First term assignment

On Thursday 17th April, Anthony in Colchester sent a fax to Komputall Ltd in Birmingham offering to buy 500 units of HP 920 Deskjet printers from Komputall Ltds's stock at £150 per unit and asked to be advised of the likely date of delivery. Komputall Ltd replied by letter dated and posted on Friday 18th April that they accepted the offer and advised that the delivery date would be Friday 25th April. On Saturday 19th April, Anthony realised that he could get similar printers from another supplier in Ipswich and he immediately sent another fax to Komputall Ltd withdrawing his offer of 17th April. The offices of Komputall Ltd were shut on the Saturday and they did not see the fax until Monday 21 April. On the morning of the same day, 21st April, Anthony received Komputall Ltd's letter of acceptance dated 18 April.

Komputall Ltd is arguing that there is a contract between the parties and that Anthony is in breach of that contract. Anthony on the other hand is arguing that there is no contract between the parties.

Using examples from case law, answer the following questions:

1. What legal arguments can Komputall Ltd make to support its position?

2. What legal arguments can Anthony make to support his position?

3. Explain how you believe an English court is likely to decide this case?

Nominal Word Limit 1,500 – students are advised to keep their essay close to this limit but shall not be penalised for exceeding it. The word limit does not include the Bibliography or footnote references.

Submission Deadline: Monday 7th December 2009 at 4pm. (Please refer to page 13 of the Undergraduate Handbook).

Sending faxes is classified as an instantaneous means of telecommunication because the average speed of a fax is 6-20 seconds.

‘'My conclusion is, that the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received'',Denning LJ Entores Ltd v Miles Far East Corporation [1955] 2 QB 327 is a landmark English Court of Appeal

http://www.oup.com/uk/orc/bin/9780199207152/koffman_ch02.pdf the name of bookthe phenomena of agreement (i think)

Where the offeror fails to receive the message of acceptance through no fault of his own, but the offeree reasonably (but wrongly) thinks that the message was received, there is no contract (per Lord Denning). Although the Entores Ltd v Miles Far East Corpn (1955) decision is still good law, it should be remembered that the use of instantaneous forms of communication has increased since the time of that decision. There are a variety of ways in which business communications can be made. This was discussed by Lord Wilberforce, in relation to the use of telex, in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 42: ‘The senders and the recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or on the assumption, that they will be read at a later time. There may be some error or fault at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.'

Acceptance By Post

As a general rule, then, an acceptance must be brought to the offeror's attention for it to be effective. However, communication through the post provides an important exception to this general rule. In Adams v Lindsell (1818) the facts were:

D wrote to P offering to sell wool and requested a reply ‘in the course of post'. D misdirected the letter and this caused it to be delayed for a couple of days. On receiving the letter, P replied immediately, by posting a letter of acceptance. After P's acceptance was posted, but before it arrived, D sold the wool to a third party, in the belief that P was not interested.

The court decided that a contract was concluded between D and P when the letter of acceptance was posted by P. This approach might appear to contradict the idea of contracts being based on a ‘meeting of the minds'. In fact, it is a further illustration of the objective, rather than the subjective, nature of agreement in contract law. The ‘postal rule', as it is known, requires some explanation. If a posted acceptance were not effective until actually delivered to (or even read by) the offeror, then this could be unfair to the offeree in the event of his letter being delayed or lost in the post. Conversely, the offeror is at a disadvantage if he is bound by a posted acceptance that has not yet reached him. The law had to choose which party to favour, in postal communications, and for a number of reasons it chose to favour the offeree.

It is worth observing that the rule laid down in Adams v Lindsell (1818) originated at a time when there was no general rule that acceptance need be communicated10. The decision in Adams v Lindsell is defensible, moreover, on the basis that D was careless in addressing his offer and that it was fair for P's action to succeed. Whether this is a sufficient basis for the postal rule that has existed since that decision (surviving a few attempts at its overthrow) is more contentious. Much time has been spent by academics debating the merits and demerits of the rule. But, in truth, it is to some extent an arbitrary solution to the problem of which of two parties should be favoured where they communicate through the post. The argument that it is easier toprove posting than receipt is far from convincing. So, too, is the explanation that it is the offeror Although an offer may be withdrawn at any time before the offeree has accepted it, the withdrawal has to be communicated to the offeree. It is not sufficient for the offeror merely to change his mind without informing the offeree. It should be noted that even where the revocation is made by letter it must still be actually communicated to the offeree. This is in contrast to a letter of acceptance of an offer, which is effective on posting. These rules are conveniently illustrated by Byrne & Co v Leon Van Tienhoven & Co. (1880) 5 CPD 344:

The defendants wrote from Cardiff on 1 October offering to sell a quantity of tinplates to the plaintiffs in New York. On 8 October, the defendants posted a letter withdrawing the offer. On 11 October, the offer reached the plaintiffs, who accepted at once by telegram (and the plaintiffs also confirmed this in writing on 15 October). The defendants' letter of withdrawal reached the plaintiffs on 20 October.

It was decided that the mere posting of a letter of revocation does not amount to an effective communication to the offeree. The plaintiffs' acceptance (on 11 October) completed a contract with the defendants and this was not affected by the defendants' letter of revocation which did not 02-Koff-Chap02.qxd 24/02/07 02:27 PM Page 39 40 Formation of the contract arrive until later. The decision was intended to promote certainty, for if the defendants' arguments had succeeded, ‘no person who had received an offer by post and accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it' (per Lindley J at 348). The case is also a vivid example of the objective view of agreement taken by the law of contract. At no time was there a meeting of the minds in fact, but it was held that there was a binding agreement.

http://www.lawofcontract.co.uk/formation/revoke-postal-acceptance.php

Where there's a posted acceptance which falls within the postal rule1, and the offeree subsequently by some other means attempts to revoke his acceptance by a communication which reaches the offeror before the posted acceptance2, two questions arise: (1) can a posted acceptance be revoked in this manner?; and (2) can the offeror rely on such a revocation?

Where the postal rule applies, a properly addressed acceptance Prima facie dates from posting3. It might therefore be argued that, as the contract dates from posting, the subsequent communication cannot revoke it

www1.doshisha.ac.jp/~tradelaw/formationofcontracts.han.doc

  1. Taking effect of acceptance

On Friday 5 March Buyer sent a fax to Seller offering to buy 1,000 tons of sugar at $500 per ton, this being the current market price. The fax was received in Seller's offices almost instantaneously at 5.00 p.m. Since the fax operator had gone home for the weekend, Seller posted a letter in the last post on Friday, accepting the offer. Although this was sent first class, it did not reach Buyer until 2.30 p.m. on Monday 8 March. Meanwhile, the market price of sugar had fallen. At 9.30 a.m. on 8 March, Buyer sent a further fax to Seller, revoking his offer to buy the sugar. This arrived in Seller's offices almost instantaneously but, since Seller was visiting customers, he did not read it until 3.00 p.m. on 8 March. Has a contract been concluded between Seller and Buyer?

Acceptance takes effect when the letter of acceptance is posted by the offeree – postal rule: Adams v Lindsell (1818) 1 B & Ald 681

In Henthorn v. Fraser [1892] 2 Ch 27, it was held that the postal rule only applies where it is reasonable to use the post. 

  • - This will normally be the case where the offer itself is made by post.
  • - If, on the other hand, the offer was made by an instantaneous mode of communication such as telex, telephone, fax and e-mail, it will not be reasonable to accept by post, unless immediate acceptance is not contemplated.

Byrne v Van Tienhoven (1880) 5 CPD 344

The defendants sent the claimants an offer on 1 October. This offer was received by the claimants on 11 October and they sent off an immediate acceptance. However, in the meantime, the defendants had sent, on 8 October, a letter revoking their offer, which reached the claimants on 20 October. It was held that a contract was concluded between the parties on 11 October. The revocation does not take effect until it reaches the offeree. So the purported withdrawal could not take effect until 20 October.

Aim of the law is to uphold justice and fairness