Law of Contract: Offer and Acceptance

This problem refers to the law of contract and surrounding issues relating to offer and acceptance. Where a party has encountered a detriment, arising from the existence of particular agreements or understandings between two or more parties, it is essential to establish that any agreement relied upon would be given legal recognition (Geldart, W. (1995) Ch. 1) (Bamford, et al (2001-2002) 1-20).

Legal recognition of an agreement, in the area of contract law, is only given where a contract can be said to have been established between the parties to an agreement. It has been noted:

‘Perhaps the most important feature of a contract is that one party makes an offer for a bargain that another accepts. This can be called a ‘concurrence of wills’ or a ‘meeting of the minds’ of two or more parties^[1]’.

In other words, legal remedies will only usually accrue to the individual who is able to establish that a legally binding contract/agreement existed between the two at the time of the events. Otherwise, any losses arising from reliance upon or detraction from any understandings which may have been reached between the parties may not be recoverable through legal processes.

There are many avenues in this problem question where parties may wish to pursue legal avenues to protect their interests. However, in order for a contract to exist between the parties, usually three elements must be shown to be present. These elements of the contract are offer and acceptance and consideration.

Offer and acceptance has been explained in the following terms: ‘There must be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement….An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to contract…^[2]’.

Where just offer and acceptance are present and a contract is abandoned before there is any performance of the terms of the agreement, it is possible to infer that there was a binding agreement between the parties through the identification of offer and acceptance. Therefore, any losses or detriments which may have been incurred as a result of reliance on the existence of an agreement may potentially be recoverable through legal processes (Mc Kendrick (2005) Ch. 1).

There can be no agreement until an offer has been accepted. Therefore the question is: does the letter sent by Quentin amount to an acceptance? Perhaps it is useful to extrapolate the entire transaction in order to find an answer. This is done below.

The advertisement which was placed by Quentin on the 1st of January, is capable of being construed as an offer (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256), which is binding on Quentin.

The acceptance of this offer made by Quentin, in the form of the letter sent by Julian is a valid acceptance, but only if the conditions set out by Julian are met. In this sense, this acceptance of the offer (the letter sent by Julian, accepting the offer made in the advert) is also an offer, which has been made to Quentin. It is an offer in that it sets out conditions which must be met before any invited acceptance is a valid one. It is likely that these pre-conditions are reasonable ones, and would therefore operate to suspend any acceptance being established until the preconditions have been complied with (Financings Ltd v Stimson [1962] 3 All ER 386).

Therefore, in order for there to be an agreement, Quentin must have complied with the conditions set out by Julian for the acceptance of the offer. To comply with the conditions, Julian would have had to have written a letter outlining the intention to accept the offer within one month, of the 2nd of January. Julian did do this, however his letter was delayed by a postal strike. In contract law, the acceptance of the offer takes place, when any letter accepting an offer is posted, not when it arrives. This is referred to as the postal rule, a precedent which was established in English contract law by the case of Adams and Lindsell (1818) 106 ER 250 (KB).

Usually, in contract and in other areas of law, the contract which flows from the principles of offer and acceptance when the acceptance is actually communicated to the offeror, and when the offeror has knowledge of the acceptance by receiving this communication (Entores Ltd v Miles Far East Corporation [1955] 2 QB 327, CA). However, the postal rule within the niche of offer and acceptance contract law deviates from this norm. Adams and Lindsell (1818) 106 ER 250 (KB) also lays the precedent that contracts are created through the acceptance of the offeree, not the communication by the offeree to the offeror.

The postal rule is a rule which may be expressly excluded through the insertion of a clause requiring the offeror to be notified before any acceptance of an offer is legally binding. There does not appear to be such a provision in this case. Therefore, it may be assumed that the postal rule applies to validate the acceptance of the offer, as communicated by Quentin’s letter of the 20th of January.

However, Julian revoked his offer by post on the 19th of January, one day before the valid acceptance was communicated by Quentin. The question arises, is the revocation a valid one?

Where an offer is open and has not been accepted the offer in this state can be revoked at any time. However, the revocation must be reported to the offeree, and a revocation made but not communicated to the offerree is not recognised in law (Byrne v Van Tienhoven (1880) 5 CPD 344). Therefore, because Julian’s revocation was not communicated until the 21st of January, at which point the offer had been accepted by Quentin, it can be argued that the there is a binding contract between Quentin and Julian which promises the services of Lesley Hash to Quentin.

This formation of a contract is arguably only significant if there is an obvious incentive for Quentin to hold Julian to the terms of the contract. Therefore, if there is some special reason why Quentin would prefer to rely upon the agreement between him and Julian, Julian must be aware that he is likely to be bound to the terms of the agreement he set out. Realistically, given that a hypothetical reliance upon the agreement by Quentin would mean that he would have to pay extra fees if Ms Hash’s latest TV show topped the ratings, it is unclear whether Quentin would wish to enforce the terms of the agreement.

Hypothetically, if the agreement were to be enforced, this may give rise to liability on the part of Ms Hash. Ms Hash had no knowledge of the terms of the agreement, and ordinarily this invalidates the terms of a contract. However, acceptance of an offer can be communicated by an authorised third party. It is likely that, Julian as her agent, would be considered in law as an authorised third party and therefore his communication of her acceptance is likely to be a valid one which is binding on Ms Hash.

Presumably Julian should have checked Ms Hash’s schedule before he accepted an offer on behalf of Ms Hash which was binding upon her. Therefore there would be an additional question of liability between Ms Hash and Julian, and perhaps there is a possibility that Ms Hash could argue that Julian had been negligent in accepting the offer on her behalf. There would be a clear case for negligent if, for example Julian had not consulted properly with Ms Hash, or if Julian had simply not checked her schedule properly. However, there is no further information about this in the problem, and therefore it is difficult to say for certain what liability issues may arise between Julian and Ms Hash. This information would, of course be useful to Quentin, should he wish to pursue either party for a legal remedy.

In practical terms because there is such a large interval of time between the required performance of the contract, and because Ms Hash’s fees are likely to be quite significant if her show topped the ratings, there may be scope for an alternative performer to be located in time for the show in July, in which case Quentin may find it advantageous to him, not to enforce the agreement to which Julian is bound.

In conclusion therefore, it is likely that there is a valid agreement between the parties which may be enforced and relied upon by Quentin.

Bibliography

Books

Bamford, K., Bramley, S., Fraser, J., Halberstadt, R., Morgan, A., Norris, M., Pooley, S. and Riddett, R. (2001-2002) The College of Law: Legal Practice Course, Pervasive and Core Topics. Publisher: Jordans. Place of Publication: Bristol. Publication Year: 2001-2002.

Geldart, W. (1995) Introduction to English Law. Publisher: Oxford University Press. Place of Publication: Oxford. Publication Year: 1995.

Mc Kendrick (2005) Contract Law: Text, Cases, and Materials. Oxford University Press. UK.

Website

http://en.wikipedia.org/wiki/Contracts

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^[1] http://en.wikipedia.org/wiki/Contracts

^[2] http://en.wikipedia.org/wiki/Contracts