Topic
Nick wrote a letter to Craig saying, “I have heard that you might be interested in buying my Vauxhall Astra motor car. I am prepared to sell it to you for £4000. Please let me know.”
Craig replied in a letter: “Yes, you’re on! Does it have a current MOT certificate? If so, when does it expire?”
Craig’s letter was lost in the post.
Nick wrote another letter to Craig saying: “As I haven’t heard from you, I assume the price was too high. Would you be interested if the price was £3750?”
Craig telephoned immediately, but Nick was not there. Craig left a message on Nick’s answerphone saying, “I accept at £3,750.”
Unfortunately, the message was not heard by Nick, because the tape was full of other messages.
Nick, having heard nothing from Craig, sold the car to Anna.
Advise Craig.
Answer:
If Craig wants to sue Nick to recover damages for breach of contract, he needs to establish a complete, final and absolute binding contract with Nick. He will only succeed if this can be proved. For a valid contract, there must be agreement and for there to be agreement there must first be an offer. In this case, the contract was made, using the rules of offer and acceptance. The clearest way to prove this is to take each communication in turn, and consider its legal effect.
First of all, an offer is made by Nick to sell his car and it is communicated by sending a letter to Craig. An offer can be distinguished from invitation to treat. An invitation to treat is a first step an expression of willingness to enter into negotiations which may, or may not, be a prelude to a firm offer by one of the parties[1]. It usually takes the form of an invitation to make an offer. An offer is an undertaking by the offeror that he or she is prepared to contract with one or more others, on certain terms, which are fixed, or capable of being fixed, at the time of the offer is made[2]. If the case of Bigg v. Boyd Gibbins LTD is applied in the problem, Nick’s letter constituted an offer, which was accepted by Craig, thus making a binding contract[3]. Clearly an offer can not take effect until the offeree has received it.
Nick may raise the argument that Craig’s response changes the terms of the offer. Therefore, the court would regard it as a counter offer as in Hyde v. Wrench where the original offer of £1000 was killed off by an offer to buy at £950[4]. The response was “ Yes, you’re on! Does it have current MOT certificate? If so, when does it expire?” It was a mere request for further information about an offer and does not amount to a counter offer, so the original offer remains open. The effect of an inquiry was considered in Stevenson v. Mclean where Mclean’s offer was not rejected by the telegram but it was merely an further inquiry as to whether Mclean would modify the terms of his offer[5]. We can say that Nick’s offer remains intact here. To fulfill the requirement of the agreement we need to consider acceptance.
Craig sent a letter to accept Nick’s offer. An acceptance is defined as an unconditional assent, communicated by the offeree to the offeror, to all terms of the offer, made with the intention of acceptance[6]. The offeror may require the acceptance to be made in a certain way. If the requirement is mandatory, it must be followed. If the requirement is not mandatory, than another equally effective method will suffice[7]. The general rule which English law has adopted which can be traced back toAdams v. Lindsell, is that in the case of postal communication the acceptance is deemed to be communicated as soon as the letter of acceptance is posted[8]. The postal rule is presently committed to the view that a contract is concluded on the posting of the letter of acceptance even where it gets lost in the post[9].
The difficulties arise when Craig’s letter of acceptance is lost in the post. In a case Craig is not responsible for his letter because Nick has chosen to start negotiations through the post and so the risk of delay or loss in the post should be imposed upon him. Postal rule used to ascertain when an acceptance sent by post takes effect. In Household Fire Insurance v. Grant where Grant had become a shareholder. Acceptance completed when the letter of allotment was posted and it was irrelevant that it never arrived[10]. A logical application of the general rule leads to the result that a contract has been concluded because the acceptance takes effect when it is posted and not when it is reaches the offeror.
There could be no contract by applying the Scottish case of Mason v. Benhar Coal Co in the existing problem[11]. In this problem, no contract came into existence when Craig’s acceptance letter was posted but never reached Nick. Because Craig has sent the acceptance letter, he is in best position to know when his acceptance is likely to reach Nick and to take steps to check that it does so reach Nick. According to the Viscount Professor Treitel who has considered view that if the offeree has incorrectly addressed the letter and the letter does not reach, then the acceptance should not take place on posting. While the offeror may take the risk of delay or loss in the post, he does not take the further risk of carelessness by the offeree[12].
If the postal rule as stated in Adams v. Lindsell and Household Fire Insurance v. Grant were to be applied there would be a contract as a result of the Craig’s acceptance letter. If Mason v. Benhar were to be applied there may be no contract. However, based on present English law’s committed view we can say that Craig’s letter was posted in a proper way and he was not responsible for loss in the post. So the contract was completed when the letter was posted.
On Nick’s side, he didn’t receive the Craig’s letter but it was his duty to keep information of the exchanging transaction even he didn’t know about the letter of acceptance. Therefore, Nick thought his offer was not accepted by Craig so he reduced the existing price of the car. Then, he launched a new offer, which will not treat as a counter offer. The only reason is that the offer did not come from the offeree. If the response of the offeree shows an inclination to contract on terms different from those of the offer then it could be a counter offer[13]. For example, A may offer to sell his guitar to C for £20.But C may accept by changing the terms of the offer. If C explicit, “I’ll give you £15 for it”, C’s answer is a counter offer [14]. However, the response of the offeree is a counter-offer.
Craig replied by telephone and left a message on Nick’s answer phone stating “ I accept at £ 3750”. So this statement was a new acceptance. In this case, communication by instantaneous rule will be applied. Communications by instantaneous means oral, telephone or telex communication. There is no direct authority in English law on the use of answer phones, but it appears from the general rule that acceptance takes effect on communication. The application of this rule to telexed acceptance is contained in the cases of Entores v. Miles Far EastCorporation and Brinkibon v. S. S. Gmbh[15]. Considering the message was left on an answering machine, when should it take effect, and considering the factors mentioned inBrinkibon v. S.S.Gmbh-intentions of the parties, standard business practice- where should the risk lie?[16]. There is no clear answer, but in assessing where the risk should lie, in the fact that Craig reasonably believes that his message has reached Nick but where as his message was not received. He thinks it has. Nick should keep his tape free, which was full of other messages. It is his own fault that he did not get the message. The application of Entores v. Miles Far East corporation where the answering machine of Nick doesn’t catch the words of acceptance, but nevertheless Nick does not trouble to ask for Craig is message to be repeated[17].
The facts were similar with Entores v. Miles Far East Corporation and Brinkibon v. S.S. Gmbh, except that the offer was made by post and accepted by telephone.
There could be no contract by the second acceptance of Craig. The general rule is that acceptance must be communicated. Nick makes an offer by post to Craig and it is clear that a postal reply is expected. Craig must ensure that his acceptance reach’s to Nick. In Entores LTD v. Miles Far East Corporation where Lord Denning gave a graphic example of gaps in instantaneous communication[18]. Thus, if the contract was made by telephone, and A failed to catch what B said because the line is so bad, there is no contract until A knows that B is accepting the offer. On the other hand, the offeror without any fault on his part does not receive the message of acceptance, yet the sender of it reasonably believes it has got to its destination when it has not, then there is no contract [19]. The contract is only complete when the acceptance is received by the offeror[20].
Nick could attempt to revoke his offer. An offer can be withdrawn by the offeror at any time before it is accepted[21]. We don’t know about his revocation but the revocation must be communicated to the offeree. For revocation to be effective in such circumstances, however, the revocation must be communicated to the offeree via a reliable third party[22]. In the case of Byrne v. Van Tienhovenwhere the withdrawal of an offer, which was sent by telegram, was held not to take effect until it was received[23].
From above discussion, it has been concluded that there is only one contract for sale of car by Nick to Craig for £4000. But in the second instance, there is no contract because of the facts there was no complete communication of acceptance of the offer. As the issue of remedies is already discussed fully, here it is inferred that only first contract was made validly. So Craig might claim to Nick for recovering the damages partially. Nick could only be forced to sell the car if the court grants specific performance, and this is only done when damages would be an inadequate way of putting the plaintiff in the position they should have enjoyed if the contract had been performed as agreed. Here this could be done by allowing Craig to claim the difference between the car’s price and the cost of a replacement.
Bibliography
1. Panford, Hilary. Module Study Guide.
2. Atiyah, P. H (1995) An Introduction to the Law of Contract. Clarendon Press.
3. Elliott, Catherine and Quinn, Frances.(1999) Contract Law. Longman.
4. Fifoot, Cheshire & Furmstone’s.(1996) Law of Contract. Butterworths.
5. Hawkins, Barrie with Bage, Grant.(1991) Making Contracts. Kogan Page.
6. Mckendrick, Ewan. (1994) Contract law. Macmillan.
7. Major, W. T. (1993) Law of Contract. The M& E Handbook Series.
8. Mcgregor Harvey (1993) Contract Code. Sweet & Maxwell
9. Poole, Jill.(1999) Case Book on Contract. Blackstone.
10. Richards, H. Paul.(1997) Law of Contract. Pitman Publishing.
11. Stone, Richard (1996) Principles of Contract Law. Avindish
12. Upex, Robert.(1995) Davies on Contract. Sweet & Maxwell
[1] See, Mckendrick, Ewan., Contract law, 3rd edition, p-27
[2] See, Major, W. T, Law of Contract, 8th edition, p-6
[3] See, Cited in Richards, H. Paul, Law of Contract, 3rd edition, p-22
[4]See, Cited in Poole, Jill, Case Book on Contract, 4th edition, p-37
[5] See, Cited in Elliott, Catherine and Quinn, Frances, Contract Law, p-20
[6] See, Hawkins, Barrie with Bage, Grant, Making Contracts, 1st edition, p-20
[7] See, Fifoot, Cheshire & Furmstone’s, Law of Contract, 13th edition, p-49
[8] See, Cited in Mckendrick, Ewan, 3rd edition, p-49
[9] See Upex, Robert, Davies on Contract, 17th edition, p-18
[10] See, Cited in Poole, Jill, 4th edition, p-47
[11] See, Cited in Mckendrick, Ewan, 3rd edition, p-43
[12] See, Loc,cit.
[13] See, Atiyah, P. H, An Introduction to the Law of Contract, 5th edition, p-76
[14] See, Upex, Robert, 17th edition, p-21
[15] See, Cited in Stone, Richard, Principles of Contract Law, 3rd edition, p-31
[16]See, Cited in Upex, Robert, 17th edition, p-19
[17] See, Cited in Elliott, Catherine and Quinn, Frances, 2nd edition, p-22
[18] See, Cited in Fifoot, Cheshire & Furmstone’s, 13th edition, p-52
[19] See, Poole, Jill., 4th edition, p-53
[20] See, Stone, Richard, 3rd edition, p-31
[21] See, Mckendrick, Ewan, 3rd edition, p-46.
[22] See, Stone, Richard, 3rd edition, p-38
[23] See, Cited in Richards, H. Paul, 3rd edition, p-38