THE FORMATION OF THE CONTRACT
The law of contract protects the parties under a valid contract. A contract is a legally binding agreement between two or more parties with the intention of creating legal obligations. For a contract to be valid, certain elements have to be present. For instance, offer between the offeree and offeror, acceptance within reasonable time, consideration-often in the form of money, the parties’ intention to create a valid contract, and capacity to contract. Ken got into two separate oral contracts with Tony and Bruce, and a promise of gifts with Barbie. The contracts were oral because he did not have any written agreements with the three parties. However some of the contracts were legally binding, while others could be referred to as gifts.
Contract with Tony
Ken placed an advertisement on his car stating, ‘’New car needed to impress girlfriend. Car for sale in good condition. Offers in the region of £1000 welcome. Call or send a letter to: Old Car Guy, Desperate Street, Lonely Town.’’ The law pertaining to advertisements states that they do not count as offers in contracts[1]. Advertisements are regarded as invitations to treat, which means that if the offeror decides not to sell the item, it would not be deemed as a breach of contract. However, advertisements can amount to offers if they meet three parameters. For instance, the advertisement should contain explicit terms, it should target a specific person or group of people, and the circumstances around the advertisement indicate that the offeror intended to make an offer[2]. In advertisements, the intention of the offeror indicates whether he or she is entering into a valid contract.
The law of contracts in advertisements also indicate that an advert can amount to an offer if consumer protection laws apply. For instance, when selling a car, the offeror should sell at the price agreed upon or below the price in the advertisement[3]. If the offeror sells the car above the advertised price, it would not amount to an offer. An offeror should also ensure that a warranty accompanies an offer if he or she intends of creating a contract with the offeree. A warranty creates obligations that should be met by the offeror, failure to which would result in a breach of contract. Conclusively, courts base their decision on the reasonable man test; this means that if a reasonable man views the advertisement as an offer, it would be considered as one.
There are several cases that highlight the state of advertisements in the law of contract. In the case of Partridge v Crittenden[4], it was ruled, in the appeal, that the advertisement was an invitation to treat and not an offer, hence the defendant’s conviction was quashed. However, in the case of Carlill v Carbolic Smoke Ball Co.[5], the defendant relied on the fact that it is not possible to make an offer to the entire world, and there was no evidence for acceptance. The Court of Appeal overturned the defendant’s reasoning and stated that the advertisement was an offer and Mrs. Carlill had performed the conditions laid out in the offer. In these two landmark cases, there are different ways in which an advertisement can amount to an offer.
Ken’s advertisement contained several elements of an offer. For instance, he stated the reason why he wanted to sell the car, which was to impress his girlfriend. He also stated that the car was in good condition, hence the offeror could rely on that statement as the warranty. He also offered means through which the offeror would contact him, if he or she wished to buy the car. Tony offered Ken £1500 for the car because he was a collector of prestigious cars. The amount was higher than the advertised amount. However, Ken was ambiguous when he stated that he would accept offers in the region of £1000, but it created intent to create a contract. With that, the agreement between Tony and Ken was legally binding.
Contract with Bruce
The postal rule is customary when it comes to acceptance of offers in contracts. The rule applies when the post is indicated as a means of communication in the advertisement. Once the letter is properly addressed and stamped, acceptance is deemed to have taken place once the letter is placed in the post box[6]. The rule further states that the dispatch time is the acceptance time[7]. The rule made it easier to determine the acceptance time, as opposed to assuming that the acceptance time is once the letter is received by the offeror. Even if the letter is destroyed, delayed, or any other unforeseeable circumstances, acceptance is deemed to have been effected once the letter was dispatched[8]. If the offeror does not wish to apply the postal rule, he or she has to indicate it in the offer or advertisement in this case.
In all aspects, the postal rule works against the offeror. For instance, it is impossible to know whether an offeree has accepted the offer and is bound by the contract, unless he or she accepts the letter of acceptance. The offeror also carries the risk attached to communication, even if he or she is not to be blamed[9]. If the letter is not dispatched at a reasonable time, the offeror cannot deny acceptance due to the incompetence of the postal office. The offeror should consider all the parameters before choosing the post office as a mode of acceptance and communication.
The postal rule was brought to light in the case of Adams v Lindsell[10]. In this case, the offeror indicated the post as the mode of communication. The offeree responded on the same day the offer was made and posted the letter. Delays in the postal office prompted the offeror to sell the goods to someone else. The acceptance was established when the offeree posted the letter and it was not the offeree’s fault that there were delays in the postal office. However, there are some instances where the defendants were estopped from using the postal rule. For instance, in the case of Holwell Securities v Hughes[11]. The postal rule is not efficient in the recent years, due to advancements in technology and forms of communication.
Bruce was interested in Ken’s prestigious car, hence he wrote a letter agreeing to purchase the car for £950. However, due to the Lonely Town Postal Service’s strike, delivery of the letter was delayed and Ken had already sold the car to Tony. In contract law, it is deemed that acceptance was effected once Bruce dispatched the letter. Ken cannot deny acceptance based on the delay at the post office. There was a legally binding contract between Ken and Bruce, and Bruce was right to sue for breach of contract.
Contract with Barbie
Consideration is considered as one of the elements of a valid contract. Without it, there is not contract; it amounts to a promise or a gift. A gift is the voluntary transfer of property from one person to another, without consideration. Oral gifts are unenforceable in law, unless the means of possession is stated[12]. For a gift to be considered valid, three parameters have to be met. For instance, the donor must possess the intention and capacity to create an unconditional gift, the gift must be delivered to the receiver, and the receiver must show acceptance, physical or presumed. These guidelines should be met to signify a valid gift.
Legal practitioners are against the donative-promise principle. The reason is that they are unenforceable in court, and they would reduce the emotional aspect attached to gifts[13]. Donative-promises are based on considerations like love, yet they take the contract law route. Legalizing gifts and promises would involve a myriad of processes that go into convincing members of the jury that it is enforceable[14]. However, there are exceptions to the rule. For instance, if the receiver had done something in reliance to the promise and the giver does not meet his or her end of the bargain, the receiver has an enforceable claim in court. The law relied upon in this instance is promissory estoppel[15]. Gifts are more emotional than they are legal; hence it is vital that a clear distinction is created between a gift and a contract in law.
In the case of Kirksey v Kirksey[16], the difference between gifts and contracts was found by the court. The plaintiff asked the defendant to move from her home to his because he had large tracts of land that were under-utilized; the condition was that she should go and see him. She moved to his farm as requested, but he kicked her out and moved her to a dilapidated part of the farm. Once the plaintiff sued, the court ruled that it did not find a valid contract, but a promise from the defendant to the plaintiff. She unfortunately lost the case because she could not tell the difference between a promise and a contract.
Ken gave Barbie his new car as a gift, in celebration of their marriage. He added that he would pay £1000 for fuel and maintenance of the car. Before he got to the car registry, he saw Barbie riding the car with Captain America. He changed his mind and applied for a divorce. Ken actualized is promise to Barbie because there was actual delivery of the gift to Barbie hence it amounts to a valid gift. His feelings were hurt because he saw Barbie with another man but that is not a good reason to go back on his promise and change his mind. His divorce may be granted on infidelity grounds. Barbie sued him for breach of contract for the car and the money for maintenance and fuel. Her claim would get a positive response from the court because she met all the parameters set by the law of contract when considering a valid gift. The agreement between Ken and Barbie was legally binding.
Bibliography
Cases: Adams v Lindsell
Carlill v Carbolic Smoke Ball Co
Holwell Securities v Hughes
Kirksey v Kirksey
Partridge v Crittenden
Dolan C. ‘Is An Oral Promise Of A Gift An Enforceable Contract?’ (Dolan Law Firm, January 5 2017) < dolanlawfirm.com/2017/01/oral-promise/> Accessed 24 May 2020.
E-law Resources. ‘Contractual agreement – offer and acceptance.’ <www.e- lawresources.co.uk/Offer-and-acceptance-contract.php> Accessed 24 May 2020.
Grin. ‘Contract Law. Does the postal rule apply to email?’ <www.grin.com/document/302312> Accessed 24 May 2020.
Lumen. ‘Contract Formation.’ <courses.lumenlearning.com/masterybusinesslaw/chapter/contract-formation/> Accessed 24 May 2020.
Upcounsel. ‘Is an Advertisement a Contract: Everything You Need to Know.’ <www.upcounsel.com/is-an-advertisement-a-contract> Accessed on 24 May 2020.
[1] Upcounsel. ‘Is an Advertisement a Contract: Everything You Need to Know.’ <www.upcounsel.com/is-an-advertisement-a-contract> Accessed on 24 May 2020
[2] Ibid
[3] Ibid
[4] (1968) 2 All ER 425
[5] [1893] 1 QB 256
[6] E-law Resources. ‘Contractual agreement – offer and acceptance.’ <www.e-lawresources.co.uk/Offer-and-acceptance-contract.php> Accessed 24 May 2020
[7] Grin. ‘Contract Law. Does the postal rule apply to email?’ <www.grin.com/document/302312> Accessed 24 May 2020
[8] Lumen. ‘Contract Formation.’ <courses.lumenlearning.com/masterybusinesslaw/chapter/contract-formation/> Accessed 24 May 2020
[9] Grin. ‘Contract Law. Does the postal rule apply to email?’ <www.grin.com/document/302312> Accessed 24 May 2020
[10] (1818) 106 ER 250
[11] [1974] 1 WLR 155
[12] Dolan C. ‘Is An Oral Promise Of A Gift An Enforceable Contract?’ (Dolan Law Firm, January 5 2017) < dolanlawfirm.com/2017/01/oral-promise/> Accessed 24 May 2020.
[13] Ibid
[14] Ibid
[15] Ibid
[16] Ala. Sup. 8 Ala. 131