offer regarding the offer acceptance. Communication of acceptance by the offeree takes place during the contract formation and has to be in the form of designated by the offeror. However, it would be important to note that the offeror is in a position to demand a specific method of communication of offer acceptance. Where both parties approve the proposed method of communication, the contract becomes effective and valid. If a buyer makes a counter offer and the seller accepts it, the offer is considered valid and acceptance is approved[4].
Revocation
Revocation can be defined as the termination or the withdrawal of an offer. Revocation involves the dismissal of a contractual offer at any time before the communication of acceptance is made[5]. The revocation must take place before the offer is updated about the offer acceptance by the offeree. Revocation can be against the offeror or the offeree. An offeror is in a position to revoke a contract any time before acceptance takes place. However, this may not apply to unilateral offers whereby offer acceptance calls for full performance. In a situation whereby an offer is received and accepted before revocation is received revocation is considered ineffective. The communication regarding revocation is complete as against the party that made it when it is in the course of transmission to the party it is made for purposely to set it out of the hands of the party who made it[6]. The completion of revocation takes place when the letter of revocation is posted for the party revoking. On the other hand, the party receiving the revocation considered revocation complete upon receiving the letter of revocation.
Rules of Offer, Acceptance, and Revocation
In every situation involving Offer, Acceptance, and Revocation, the respective rules are applied with an intent of enforcing an agreement by the law. The agreement forms the foundation for the success of the formation of a contract. Additionally, for two parties to enter into a contract, the offeror must make an offer, and the offeree must accept it. The revolution and development of the business sector in the globe has propelled the establishment of new forms of contractual agreements[7]. The main reason behind this is the establishment of new business models such as global business and e-business. The more the businesses are involved in these new models, the more need it arises for the adaptation to the changes. Subsequently, the Offer, Acceptance, and Revocation Rules have gained popularity contributing towards the adaptation to the changes. These rules work in a unique way and about the pre-stated law. Additionally, these rules have an impact on how business contracts are reached in the modern business environments.
An offer will only take place if one party expresses his or her willingness to contract on specific terms without any additional negotiation[8]. Therefore, an obligatory contract can only be formed after the acceptance of the offer by the offeree. It would be important to note that an offeror can make an offer either expressly or impliedly and an agreement is expected to follow after the acceptance by the offeree. In the case of Chapelton v Barry Urban District Council [1940], there was a display of deckchairs for hire. Additionally, on the beach was an offer open for either acceptance or rejection either by taking or sitting on the chair. In this case, an offer is clear considering that all the terms were pre-stated during the exercise. Therefore, there was no need for any extra negotiations regarding the agreement making acceptance automatic by default. In the case of Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd [1986], an invitation is made on two parties in an attempt to make them purchase shares on highly competitive grounds. The promise was acceptance of the bid from the highest offer. Above is a suitable example of a tender offer whereby the promised accepts the offer from the highest bidder. Contract law notes that an offer can be terminated in various occasions. An offer can be withdrawn any time before acceptance takes place provided there is official communication between the offeror and the offeree. If the offeror dies or a certain period elapses, the offer is considered terminated. In addition to that, in a case where the conditions stated fail, the offer is considered invalid.
The rules governing an Offer distinguish it from and an invitation to treat which include an offer to negotiate, offer to chaffer and offer to receive offer. Different from an offer, an invitation to treat involves an invitation to negotiate with intent to create an offer. The display of goods for sale with an attached price tag for customers is an invitation for them to make an offer to buy them. The following cases are perfect examples of an invitation to treat: Fisher v Bell (1960) and Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd (153). In both cases, the display of goods is not an offer but an invitation to treat. Advertisements, price lists, catalogs and brochures all fall under the category of invitation and are governed by a common general rule. However, the rule notes that an advertisement on a reward for a specific happening is an exception. In such a situation, the advertisement is categorized as a unilateral offer. The Carlill v Carbolic Smoke Ball Co (1893) is a suitable illustration. Advertisements involving rewards for a stolen property that could result in an arrest are also categorized as offers. The same rules on offer depict that the use of media and internet platform for selling products to the public at large is considered as an invitation to treat and not an offer[9]. Even if the media platforms used the word “offer,” the laws considers it differently. The Partridge v Crittenden [1968] case fully fits the situation. Another situation raising questions involves the case of a carrier who issues a ticket to a traveler. In this case, the law considers the act of issuing the ticket as a promise to provide traveling services to the passenger is the offer. However, the advance booking of the ticket makes the traveler the offeror and the carrier the offeree for accepting the booking by the traveler.
The Sales of Goods Act 1979 is keen to categorize offer and invitation to treat in auctions. According to the act, an auction sale is only complete when the auctioneer accepts the highest bid among many. The Payne v Cave [1789] categorizes a bid as an offer whereby the auctioneer has a choice of either accepting or rejecting it. However, the case is quick to note that in a situation whereby a party calls for bids, it is considered as an invitation to treat. The case of Harvey v Facey [1893] noted that a statement of price is not an offer. Instead, it is an invitation to treat if the seller does not bind himself with accepting a certain price. If this is the case, there may be an existing offer that a buyer may accept[10].
For an offeree to accept an offer, all the pre-stated terms in the offer must be accepted and communicated to the offeror. On the other hand, if the offeree calls for variations of some or any of the terms it is considered as a counteroffer and has an effect on the proceedings of the original offer[11]. Also, rules governing contractual proceedings note that an offer should not be available for acceptance at a point where the offeree has already accepted it. Rejecting an offer takes place if the offeree demands new conditions regarding the offer or rather does not want to accept the offer. Additionally, termination of an offer could be as a result of revocation before the offeree accepts it. An offeror can revoke an offer any time before acceptance without breaking the law. However, the revocation is only considered legal if the information regarding it reaches the offeree before accepting the offer. Additionally, the offeror is not the only legal personnel who pass the information regarding the offer to pass by the offeror[12]. It is legal for an offeror to use a reliable third party to communicate the information to the offeree. It would be important to note that an offeror could use a second subsequent offer to revoke the first one. However, this calls for the second offer to have sufficient odds regarding the first one so that it can be accepted[13].
Law application in the case
In the case study, it is evident that all the parties involved entered into a contract independently among each other. Jenny and Lewis made an attempt of entering in a multilateral contract that involved complementary promises between the two. In this case, Jenny made an offer to Lewis with intent of making him purchase her car. Legally, Jenny is the offeror while Lewis is the offeree. Jenny made an offer to Lewis expecting him to make a response in the form of either an acceptance or rejection. Although Lewis did not accept the offer by Jenny, he is expressing his interest in entering into a contract with her by offering a specific time limit. However, it would be important to note that the two did not make any negotiations on the contractual conditions. On the other hand, Jenny did mention the payments that she expected from Lewis in case he purchased the vehicle. Mention the specific amount of money expected from the sale of the car and pointing out the car’s specifications makes it a definite statement amounting to a legal offer[14]. At this point, Jenny as the offering party was legally bound to revoke the offer before Lewis accepted it. According to the contractual law, Jenny was right to approach another customer before Lewis made the official acceptance of her offer. This case, however, could be different if Jenny accepted any payments from Lewis to keep the offer for a specified time. As long as there was neither an acceptance nor this kind of payment, Jenny was right to sell the car to Grant. According to the contractual rights of an offeror, Jenny made the right decision to make the same offer to another party after the first one delayed to make an acceptance[15].
The acceptance of an offer by the offeree makes the contract legal and valid. At this point, any revocation by the offeror translates into a breach of contract and is punishable by the law[16]. In the case, Lewis as the offeree had a right to either reject or accept the offer. Accepting the offer meant that he was unconditionally willing to enter into contract with Jenny. Rejection the offer would automatically lead to the termination of the offer. The fact that Lewis did not do any of the above means that there were chances of the contract being completed or the offeror revoking her offer. Legally, Lewis was hanging on the balance considering that he was financially ready to enter into a contract with Jenny. Lewis may claim in a court of law that by stating that he would come to purchase the following week meant that he had accepted the offer. However, Lewis should be aware that an acceptance calls for an official communication to the offeror.[17] On the other hand, Lewis has a right to defend himself by arguing that Jenny did not offer an official platform for making the acceptance communication. According to the contract law, the offering party should provide the offeree with an official communication channel of his or her preference to make communications regarding acceptance. Lewis did not make a counteroffer making the original offer valid and relevant. Lewis could demand his rights by claiming that the fact that Jenny did not make communications on acceptance makes her legally liable for revoking the offer.
Any time before the offeree accepts the offer, the offeror has a contractual right of revoking it[18]. Jenny made the offer orally and did not demand any acceptance channel meaning that Lewis could use any to accept the offer. In this case, revocation was effective because although the offer was received by the offeree, it was never accepted. Revocation took place before acceptance translating into a legal activity[19]. Jenny held power to revoke the offer made to Lewis and offer a similar offer to Grant (an independent offer) because Lewis had not accepted the offer. Although the sale seemed like a coincidence, Grant was right to purchase the car from Jenny as long as he met the pre-stated conditions. Upon receiving the offer from Jenny, Grant responded with haste by accepting it without demanding additional conditions making it’s a legally effective acceptance. Therefore, Jenny had to fulfill the promises she made to Grant. It is important to note that Jenny did not mention to Grant that she had made a similar offer to Lewis. Therefore introducing a third party to Grant later would be unacceptable both to him and the law[20].
Bibliography
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Deakin, Simon F., and Gillian S. Morris. Labour law. Hart publishing, 2012.
Eisenberg, Melvin A. “The Revocation of Offers.” Wis. L. Rev. (2004): 271.
Furmston, Michael, and Greg J. Tolhurst. Contract formation: Law and practice. Oxford University Press, USA, 2010.
Ijiri, Yuji. Recognition of contractual rights and obligations: an exploratory study of conceptual issues. Financial Accounting Standards, 2008.
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[1] Ijiri, Yuji. Recognition of contractual rights and obligations: an exploratory study of conceptual issues. Financial Accounting Standards, 2008.
[2] Mack, Eric. “Natural and Contractual Rights.” Ethics 87, no. 2 2006: 153-159.
[3] Mack, Eric. “Natural and Contractual Rights.” Ethics 87, no. 2 2006: 151-160
[4] Deakin, Simon F., and Gillian S. Morris. Labor law. Hart publishing, 2012.
[5] Eisenberg, Melvin A. “The Revocation of Offers.” Wis. L. Rev. (2004): 270-274.
[6] Eisenberg, Melvin A. “The Revocation of Offers.” Wis. L. Rev. (2004): 271.
[7] Koffman, Laurence, and Elizabeth Macdonald. The law of contract. Oxford University Press, 2010.
[8] Mack, Eric. “Natural and Contractual Rights.” Ethics 87, no. 2 2006: 171-180
[9] Wooldridge, Frank. “Recent Directive on Takeover-Bids, The.” Eur. Bus. L. Rev. 15 (2004): 147.
[10] Wooldridge, Frank. “Recent Directive on Takeover-Bids, The.” Eur. Bus. L. Rev. 15 (2004): 130-135.
[11] Clarke, Blanaid. “Reinforcing the market for corporate control.” Eur. Bus. L. Rev. 22 (2011): 517.
[12] Quinot, Geo. “Offer, acceptance and the moment of contract formation.” European Contract Law: Scots and South African Perspectives (2006).
[13] Clarke, Blanaid. “Reinforcing the market for corporate control.” Eur. Bus. L. Rev. 22 (2011): 502-510.
[14] Knapp, Charles L. “An Offer You Can’t Revoke.” Wis. L. Rev. (2004): 309.
[15] Knapp, Charles L. “An Offer You Can’t Revoke.” Wis. L. Rev. (2004): 370.
[16] Eisenberg, Melvin A. “The Revocation of Offers.” Wis. L. Rev. (2004): 210-230.
[17] Wooldridge, Frank. “Recent Directive on Takeover-Bids, The.” Eur. Bus. L. Rev. 15 (2014): 147.
[18] Eisenberg, Melvin A. “The Revocation of Offers.” Wis. L. Rev. (2004): 264.
[19] Ijiri, 2008
[20] Quinot, Geo. “Offer, acceptance and the moment of contract formation.” European Contract Law: Scots and South African Perspectives (2006).