Legal Forum
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In the case study, Adam advertised his Mercedes Benz for sale, and Barry saw the advert was in interested. Adam made the advert for $30,000 and Barry offered to buy the same for $25,000. Adam could not sell the Mercedes for $25,000, but he had another car, Audi, for sale at $22,500. Barry is interested in the Audi, and he immediately writes a cheque for $22,500 and sends it to Adam accepting to purchase the car. Unfortunately, by the time Adam receives the cheque, he has already sold the car to another person.
The issue that arises is whether there is a contract that has been formed by the conduct between Barry and Adam. If there is a contract that has been formed, it means that Adam is in breach by selling the vehicle to another person. If there is no contract, it means that the parties have no liability towards each other and therefore, Adam will return the cheque to Barry.
A contract is a legally enforceable agreement, and this means that when parties enter into a contract, they are obliged to each perform what is expected of them under the contract, otherwise the aggrieved party can move to court to enforce the agreement. There are some essentials elements that must be present in a contract so that the same can be legally binding and enforceable (McKendrick, 2012). Therefore, the question that arises from the above scenario is whether these basic elements were present, and whether there was a legally enforceable agreement between the parties.
Law and Application
The first essential element of a valid contract is the offer. An offer is an expression of willingness to deal by the offeror in a contract. The offeror should show that he is willing to enter into a legally binding engagement under the terms of the offer (McKendrick, 2012). An offer should be distinguished from an advertisement which is a mere puff by the party. In the case of Partridge v Critenden (1968) 2 All ER 425, the court held that advertisements are mere invitations to treat that invites other parties to make offers. In this case, Adam advertised the sale of his Mercedes and therefore, he was inviting the public, including Barry, to make offers to purchase the car. Barry made an offer to purchase the car at $25,000, which was lower than what the vehicle was advertised for.
There are various ways that an offer is terminated and they include death of the offeror, counter-offer, revocation of the offer and lapse of the specified time or reasonable time as the case may be (McKendrick, 2012). From the above case, it is shown that when Barry made the offer to purchase the Mercedes for a lower amount that advertised for, Adam rejected the offer by a counter-offer. The counter offer was that Barry could buy the Audi for $22,500 since Adam could not sell the Mercedes less than $30,000. In the case of Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109, the Plaintiff offered to sell shares at a certain price. The defendant counter offered with a lower price, which the Plaintiff refused. Six months later, the Plaintiff sought a specific performance to force the defendant to purchase the shares at the counter offer price. The courts, however, refused the Plaintiffs claim on the basis that the counter offer was not an acceptance. The Plaintiff, therefore, could not later seek to accept an offer that had already been refused. The offer that is to be considered whether it was accepted and whether it led to a legally binding contract is Adam’s offer to sell the Audi to Barry.
The second essential element of a valid contract is acceptance. Acceptance has been defined as the expression of willingness to contract with the offeror at the exact terms of the offer. The general rules of acceptance are that acceptance must take place before the offer is terminated. Acceptance must also be communicated to the offeror, and is only effective after communication. Silence cannot also amount to acceptance, even if the offer required silence to be interpreted as acceptance. his was held in the case of Felthouse v Bindley [1862] EWHC CP J35 whereby the plaintiff intimated that if he did not hear anything from the defendant, then he will assume that he had accepted to purchase the horse. Acceptance should also be on the terms of the offer, and any deviation from the terms will mean that the offeree is making a counter offer.T
In this case, Barry made an acceptance to purchase the Audi pursuant to Adam’s offer. However, it is not clear whether the acceptance was valid, and therefore, whether it led to binding relations between Adam and Barry. The acceptance was made on the very terms of the offer and therefore, did not amount to a counter offer. Barry accepted to purchase the Audi for $22, 500 as offered by Adam. In the case of Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401, the court held that acceptance need not be express, and that the court can read from the conduct of the parties when the parties are performing the contract. Therefore, the act of sending the contract amount can be held to be acceptance even if Barry did not communicate that he wanted to purchase the Audi.
However, it is not clear whether the above acceptance is valid. This is because by the time Barry received the communication of acceptance, he had already sold the Audi. This is where it is important to consider the postal rule, which is an exception to the rule that acceptance is only effective when the offeror gets notice of the acceptance. The postal rule was devised in the case of Dunlop v Higgins (1848) 1 HL Cas 381, whereby acceptance of an offer was accepted through the post, but by the time the letter arrived, the owner had already dealt with someone else. The court held that there was a valid acceptance which was effective when the letter was posted. Therefore, the postal rule of acceptance dictates that acceptance through the post is effective once the letter is properly addressed and properly posted, even if the letter never gets to the offeror. However, the rule applied when the parties agreed that acceptance should be through the post, or the post is the most reasonable channel of sending acceptance.
In this case, acceptance was made through the post and the letter reached Adam after he had sold the vehicle to someone else. We are not informed whether the parties had indicated that acceptance should be through the post. However, from the facts of the case, the cheque could only be send through the post since the parties were communicating through email. However, it may also be assumed that Adam expected Barry to communicate his acceptance through email then they would arrange how he would get the cheque.
Another essential element of a contract is consideration which is defined as a gain or a detriment by each of the parties to the contract. Every valid contract must have consideration, but the question of consideration follows that one of a valid acceptance. In this case, if there is a valid acceptance, then there will be consideration because Adam was willing to give up the car and Adam was giving up his money for the contract.
The other essential element of a valid contract is whether there is intention of the parties to enter into legally binding relations. From the case study it can be seen that this was a commercial transaction. In the case of Esso Petroleum v Commissioners of Customs & Excise [1976] 1 WLR 1, the court held that there is a presumption that the parties intent to enter into legally binding relations when they engage in commercial transactions. This presumption can be rebutted by the party alleging that there was no intention to be legally bound.
From the above analysis, it can be noted that acceptance was made through the post, yet it was not the method anticipated by the offeror. Therefore, there was no binding contract between Adam and Barry, and Adam has no obligation whatsoever to Barry. Since there was no contract, then Adam was not in breach when he sold the vehicle to someone else. Accordingly, Adam cannot sue for damages for breach.

McKendrick, E. (2012). Contract Law: Text, Cases, and Materials. Oxford: Oxford University Press
List of cases
Esso Petroleum v Commissioners of Customs & Excise [1976] 1 WLR 1
Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401
Dunlop v Higgins (1848) 1 HL Cas 381
Felthouse v Bindley [1862] EWHC CP J35
Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109
Partridge v Critenden (1968) 2 All ER 425

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