23 août 2009
Law of Contract 1st Assignment ( 1 BA legal Science)
1st BA Contract Assignment 2008
Penelope places an advertisement in the Galway Advertiser stating that she wishes to let out commercial premises in the city centre. Anna, who is based in Dublin, sees the advertisement and enters negotiations for the lease. These negotiations take place by means of fax and telephone. Penelope eventually sends a fax setting out all her terms. Anna replies by fax, agreeing to all the terms and stating that the premises must be redecorated at Penelope’s expense before she moves in. She ends with the words “there is no need to contact me”. Penelope replies by letter, saying that she will be happy to redecorate. Due to a partial strike by postal workers, the letter does not reach Anna until five days after it was posted. In the meantime, Anna finds cheaper premises in Galway and sends a fax to Penelope telling her that she will not be leasing her property. Penelope believes that she has a contract with Anna and wishes to sue her for breaching it. Advise Penelope.
The issues which arise in this problem are invitation to treat, counter-offer, and acceptance of a counter-offer, intention to enter legal relations, rejection and the postal-rule. An offer may be defined as a clear, unambiguous statement of the terms upon which the offeror is prepared to contract should the offeree decide to accept. Conversely, statements of terms which do not purport the implementation of a valid contract in case they were agreed to the offeree are called “an invitation to treat”.
An invitation to treat is an expression of willingness to embark on negotiations with the other party to see whether agreement can be reached.
A couple of situations have been considered as an invitation to treat over the years. Notably, the display of goods in a shop window Gibson v Manchester City Council and Fisher v. Bell; the display of goods in a self service shop in Pharmaceutical Society v. Boots Cash Chemists and R. v. Dawood; the advertisements seen in Wilson v. Belfast Corporation and Grainger & Sons v. Gough. In this later, a supply of catalogue for different types of wines by a wine trade was not considered to be an offer.
The general principle regarding advertisements is that they constitute purely an invitation to treat and cannot be held as an offer. This was demonstrated in Wilson v. Belfast Corporation. The same outcome was reserved to the litigant in Partridge v. Crittenden. Nonetheless, some exceptional cases related to advertisements amounted as an offer correspondingly in Carlill v Carbolic Smoke ball and Billings v. Arnott.
Also, auctions and applications for tenders have been viewed as an invitation to treat. This was established in Harris v. Nickerson. Moreover, in Tully v. Irish Land Commission, goods had to be sold without reserve; this represented a mixture of an invitation to treat and an offer. Similarly to auctions, applications for tenders have been treated as invitation to treat in Boyers & Co. v. Duke and Harvey v. Facey.
In general social, domestic and family agreements do not intent to create legal contract; except if it is explicitly defined. This is demonstrated in Smith v. Huges, Balfour v. Balfour and Merritt v. Merritt. Nonetheless, parties engaged to an agreement with a commercial business create legal relations unless the contrary. As in Rose & Crompton and Edwards v. Skyways. In this later, the defendant claimed that the use of the term ``ex-gratia'' understood that it was not intended to create legal relations. But, the court decided that this was insufficient argument to refute the assumption that commercial transactions are contractual.
A counter-offer is a response to an offer, made to the offeror by the offeree, which seeks either to introduce a new term or to vary an existing term of the offer. The effect of a counter-offer is to extinguish the original offer and the counteroffer then becomes the communication that is capable of acceptance. This was confirmed in Jones v. Daniel and Swan v. Miller. It is vital to note that a counteroffer can be accepted in case of request of information as seen in Stevenson v McLean;
Acceptance as a general rule must be communicated to the party making the offer by the party accepting the offer. An acceptance is effective from the moment it is communicated and reaches the offeror. This has been seen in Entorses v. Miller Far East Corporation. However, there are exceptions whether the proper means of communicating acceptance is by post and performance of some acts. The acceptance is valid when the letter is posted. In Kelly v. Cruise Catering Ltd, a valid contract of employment took place at the moment Kelly who lived in Dublin posted his letter of contract acceptance to the company which recruited in Norway. In case of unilateral: Carlill and Billings, communication of acceptance was consumed by act and performance. The mode of communication plays a crucial role in acceptance of an offer as seen in Quener Cluain v. Cole. The mode of communication prescribed should be respected by both parties doing otherwise renders the act invalid. This is seen in Eliason v Henshaw and Tinn v. Hoffmann& Co.
Rejection is one of the ways by which an offer can be terminated. The freedom of contract dispositions give rights to every offeree to reject an offer at any time prior its acceptance.
An acceptance by Post brings in operation the “postal rule” which provide that a contract exits when the letter of acceptance is posted not when it reaches the offeror. In Sanderson v. Cunningham as the contract was not concluded in Ireland the claim failed. The Irish court of appeal held that the contract concluded by posting it in London. Also in Dooley v. Egan. Postal rule does not apply during a strike by postal workers and in the case of revocation.
Penelope’s advertisement in the Galway Advertiser constitutes an invitation to treat.
Nothing clear and specific is mentioned at this stage purporting this invitation to treat to be considered as an offer. Anna who lives in Dublin enters bargain with Penelope for the lease of the property using fax and telephone as methods of communication. In response to the offer, Anna agrees to all terms of the lease but adds news terms in fax message: an obligation for the redecoration of the premise on Penelope’s expense before she moves in.” This is a counteroffer which destroys the initial offer. The plaintiff and the defendant are engaged in a commercial agreement. Therefore, there is presumption to create legal relations, which has not been rebutted, as terms for a lease sent by the plaintiff were agreed by the defendant. Defendant words “No need to contact me” are beside the point and cannot dismiss the contractual aspect of commercial deals. Penelope accepts the counteroffer and communicated to Anna in a letter by post. In general rule, once an acceptance is made it has to be communicated to the other party. Furthermore, an acceptance is effective at the moment it reaches the party who makes the offer. At this stage Anna did not receive any valid acceptance from Penelope; therefore she was under no obligation to terminate the offer by rejection at any time. She communicated to Penelope by fax stating that she will no longer leasing her premises even though communication does not apply on termination of an offer.
It is unclear whether or not there were any prescribed methods of communication of an acceptance. Nonetheless, it is mentioned in this case that negotiations were made through Fax and Telephone. By using post instead of Fax and Telephone considered in this case as instantaneous means of communication, Penelope‘s acceptance of Anna’s counter offer can be seen as invalid as she accepted it by another method.
Penelope’s letter of acceptance reached Anna five days after it has been posted due to a partial strike of postal workers. In the normal situation, Penelope’s letter of acceptance would be completed at the moment she posted it by applying the postal rule. This would make it a valuable acceptance. However, as Penelope’s was sent during a partial strike of postal workers, the postal rule does not apply. As a result, there was no valid acceptance from Penelope and Anna was not legally bound with Penelope offer. In this respect there was no completed contract and no breach of contract.
In summary, the resolution in this case depends on two elements: the acceptance of a counteroffer and the application of the postal rule.
If Penelope’s acceptance of Anna’s counteroffer is effective and valid; the initial offer made by Penelope in which Anna agreed to all its terms by sending a fax, remains alive and a valid contract was completed at that moment. Anna’s termination of an offer by rejection communicated to Penelope by Fax would be considered as a repudiation of contract. If the court decides to treat likewise partial strike by postal workers and absolute strike, therefore the postal rule would not apply and Penelope’s acceptance of Anna’s counter-offer was not communicated to her, prior her decision to terminate the offer. Consequently, Anna’s was not lawfully bound by any contract terms. Her rejection of Penelope’s offer would not be considered as a violation of contract.
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