Contract Breach Agreement | Free Contract Law Essay
In order to advise Sarah on recent events it would be necessary to establish whether there is a breach of contract between Sarah and Tom and also a breach of contract between Sarah and Dan. A breach of contract will occur where, without lawful excuse, a party fails or refuses to perform an obligation imposed upon it, under the terms of the contract. It also needs to be determined if Sarah managed to revoke her offer with Tom and whether there has been communication with Dan? Other issues that need clarifying are what is a contract? And what is required to conclude a contract?
A contract in law terms is defined as an agreement that legally binds the parties. A party to contract is bound because he has agreed to be bound. For a valid contract to exist between Sarah and Tom and Sarah and Dan, it must be shown that there has been an offer and that that offer has been accepted. In addition there must be an intention from both parties to create legal relations and consideration. So in order to conclude that there is a contract giving rise to enforceable obligations, we must first identify the existence of a binding agreement between the parties.
The first question to address is whether Sarah has made an offer. This involves an examination of what constitutes an offer. Other questions then arise, such as did Tom or Dan accept the offer, or were the offers withdrawn before acceptance could occur? It is also necessary to determine whether the correspondence in question, be it offer, acceptance or revocation, has been effectively communicated, since until such time it cannot take effect. This involves identifying the applicable principle for communication, for example, the general rule may apply and the communication may need to be actually communicated to the recipient. You must then determine whether this in fact happened and if so, determine at what point in time it occurred. In addition, it needs to be distinguished which type of offer has been made. A unilateral offer, is one in which a person promises to do something on specified terms and a bilateral offer is an exchange of promises. The offers concerned come under the description of a bilateral offer.
From what is apparent, Sarah sees Tom's car advertised in the local paper and makes an offer for his car and subsequently a day later sees Dan's car for sale outside his house and in addition makes an offer for that car. In both situations it seems Sarah has tried to revocate her offers in the time scale given.
Tom's advertisement in the local newspaper to sell his vehicle for £2,000 cannot be construed as being an offer, as the general rule applicable to advertisements is that, at least in the case of bilateral contracts; an advertisement constitutes an invitation to treat. An invitation to treat is to be distinguished from an offer as it merely indicates a willingness to deal but does not display an intention to be bound. Thus, to take a standard example, imagine that a vendor of goods advertises them for sale in a local newspaper. The advertisement will generally be regarded as an invitation to treat and not an offer. This principle is demonstrated in the case of Partridge v. Crittenden.
Sarah believing the car looked rather old and dirty offered Tom £1,500. The question here is has Sarah at this instant made Tom a definite offer for his car? An offer, capable of being converted into an agreement by acceptance, must consist of a definite promise to be bound, provided that certain terms are accepted. The offeror must have completed his share in the formation of a contract by finally declaring his readiness to undertake an obligation upon certain conditions, leaving to the offeree the option of acceptance or refusal. It is clear in this instant that by Sarah offering £1,500 for Tom's car she has made a definite offer for his car.
It is apparent Tom sought £2,000 for his car, so refused Sarah's offer but clearly states he will sell her the car for £1,900. The following day after considering Tom's offer, Sarah makes a further offer, on this occasion for £1,800. At this instant in English law, Sarah's new offer becomes a counter offer, as Sarah's new offer has destroyed the original offer, that is, it operates as a rejection of the original offer. A counter offer is an offer made in response to a previous offer by the other party during negotiations for a final contract. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or there is no contract. The acceptance must be unconditional otherwise it is not an acceptance at all, therefore making your offer at present void. It is treated as if it had never been made, so a void contract can have no effect, this theory is demonstrated in Hyde v Wrench. It is evident that Tom has decided to consider Sarah's new offer and communicate his answer to her the following day. The general rule is that the law requires the offeree to positively communicate assent.
Later that day, Sarah makes an effort to phone Tom to revoke her offer but could not get in contact with him. The case of Routledge v Grant states that an offer may be withdrawn at any time before it has been accepted and for this purpose, the revocation must have been communicated prior to the acceptance of that offer.
It is clear Sarah's friend tried to inform Tom of Sarah's revocation of offer, but it is not evident whether Sarah's friend managed to terminate the offer with Tom. Whilst the offeree must communicate acceptance, a third party who is a sufficiently reliable informant may communicate revocation of an offer. Notice of the revocation would not be effective though if it came to the offeree's attention by way of mere rumour or supposition. The case often quoted, as being the authority for this principle is that of Dickinson v Dodds.
It is apparent at 5 p.m Sarah received conformation from Tom by the form of text message, stating that he was prepared to sell his car to her. Tom assured Sarah that he would contact her by phone to let her know his decision, which he has done. However, Tom's prescribed method of communication was stated that he would phone Sarah, not text her. Unless Tom stipulates that this is the only method of acceptance, which suffices, then acceptance by some other means equally expeditious would constitute a valid acceptance. This principle is applied in Yates Building Co V R J Pulleyn & Sons.
The issue here is did the notice of revocation communicated to Tom via an independent third party reach him sooner than 5 p.m. With Tom communicating with Sarah and accepting her offer, it does seem that Sarah's offer was not revoked in time. Perhaps, as Treital suggests, “It would make matters simpler if the rule was that revocation must only be communicated to the offeree by the offeror”.
Without a doubt, there appears to have been an act of acceptance on Tom's part and all the essential elements of a contract appear to have been applied. This also accords with the following definition by Treitel. “An acceptance is a final and unqualified expression of assent to the terms of an offer”. Plus, it is obvious consideration has taken place as Sarah offered money for Tom's car, therefore, something of value has been offered in exchange for getting something from another person. The principle here is that the parties to a contract must each provide something, whether money, the provision of a service or some other form of contribution to the contract.
Additionally, on Friday morning Sarah sees Dan's car for sale for £1,800 or nearest offer. Therefore, as Dan does stipulate that the sale is £1,800 or nearest offer, it suggests that he is inviting persons to make an offer. This as noted above is perceived as an invitation to treat. Sarah leaves a note for Dan telling him she will buy his car for £1,700 and states she will be back at 5p.m. with the money and asks Dan not to sell the car to anyone else.
It could be perceived that Sarah had no communication with Dan, as the general rule is that an acceptance must be communicated to the offeror and the acceptance is generally only validly communicated when it is actually brought to the attention of the offeror. Leaving a note for Dan does not mean he will actually see or read the note therefore the acceptance is incomplete. The operation of this rule was illustrated by Lord Denning, in Entores V Miles Far East Corporation who stated.
“If an oral acceptance is drowned out by an over flying aircraft, such that the offeror cannot hear the acceptance, then there is no contract unless the acceptor repeats his acceptance once the aircraft has passed over”.
However, Sarah was at Dan's address, so when she posted the note it could be seen as an appropriate and reasonable means of communication. This argument is a strong one and it could be said that once the acceptance is posted the offeror can no longer revoke the offer. As a matter of theory any one of a number of possible solutions could be used to ascertain when an acceptance sent by post takes effect. It could be when the letter is posted, when it reaches the address of the offeror, when it is read by the offeror or when in the ordinary course of the post, it would reach the offeror.
The general rule which English law has adopted can be traced back to Adams v Lindsell, which is now understood to stand for the proposition that acceptance, takes place when the offeree posts the letter of acceptance. However the application of the postal rule requires that the letter of acceptance have been posted, addressed and stamped properly. However, today it has become firmly established in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH that acceptance is only affective when the letter is placed in the control of the Post Office, that is, put into a postbox, or handed to an officer of the post authorised to receive or collect letters.
At 4.30 p.m. Sarah sent an e-mail to Dan to revoke her original offer for his car. E-mail messages raise complex questions as such messages are sent via a server and may not be immediately received. Article 11 of the Directive on Electronic Commerce provides that acceptance is deemed to be received when the parties to whom it is addressed are able to access it. As revocation is effective on receipt, Dan might not have received Sarah's e-mail and not knowing of her revocation, the acceptance could still be effective. The case of Byrne v Van Tienhoven demonstrates the principle that an offer to contract cannot be considered withdrawn until the offeree has received it.
In the meantime, Dan refuses an offer for his car from Laura, thinking he already had a sale with Sarah. Since Dan was not to know of Sarah's revocation, the promissory estoppel argument could be considered here. This rule has been established for the protection of the person who should not be put to the trouble or possible expense of rejecting an offer and it is largely based on the dicta of Lord Denning in Central London Trust Ltd v High Trees House Ltd. Lord Denning states the doctrine of promissory estoppel in more accurate terms as:
“Where one party has, by his or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise had been made by him”.
As regards to Sarah's contractual dispute with Tom, he accepts Sarah's offer but in the form of a text message, even though he stated he would inform Sarah of his decision by phone. However, Tom did not prescribe a certain method of communication and because he did not stipulate this, then this would constitute a valid acceptance. However, if Sarah's friend managed to revocate her offer with Tom earlier in the day and ahead of Tom accepting her offer then Sarah is in no breach of contract, as an offer can be revoked at any time before it has been accepted. On the other hand, Tom has followed all the essential elements of a contract and if this dispute went to court, they could assess the situation not from the perspective of the parties, but from the perspective of a ‘reasonable man'. In other , the judge will want to decide if, given all the circumstances, a ‘reasonable man' would believe there to be a contract, Judge Blackburn in Smith v. Hughes stated:
“If whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to terms proposed by the other party, and that other party upon that belief, enters into a contract with him, the man thus conducting himself would be equally bound as if he had agreed to the other party's terms”.
In conclusion, Sarah would be advised to discover if her friend actually revoked her offer with Tom in time, if she did not, then a valid contract does exist, which has now been breached. Hence, Tom will have a claim for breach of contract and may seek a remedy, and usually, every breach of contract will give rise to a right to claim damages. If Sarah's friend managed to revoke the offer in time, the offer, after being revoked successfully is void.
Accordingly, even though Sarah tried communicating with Dan when she sent the e-mail, Dan might not have received the e-mail and not knowing of Sarah's revocation, the acceptance could still be classed as effective. However, it is clearly evident that Dan did not reply to Sarah's offer and the general rule is that silence does not amount to acceptance. Even if Dan had made up his mind to a final acceptance, the agreement is not yet complete as there must be an external manifestation of assent, some spoken or act done by Dan or by his authorised agent, which the law can regard as the communication of the acceptance to the offeror. Therefore, it could be seen that Dan has had no communication with Sarah and has not accepted in response to the offer. The authority for this is said to be the decision in Felthouse v Brindley.
Finally, it could be argued that when Dan refused Laura's offer believing he had sold his car to Sarah, Dan was intending to create legal relations with Sarah. However, even if the estoppel argument holds up in court, for a contract to be finalised all the essential elements must be applied and in this case they have not. There was no acceptance or communication on Dan's part, so it would be advisable to inform Dan, that no contract has been breached as no contract has ever been legally concluded.
- Furmston, M., (2006), Law of Contract, 15th Edition, Oxford: Oxford University Press. Ch. 3&4
- McKendrick, E., (2007), Contract Law, 7th Edition, Oxford: Oxford University Press. Ch. 2&3
- McKendrick, E., (2005), Contract Law Text Cases and Materials, 2nd Edition, Oxford: Oxford University Press. Ch. 2, 3, 4 &7
- Poole, J. (2006), Textbook on Contact Law, 8th Edition, Oxford: Oxford University Press. Ch. 2,3,4,5 &9
- Richards, P., (2007), Law of Contract, 8th Edition, London: Pearson. Ch.2, 3 &4