Contracts Between Parties | Free Contract Law Essay

For a valid contract to exist between two parties or more, it must be shown that there has been an offer, and that the offer has been accepted. In addition, there must be an intention from both parties to create legal relations, and consideration. In commercial agreements such as the agreements between Bertram and Simon, the intention to create legal relations is usually presumed to be present unless there is strong evidence to suggest the contrary; Edwards v Skyways (1964), and the consideration for the parties will be the candle sticks on Simon's behalf and money on Bertram's behalf; Currie v Misa (1875).

The first concern in this case would be to determine the form of the offer made by Simon to Bertram. We do not know whether it was a unilateral offer; Gibson v Manchester City Council (1979), as the previous auction for the candle sticks almost certainly was, or a bilateral offer. If it were only an invitation to treat, Simon would be free to accept or reject any offer, and an acceptance by Bertram would not be binding as in Fisher v Bell (1960). Nevertheless, judging by Simon's response to Bertram's letter of 19th September, it can be assumed that Simon's offer was meant as a bilateral offer to Bertram.

Simon can withdraw his offer at any time until it is accepted, Payne v Cave (1789). His letter of 18th September states that the offer “would remain open until September 25”, but this is merely a condition of acceptance and would only be enforceable if it were supported by separate consideration; Mountford v Scott (1975). In order to withdraw the offer, Simon's revocation must be communicated to Bertram before the offer is accepted; Byrne v Van Tienhoven Co (1880) and selling the items to a third party within this time without first revoking the offer would be a breach of contract.

For the offer to have been converted into a contract, one must ascertain whether Bertram's letter of 19th September constitutes a counter-offer or an enquiry. If it is an enquiry, the original offer would remain intact; Stevenson, Jacques & Co v McLean (1880), however if it is judged that Bertram is introducing new terms to the contract, the original offer would be destroyed and his letter of 22nd September would not be capable of accepting the original offer as in Hyde v Wrench (1840), then Simon would be reasonable to sell the candle sticks to Charles.

In this case, it might be judged that the grammar used in Bertram's letter bears closer resemblance to an enquiry as he asks a question rather than makes a statement of intent, for example “would you be prepared to accept £1000?” and not “I am prepared to pay only £1,000”.

The next matter which will need to be assessed is whether Simon was successful in revoking his offer upon receiving Bertram's letter of the 19th September. As previously stated, the revocation would need to be communicated, as Bacon VC commented in Dickinson v Dodds (1876) a Defendant cannot say “I made up my mind that I would withdraw, but I did not tell the Plaintiff”. Also, the communication need not be communicated by the offeror personally; it is sufficient that it is made via a reliable third party. In this case, Simon requested his secretary to telephone Bertram which would seem to be acceptable.

The courts will need to ascertain whether it was fair for Simon to assume that the message to revoke had been communicated to Bertram. By using a telephone, this is an instantaneous method of communication, effective on receipt; Entores v Miles Far East Corp (1955). However, it can be assumed that the call was made out of office hours as a cleaner answered the phone. In Brinkibon Ltd v Stahag Stahl (1982), the House of Lords stated that a telex message sent outside office hours would not be considered instantaneous receipt but taken to have been communicated when it would normally have been read (or listened to) in the ordinary course of business.

Furthermore, in Brinkibon: The Brimnes it was held that there was no actual requirement that it be read by any particular person within the organisation.

Nevertheless, it may be argued in this case that the message was not accessible at the start of the next business day, for example if it was not written down by the cleaner, or imparted to someone else. Denning LJ in Entores stated; “where the offeror without fault on his part does not receive the message of acceptance – yet the sender of it reasonably believes it has got home when it has not – then I think there is no contract”, so Bertram might successfully argue that the message was not communicated to him, in which case the fault would lie on Simon's side since his secretary did not check that the cleaner passed the message to Bertram.

With reference to Bertram's acceptance letter of the 22nd September, received by Simon on 27th September, it would be fair to apply the postal rule as first established in Adams v Lindsell (1818) as Simon did not specify that acceptance must be communicated to him as in Holwell Securities Ltd v Hughes (1974). According to Quenerduaine v Cole (1883), it might be argued that Bertram should have used the telephone as method of his communication of acceptance as the original offer was made by this method, however Bertram could argue that Simon implied that post would suffice by communicating by post on Bertram's request.

The crux of this case is determining whether Bertram's letter of 19th September was an enquiry or a counter offer. If a court were to find it to be an enquiry, Bertram's acceptance dated 22nd September will be binding at the point of postage, within the time limit set by Simon, and by selling the candle sticks to Charles a breach of contract has occurred. Whether Simon successfully revoked the offer on 23rd September would be immaterial as the offer would have already been accepted. On the other hand, if Bertram's letter of 19th September is found to be a counter offer, Simon is not party to this new contract as he has not accepted the counter offer and could not be in breach by selling the candle sticks to Charles.

An award of damages is the usual remedy for breach of contract. If Simon were to be found in breach, Bertram is likely to be limited to claiming damages which would put him in the same position he should have enjoyed had the contract been performed, calculated as a loss of expectation; Hill & Sons v Edwin Showell & Sons Ltd (1918). This could be achieved by allowing Bertram to claim the difference between the ‘On Market Value' of the candle sticks, which may or may not be £1,300, and the contract amount of £1,200. In this case it does not seem that Bertram would require compensation for losses incurred due to a reliance on performance of the contract; Lloyd v Stanbury (1971) although these might be achievable.

Had Alice's message been left with Bertram's secretary instead of with the cleaner, the issue of revocation would be clarified. Circumstances would now imply that the communication was made during working hours, and Bertram's secretary would be an authorised messenger. The courts are reluctant to defend parties who fail to receive messages through their own fault, such as Denning LJ in Entores “…the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated…” It seems that in these differing circumstances Simon would be able to successfully defend the case of revocation; however this would still not have a bearing on the result of the case if Bertram's letter of 19th was judged to be an enquiry for the reasons previously discussed.



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