Legally Binding Contract

It is held within this case that there was a legally binding contract as there was an acceptance via post and no counteroffer had been made during the negotiations.

An advertisement is generally considered an invitation to treat; an invitation to treat “invites the other party to make an offer ”, this differs from an actual offer as this requires the offeror being bound to the offeree and the offeror is obligated to provide the item in question and there is a binding contract between the two parties. However in the case of an invitation to treat, the offeror invites the offeree to make an offer and it is then at the discretion of the offeror whether they accept it or not. This would preclude any issues that may arise if the demand exceeds supply. Hence the difference between the two is the intention to be bound. Another distinction between an invitation to treat and an offer; is that there is a possibility to continue the bargaining process, where as this would not occur with an offer which has fixed terms to which the offeree becomes bound to, once they have accepted.

It is relatively obvious from this that Adam’s advertisement was merely an invitation to treat to prevent the demand exceeding supply, ergo this is not an offer, and therefore Adam is not bound to give Bob the stamps. Also Adam was not intending to be simply bound to Bob when initially putting his advertisement into the newspaper.

The most notable case to cite would be Partridge v Crittenden (1968) , in which the court stipulated that advertisements were invitations to treat and not offers.

Bob on visiting Adam to see the stamps, told him that he was very interested in buying the stamps, this may be considered as part of the bargaining process and not yet an offer. Adam’s statement that he would reduce the price to £475 from £500 is not considered a counteroffer and therefore Adam’s original terms could still stand, if he so wished. Adam proceeded to tell him that the offer would be open till Thursday, with this both parties would have the right to withdraw beforehand and after that the offer would be nullified if Bob didn’t accept before noon on Thursday. However as stated in Routledge v Grant (2001) , in this case there is no offer and acceptance without consideration, consequently at this point it would still be considered that there is no contract. If Bob had included a “collateral’ contract, which is ‘a subsidiary contract that induces a person to enter into a main contract” however as he did not do so, due to precedent it would be considered that so far there is still no contract.

The distinction between a counteroffer and an enquiry is; a counteroffer is when the offeree introduces a new term into the contract this annuls the original contract, however if the offeree merely makes an enquiry, such as Bob, this does not extinguish the contract. Therefore on asking Adam whether he could pay in two instalments, this would not extinguish the offer.

The appropriate case for this aspect of the scenario is Stevenson, Jacques & Co. v McLean (1880) where the defendant was asking the plaintiff to clarify whether he would modify the terms of the contract, asking if he could pay the 40s over 2 months. In the judgment of this case, Lush J stated “Here there is no counter proposal…there is nothing specific by way of the offer or rejection, but a mere enquiry, which should have been answered and not treated as a rejection of the offer”.

When Adam said no to Bob’s enquiry, this should not be construed as a rejection of the offer as it was merely intimating that he was saying no to the query. Also it may be considered ambiguous as he did not expressly state that he was rejecting the offer.

Bob finally accepted the offer via post; this then created a legally binding contract. The consideration with this contract will be shown when Adam provides the stamps and Bob provides the £475. This also presents the fact that there is an intention to create legal relations, as Bob expressed his interest and then accepted the contract via post and Adam had told Bob that he would keep the offer open to him till Monday. Despite the postman’s illness the onus of risk is on the offeror and therefore if Bob had stamped and addressed the letter he would be subject to the “postal rule”. The postal rule as set out in Adams v Lindsell (1818) , states that acceptance is effective on sending. Therefore as soon as Bob sent the letter there was a binding contract. It was also established that it would be unfair to the offeree if the acceptance was only binding when it reached the offeror, and at the risk of it being lost or delayed in Adams case where due the Postman’s illness had delayed the delivering of the letter, Bob should still have the right to the stamps.

Therefore Bob has the right to the stamps as there is a legally enforceable contract, through the postal rule, due to the information an offer and acceptance is applicable here.