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Published: Fri, 02 Feb 2018
The court uses the Objective test
On the 29th October, 2010 Steven advertised in the NewFocus Paper, “Yamaha Piano latest model, excellent condition, RM15, 000, interested please call 016-1234567″.
On the 1st November 2010, Tanny after seeing the piano, offered RM10, 000 to buy the piano. Steve said “I will not sell it below RM14, 000 and I will not sell it to anyone else before 7th November 2010.”
Tanny went to Australia for a few days and came back to Malaysia on the 7th of November 2010. On the 8th of November 2010, Tanny decided to post a letter accepting to buy the piano for RM14, 000. Steven received this letter on the 11th of November 2010.
Discuss the above issues and explain if Tanny’s letter of acceptance is valid.
On the 29th October 2010, Steven advertised in the New Focus Paper, “Yamaha Piano latest model, excellent condition, RM15,000, interested please call 016-1234567″. Steven is making an invitation to treat instead of an offer because advertise in a newspaper or on a poster, display of goods for sale in a shop window or on the shelves of a self-service store is generally not considered an offer but instead will be regarded as an invitation to treat, since there is no guarantee that the store can provide the item for everyone who might want one.
An invitation to treat is an indication of a person’s willingness to negotiate a contract. In Harvey v. Facey, an indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat. Similarly in Gibson v Manchester City Council the words “may be prepared to sell” were held to be a notification of price and therefore not a distinct offer.
On the 1st November 2010, Tanny offered RM10,000 to buy Steven’s piano after he has seen it. Tanny is making an offer and that makes Tanny an “offeror” (Section 2 (a)) and Steven is the one who being offered which is called “offeree” (Section 2 (c)).
An offer is defined by Treitel as “an 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 to whom it is addressed”, the “offeree”. An offer is a statement of the terms on which the offeror is willing to be bound. The “expression” in the definition refers to those that communicate the basis on which the offeror is prepared to contract. (i.e., letter, newspaper, fax and email).
The court uses the Objective test (Smith v. Hughes) to determine whether the parties have an agreement or valid offer, therefore the ‘intention” referred to in the definition is objectively judged by the courts. In the Smith v. Hughes case, the court emphasized that the important thing is not a party’s real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affects the contract. As a minimum requirement the conditions for an offer should include at least the following 4 conditions: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Without one of the minimum requirements of condition an offer of sale is not seen as a legal offer but rather seen as an advertisement.
On the same day Steven said to Tanny that he will not sell his piano below RM14,000, he is making a counter offer to revoke the original offer made by Tanny. If the offeree rejects the offer, the offer has been destroyed and cannot be accepted at a future time. A case illustrative of this is Hyde v. Wrench (1840) 49 E.R. 132, where in response to an offer to sell an estate at a certain price, the plaintiff made an offer to buy at a lower price. This offer was refused and subsequently, the plaintiffs sought to accept the initial offer. It was held that no contract was made as the initial offer did not exist at the time that the plaintiff tried to accept it, the offer have been terminated by the counter offer. In this case, Steven had turned himself from an offeree to an offeror and made a new offer to Tanny.
Steven also made an unilateral contract to Tanny by saying that he will not sell his piano to anyone else before 7th November 2010. In unilateral contract, only one party to the contract makes a promise. For example: Steven promises Tanny that he will not sell his piano to anyone else before 7th November 2010, Tanny is not obliged to accept Steven’s offer, but Steven is obliged to sell the piano to Tanny if he sent the letter of acceptance within the due date. Tanny will have a contract with Steven if he sent the letter of acceptance before 7th November 2010.
On the 7th November 2010, Tanny came back to Malaysia from Australia and he has not posting the letter of acceptance to Steven. Tanny has to accept the offer for the contract to be effective otherwise the contract will not take place. This is because the contract or agreement cannot be formed without an acceptance, the offer and acceptance must be communicated in order contract and agreement can be formed successfully. The offer between Steven and Tanny can last until 11.59pm 7th November 2010 before it went to expiry, this mean after 1 minute the proposal will collapse and no agreement will be made even if the letter of acceptance has been received by Steven.
On the 8th November 2010, Tanny post a letter accepting to buy the piano for RM 14,000. Action of Tanny has made the proposal made previously expired due to lapse of time; posting rule cannot take place even though Tanny has communicates with Steven because the letter is post after the deadline. Example case: Adam v Lindsett, Tanny’s section 2(c) acceptance letter is not valid because no acceptance was made before the deadline (7th November 2010) and so the deal collapsed as no agreement or contract was made.
The posting rule is an exception to the general rule of contract law in common law countries that acceptance takes place when communicated. The posting rule states, by contrast, that acceptance takes effect when a letter is posted. One rationale given for the rule is that the offeror nominates the post office as implied agent and thus receipt of the acceptance by the post office is regarded as that of the offeree. The main effect of the posting rule is that the risk of acceptance being delivered late or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this risk, he can always require actual receipt as a condition before being legally bound. However, if the offeree mails a rejection and then sends an acceptance (or otherwise changes his mind), whichever communication is received by the offeror first controls. The posting rule applies only to acceptance. A letter is regarded as “posted” only when it is in the possession of the Post Office; this was established in the case of Re London & Northern Bank  1 Ch 220. A letter of acceptance is not considered “posted” if it is handed to an agent to deliver, such as a courier. Postal rule does not stand after due date. An offer can be terminated on the grounds of rejection on the part of the offeree, that is if the offeree does not accept the terms of the offer. Also upon making an offer,an offeror may include as a condition to the contract the duration in which the offer will be available. If the offeree fails to accept the offer within this specific period then the offer will be deemed as terminated. Therefore the letter post by Tanny to Steven is not acceptance letter, it is a new offer offered by Tanny as he want to buy that piano at the price of RM 14,000. Tanny become an offeror and Steven is the offeree.
On the 11th November 2010, Steven received a letter sent by the Tanny. As the previous proposal collapse due to the deadline, the letter post by Tanny cannot be considered as letter of acceptance even if it is received by Steven, the letter post by Tanny will be considered as a new offer to Steven.
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