Contract formed in selling an antique table

In answering this question, the main question to be raised is whether there’s a contract formed in the course of Alan dealing with Bill with regards of Bill’s advertisement on selling an antique table.

Offer or invitation to treat?

Generally, a contract is established when there is offer and acceptance, consideration and intention to create legal relations. Before concluding whether there is a contract made between Bill and Alan, there is a need to first consider whether an offer or an invitation to treat has been made.

It is understood that with Bill putting up an advertisement, the general rule is that it is an invitation to treat. By invitation to treat, it is said that an offeror is willing to enter into negotiations which would lead to a formation of contract with the offeree at a later date [1] . Like in the case of Patridge v Crittenden [2] , the offering for sale of Bramblefinch cocks and hens was not an offer because of the limited amount of live birds available for sale. An offer is the expression of willingness to contract on certain terms made with the intention that it shall become binding as soon as it is accepted by the person whom it is addressed to [3] . Had it been an offer, the appellant would be compelled to sell more than he is capable of since anyone can accept his offer and therefore be entitled to a Bramblefinch. It is arguable though that the offer could last ‘while stocks last’ and only if it was made known to the offeree before an acceptance is made.

On another note, an advertisement can also be interpreted as a unilateral offer with reference to the case of Carlill v Carbolic Smoke Ball Co [4] . Here, it is made known that anyone who caught influenza using the carbolic smoke ball gets a compensation of £100. In order to reinforce the public’s confidence towards their product, the manufacturers promised a deposit of £1000 in the bank to show their good faith. Acceptance to the offer is not communicated to the offeror here but is acknowledged as soon as a person has bought the smoke ball and used it.

Relating this to Bill’s advertisement though, an invitation to treat would be more appropriate in describing his way of advertising as antiques are rare and with a ‘mahogany table circa 1780, English’ for sale, it can be said to have invaluable price in an antiques collector’s point of view. Hence, price would definitely be negotiable and a bilateral contract is ceased to exist till an agreement is reached between the offeror and the offeree.

Counter offer or mere inquiry?

Moving on, the next issue to be clarified is whether Alan had made a counter offer or merely inquiring more about the table when he called Bill, stating that he ‘can only pay £2000’ when in fact, as advertised, the table was priced at £2500 upon reading the advertisement on Friday.

Supposing Bill’s advertisement is just an invitation to treat, no counter offer was made. Instead, Alan was making an offer to Bill in accepting his advertised table, only with £500 less. Alan is entering into a negotiation with Bill at the duration of the phone call on Friday.

According to Article 19 of the Vienna Convention, ‘a reply to an offer in which purports to be an acceptance but contains… other modifications is a rejection of an offer and constitutes a counter offer’ [5] . Therefore, with Bill replying Alan that ‘he could not accept less than £2250’ shows that he is making a counter offer with Alan, rather than accepting his offer. A counter offer directly demolishes the original offer as can be seen in Hyde v Wrench [6] where the defendant refused to sell some land worth £1000 to the claimant when the claimant counter offered to buy it for £950 then seek to revert back to buying it for £1000. The defendant is allowed a non- acceptance of the original offer once it has been cancelled.

With that, a new offer is made by Bill and the table is now priced at not less than £2250.

Lock- out agreement

Furthermore, Bill had also included in his counter offer to Alan that the mahogany table in question would not be sold to anyone before Wednesday whilst Alan considered the matter. Is it possible that a lock- out agreement is made between Alan and Bill?

With reference to Pitt v PHH Asset Management Limited [7] , a lock out agreement is made when the vendor confirmed that no further consideration would be given to other offers until ‘there is an exchange of contracts between them within a period of two weeks of the receipt of the contract’. There is a breach of lock out agreement when the draft contract sent by the plaintiff on November 7 was ignored and later withdrawn on November 18. This is contrasted with the court’s decision in Walford and others v Miles and another [8] that the defendants are allowed to negotiate in good faith for a reasonable period during a lock- out agreement. However, consideration for such collateral agreement was no more than an agreement to negotiate and was therefore unenforceable.

Thus, contrasting both cases, a lock out agreement is only valid when all negotiations had been straightened out. Regarding Bill’s agreement to keep the table for Alan from other offers, Alan was only given the consideration to negotiate further. Bill is not legally bound by Alan’s period of consideration in purchasing the table since the agreement was done in good faith.

Therefore, Bill is entitled to a termination of negotiations if he were to sell the table to someone else like what he did when he sold his table to another dealer, Tom, who agreed to purchase it on the originally stated price of £2500 on Monday, two days before Alan was supposed to communicate his acceptance. This can only be done only if Bill has no knowledge of Alan’s acceptance.

Acceptance

On Alan’s acceptance, there are two ways which Alan used in bringing Bill’s attention to his acceptance of Bill’s offer, via telephone and faxing. The general rule for acceptance is that it must be communicated to the offeror [9] . Alan’s first attempt in communicating his acceptance was clearly futile since Bill was not available when the telephone rang.

The question of whether Alan had called Bill during office hours thence arises when it is said that Bill had closed his shop on Monday. No evidence is given as to whether Bill had closed his shop earlier, which is during office hours or otherwise. The issue of communicating acceptance during office hours is crucial because in Mondial Shipping and Chartering BV v Astarte Shipping LTD [10] , a telex of acceptance received on 2341 hours on a Friday night is held to be communicated only on the next working day during working hours, which is Monday. Therefore, Alan’s subsequent step in faxing his message of acceptance to Bill in agreeing to buy the table for £2250, if sent during working hours, is considered to be successfully communicated to Bill.

Still, what happens then when the fax message was dropped into the waste bin accidentally before Bill came across with Alan’s message? A Scottish case, Mason v Benhar Coal Co [11] held that when an acceptance does not reach the offeror, no contract materialised between the offeror and the offeree. The offeree is in the best position of knowing his mode of communicating his reponse that he is in the position to take steps in ensuring such communication reached the offeror. In a more recent Scottish case, Thomas Park and Another v Partial Recall of Inhibition [12] , in contradiction to Mason 1882 [13] , it was held that the postal rule applied to the third of three letters comprising the missives, and that an offer or an acceptance could be communicated validly by fax. With the application of modern postal rule to faxing, it could be said that acceptance is communicated once the message has been faxed.

With two contradicting cases, one must consider whether faxing belongs to instantaneous or non- instantaneous mode of communication. Holwell Securities Ltd v Hughes [14] suggested that the postal rule should not be applied where it would lead to ‘inconvenience and absurdity’ [15] . Faxing overlaps with instantaneous mode of communication and the application of postal rule as acceptance is done on written documents sent over to the offeror.

Hence, it is safer to stick to the general rule that acceptance must be communicated to the offeror and with Alan’s fax message disposed of without Bill’s knowledge; Alan’s acceptance is likely not to be communicated.

Revocation of offer

Revocation of offer is made when an offeror withdraws the offer before it is accepted. Withdrawing an offer through post, especially, gives odd impacts as can be seen in Byrne v Van Tienhoven [16] . The defendants had sent an offer on 1 October but sought to revoke it on 8 October which was not received by the claimants till 20 October. Acceptance has however, been made on 11 October upon receiving the offer by the claimants. The postal rule does not apply to revocation of an offer as it must be communicated so it was held that the defendants had breached a contract made on 11 October by having the revocation communicated to the claimant after the date the contract was made.

Revocation can also be made via a third party too as illustrated in Alan’s case. Alan, having met Tom in the local pub the day after his failure in communicating his acceptance of Bill’s offer, learnt of Bill’s table being sold to Tom. He then immediately posted a letter to Bill, insisting on Bill’s counter offer of selling the table for £2250. Alan’s case parallels that of Dickinson v Dodds [17] , where the defendant has sold a house initially offered to the claimant to a third party and the claimant was informed of such news through a third party. The court held that offer made to Dickinson has been withdrawn and is incapable of being accepted as soon as Dickinson heard of the news that the house he intended to buy was sold. Alan’s offer has already been revoked so it is useless as to him posting a letter, reaffirming his acceptance.

Besides, Bill’s withdrawal of his offer, even though unbeknownst to him that Alan had already known of the revocation, is considered to be communicated to Alan as soon as Alan receives the letter due to the non- application of the postal rule in informing revocation sent by letter. Bill writing to Alan to revoke his offer could be permissible as he was not informed of Alan’s acceptance on Monday, the same day in which he sold the table to Tom. It can be said that Bill did not breach any contract with Alan because offer and acceptance was not fulfilled thus no contract was made on Monday.

Conclusion

It is highly unlikely that a contract was formed between Alan and Bill that Alan cannot really ask for damages. Alan can however, rely on faxing being a non- instantaneous communication that modern interpretation of the postal rule is applied and that is acceptance takes effect once the agreement had been faxed over to the offeror and not when it reaches the offeror. Alan’s insistence on buying Bill’s table for £2500 since Monday can also show that Alan has reached a conclusive point with Bill on Monday that when Bill sells the table to Tom, he is in breach of the lock- out agreement he has with Alan. Tom, in breaking the news of buying the table from Bill can also be seen as an unreliable third party in communicating Bill’s revocation of offer because Alan did not personally examine the table which Tom had claimed that he had bought from Bill.

However, Alan and Bill posting letters to each other at the same time shows a cross offer, illustrated in Tinn v Hoffman [18] . According to McKendrick, ‘there must be a definite offer mirrored by a definite acceptance’. Both of them do not share the same intention in creating the legal relation which contributes to the making of a contract between them.