Overview of Contract Law Provisions
Discuss about the Valid Contract Formed Between Two Company.
- The issue in this case is to determine whether a valid contract had been formed between Swan ValleyCitrus Pty Ltd (SVC) and Fresh Fruits Pty Ltd (FF) on 14th March
- The issue in this case is to determine whether a valid contract had been formed between Swan ValleyCitrus Pty Ltd (SVC) and Fresh Fruits Pty Ltd (FF) if the fax had not reached SVC
The above issue can be addressed in the light of contract law provisions. The contract law provisions which would be put to test in relation to the issue are that of an offer (Invitation to offer, actual offer, revocation of an offer) and Acceptance (Acceptance through electronic media, counter offers and inquires.
Knapp, Crystal and Prince (2016) has stated that an offer is an expression of willingness in relation to getting into a contract based of specific terms, which is made with the intention of binding the other person legally when it has been lawfully accepted. The other person has to be a person to whom the expression has been addressed. It is a statement of terms provided by the offeror on which he wants to be bound.
In the case of Partridge v Crittenden [1968] 1 WLR 1204 the court had to determine whether an act was an offer or an invitation to a offer. In this case the defendant had been imposed with a charge of “offering for sale protected birds” in a news paper. In this case it had been stated by the court that he was actually not offering to sell them. It was stated by the judges that it does not signify business sense to hold an advertisement as an offer as the person who has made the advertisement may be subjected to contractual obligations of selling more goods than he actually has. ‘
Further it had been held in the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 that goods on display for sale in a window of a shop would be considered as an invitation to treat.
The above cases clearly signify that an advertisement for sale of goods is not to be considered as an offer. This means that there is no legal significance of the situation when a person makes an invitation to treat in contract law. No contractual claim may be brought by the parties against an invitation to treat. However when a letter constituting basic contractual terms like price and specification of goods is sent to a person it is considered as an offer.
In the case of Routledge v Grant (1828) it had been stated by the court that at any moment before the offer has been accepted by the offeree the offeror has the right to make a revocation of the offer. Revocation of offer signifies the right of the offeror to cancel the offer and make it no longer available for acceptance. This rule is also valid in a situation where the offer has been revoked by the offeree before the time which was mentioned in the offer as the time of acceptance. In addition it had been specifically provided by the court in the case of Byrne v Van Tienhoven (1880) that communication of the revocation of offer is mandatorily required for the offer to be legally revoked. Moreover if the revocation of the offer has been made through post, it only becomes enforceable when has actually been received by the person to whom the offer had been initially made. In DICKINSON V. DODDS [1876] 2 CHD 463 it was stated that offer may be revoked by time.
The Concept of Offer in Contract Law
According to McKendrick (2014) an acceptance is said to have been made when the person to whom the offer has been addressed agrees in an unequivocal way to be bound by the terms stated in the offer. There must not be any change in the initial offer triggered by the acceptance for it to be valid at law.
Generally, when an acceptance has been made through non instantaneous modes of communication the postal rule is applied to determine when the acceptance has actually taken place. The postal rule as provided by the case of Adams v Lindsell (1818) 1 B & Ald 681 signifies that if the letter is correctly posted and addressed it would it would count as an acceptance when it has been posted rather than when or if at all it is received. However in instantaneous modes of communication the rule is not the same. In the case of Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 it had been stated by the court that where acceptance has been done through fax during the official hours only when the offeror’s fax machine has received the fax the acceptance is made.
A counter offer is any acceptance which has not been made by the party unequivocally. Along with not accounting to an acceptance at all a counter offer by law “kills” the initial offer and it is no longer eligible to be accepted. The provisions of a counter offer had been detailed in the case of Hyde v Wrench (1840) 49 ER 132. In this case the plaintiff lost a claim as he had altered the initial offer of the defendant and thus the offer came to an end.
Where a counter offer ends the initial offer a mere inquiry does not have the power to bring an offer to an end. In the case of Stevenson Jaques & Co v McLean (1880) 5 QBD 345 it had been ruled by the court that a mere inquiry is not a counter offer. A mere inquiry is a simple question which has been asked by the offeree to satisfy any doubts in relation to the offer.
Application for issue A
In this section of the paper the issue would be determined by a step-by-step approach based on the above discussed rules.
Firstly it has to be determined that whether the letter sent by SVC is an offer or an invitation to treat. The letter which had been sent by SVC to FF contained terms in relation to the quantity of fruits which are available for sale and the price of orange per metric ton. In the given situation it can be stated that the letter contains adequate details to make it an offer and not an invitation to treat. Further it has been sent in from of letter and thus the intention of creating a legal obligation on the part of SVC is also clear. Thus the letter sent by SVC is an offer which if accepted on time will establish the formation of a valid contract.
The Concept of Revocation of Offer in Contract Law
A letter had been sent by FF to SVC on 6th march, the purpose of which was to “inquire” about packaging details and quality of the oranges in context. However there was no reply made by SVC to the letter. In the given situation SVC cannot claim that a counter offer has been made by FF. This is because a counter offer as per the case of Hyde v Wrench has to have additional terms in relation to the initial offer which was not present in the letter sent by FF. Thus the letter is merely an inquiry and as per Stevenson Jaques & Co v McLean and it has not defeated the initial offer which is still eligible to be valid before the time provided by it.
There has not been any revocation of offer made by SVC in the given situation which they may have relied on as a defence in the claim as per the provisions of Byrne v Van Tienhoven and Routledge v Grant.
The time of acceptance as provided by the offer was within 14 days of 1st march. It has been provided that the letter of acceptance had been sent by FF on 14th March, which is on time in relation to the actual time of acceptance provided by the offer. The acceptance has been made through Fax. It has been discussed above that inquiries do not constitute a counter offer and do not bring the original offer to an end. Thus the inquiry made on 6th march will not be a counter offer and the offer is valid to be accepted before time. In the given situation there has been no revocation of offer by SVC thus FF have the right to accept the offer before time which they have done. Thus there is a valid contract between FF and SVC in relation to the first issue in context.
On the other hand there has also not been a valid acceptance when the situation of the second issue is analysed. In this situation if the fax had been sent on 14th March then it would have been a valid acceptance and a contract had been formed between the parties only if the fax had reached the fax machine of SVC according to the Entores Ltd v Miles Far East Corporation case. However it has been stated in the situation that the fax did not reach SVC due to transmission error and thus it would not be counted as a valid acceptance.
Conclusion
Thus form the above discussion it can be stated that a valid contract between SVC and FF has not been formed in both the situation. The reasons for this are below
- In this situation the offer has been accepted on time before any revocation and thus there is a valid contract between FF and SVC.
- In this situation the acceptance was not valid as per the rules of electronic communication because it did not reach the fax machine of SVC
References
Adams v Lindsell (1818) 1 B & Ald 681
Byrne v Van Tienhoven (1880)
DICKINSON V. DODDS [1876] 2 CHD 463
Entores Ltd v Miles Far East Corporation [1955] 2 QB 327
Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401
Hyde v Wrench (1840) 49 ER 132
Knapp, C. L., Crystal, N. M., & Prince, H. G. (2016). Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Partridge v Crittenden [1968] 1 WLR 1204
Routledge v Grant (1828)
Stevenson Jaques & Co v McLean (1880) 5 QBD 345
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