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Published: Fri, 02 Feb 2018
The element of offer and acceptance
What is contract law? The Law of Contract can be defined as the ”agreement between two or more parties, in relation to a particular subject, forms a contract. Contracts can cover an extremely broad range of matters, including the sale of goods or real property, the terms of employment or of an independent contractor relationship, the settlement of a dispute, and ownership of intellectual property developed as part of a work for hire.”(Aaron Larson,2003)
Furthermore, the elements of the contract law includes offer, acceptance of the offer, capacity, consideration, intention to create legal relation and certainty of contract. In order to answer this particular question, it is necessary to discuss the element of offer and acceptance. Generally speaking, when one party makes an offer and another party accepts the offer include its terms and conditions involving the valid consideration, the contract is formed and it is valid.
Whether the letter dated 22 May wrote by David to Robert and Jenny is an offer or invitation to treat?
The first issue need to be considered is whether the letter dated 22 May wrote by David to Robert and Jenny is an offer or invitation to treat. An invitation to treat can be defined as ”an indication that a person is prepared to receive offers with a view to entering into a binding contract, for example, and advertisement of goods for sale or a company prospectus inviting offers for shares.” (ACCA Corporate and Business Law,2010). While an offer can be defined as ”the express or implied statement of the terms on which the maker is prepared to be contractually bound if it is accepted unconditionally”. (ACCA Corporate and Business Law,2010).
When David wrote to Robert and Jenny asking about the sole distributor for the scanner where in a certain circumstances the letter, such conduct is deemed to be an invitation to treat because he is inviting either one of them to become the sole distributor but not offer them to become the sole distributor. It is clear that David made a general offer to either both of them who is interested to become the sole distributor. He is inducing them to become the sole distributor.
Next issue we need to be considered is whether letter dated 24 May made by David is an offer. In this case, the letter dated 24 May is an offer because David expressly stated in the letter to offer Robert to become sole distributor at the basic of 10% commission. It is an express statement that David is prepared to be contractually bound by the letter if it is accepted by Robert.
Another issue need to be considered is what is acceptance? Did Robert accept the offer made by David? In the case of Eliason v. Henshaw 4 Wheat 225, the Court explained acceptance of offer as follow:
“An offer of a bargain by one person to another, imposes no obligation upon the former, until it is accepted by the latter, according to the terms in which the offer was made. Any qualification of, or departure from, those terms, invalidates the offer, unless the same be agreed to by the person who made it. Until the terms of the agreement have received the assent of both parties, the negotiation is open, and imposes no obligation upon either.”
Robert posted a letter to David to accept his offer. The issue arises here is whether such acceptance by post is valid. Hence, it is necessary to consider whether such acceptance by post is valid in this case and how does the postal rule take place? Is it an acceptance when the letter of acceptance is posted or when the offeror accepts the letter of acceptance?
Postal rule might be the worst communication through the post anticipated by the party. It can be defined as ”the acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete as soon as the letter of acceptance is posted, even if the letter is delayed destroyed or lost in the post so that it never reaches the offeror” (Contact Law Page). This principle can be found in the case of Household Fire and Carriage Accident Insurance Co v Grant 187, the court held that the acceptance is effective at the time of the letter of acceptance was sent out, even if the letter never arrives.
In another word, acceptance by letter is valid once the letter of acceptance is posted, regardless whether the letter is delayed, destroyed or never reached the offeror. Hence, Robert”s letter to accept David”s offer is an acceptance when Robert is posted the letter to David regardless when will David receive the letter.
However, since Robert incorrectly addressed the letter and consequently the letter did not arrive until 2nd June, the issue arises whether postal rule will affect by wrong address? Law clearly stated acceptance is completed once the letter of acceptance is posted, even there is delayed or never reach to the offeror. Yet, by applying this rule, one should not rely on this rule when he incorrectly addressed the letter. It is impossible for the offeror to receive such letter and the mistake is not done by a third party but it is done by the offeree himself. Robert did the mistake in the first place, even before the letter was sent out. Hence, the acceptance by letter is not completed.
However, David mentioned that if he heard nothing from Robert by 31st May, he will assume that the offer is acceptable to Robert. Therefore it is necessary to consider whether the acceptance by silence applied in this case since David never receive any reply from Robert.
The acceptance by silence is generally not considered as a binding contract because an offeror cannot impose acceptance merely because the offeree does not reject the offer. By following case of Felthouse v Bindley 1862, there is no acceptance of silence when a contract is made. Hence, when David is making the offer specifically says that Robert”s silence is considered as an acceptance, such acceptance by silent is not valid. There is no acceptance made.
When David telephoned Robert and told him that the post of sole distributor was no longer available. Whether such action by David is amounted to revocation of offer? The offeror can revoke his offer as long as it is before the acceptance is complete. In this case, since there is no acceptance is completed, hence David can anytime revoke his offer.
Therefore, there is no any binding contract between David and Robert because there is no acceptance in this case. Acceptance by silence is not an acceptance and since the letter of acceptance by Robert is incorrectly addressed, the postal rule does not take place at all. David can revoke his offer since there is no acceptance by Robert.
On 20th May, Jenny posted a letter to David in which she offered to become David”s sole distributor for a 5% commission. In this case, an offer was made when Jenny wrote to David to offer herself as a sole distributor. The letter clearly stated that she offered to become the sole proprietor. Hence she is prepared to be contractually bound when David accept her offer.
On 1st June, David received Jenny”s letter and posted a letter to accept her offer. By applying the postal rule as discussed above, an acceptance is completed when David posted the letter of acceptance to Jenny on 1st June.
There is clearly an offer and acceptance between Jenny and David. Hence, a valid contract is considered made and it is binding between Jenny and David.
As a conclusion, there is no binding contract between David and Robert as there is no acceptance in the case. However, there is a binding contract between David and Jenny as there is an offer and acceptance. This is because Jenny has agreed with the agreement which involves the valid consideration, the contract between the parties is valid.
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