The Classical Model of Contract Law

The classical model of contract law stated that for a contract to come into existence some specific elements must be present; intention to create legal relations, an offer followed by a matching acceptance, the presence of consideration, privity between the parties and certainty of the terms. Should any of these elements be missing then a contract would not exists. Considering the facts of the above case, we shall focus more on offer and acceptance. We shall see what an offer is, what constitutes an acceptance and how does a contract come into force.

An offer as was differentiated between an invitation to treat in Partridge v Crittenden [1969] 1 WLR 1204 and Carlill v Carbolic Smoke Ball Co. [1892] 2 QB 484 is a willingness to enter into a contract by one party, whereby if accepted by the other then that party is bound by it. An offer does not necessarily have to be made in writing. It can also be implied by conduct; Dawson v. Helicopter Exploration Co. (1955) or orally. When an offer is made by any of the above methods and a matching acceptance is not met, then there is a counter-offer. Such was the case in Hyde v Wrench (1840) 3 Beav 334, whereby the defendant offered to sell his farm to the claimant for £ 1000 but the claimant offered to buy for £ 950 instead of the proposed £ 1000, killing the original offer. Thus, it was held that no contract existed between the parties as the £ 950 constituted a new offer, putting an end to the previous offer. An acceptance however, is a final and unqualified expression of assent to the terms of an offer. It must always be communicated and must not vary from the initial offer, otherwise it is not an acceptance. In the case of Anthony and Komputall Ltd, the facts are similar to that of Byrne v Van Tienhoven (1880) CPD 344. It was decided by the court that a contract came into existence when the claimant posted the acceptance letter despite the fact that the defendant sent a withdrawal letter afterwards. Komputall Ltd could definitely argue that a contract existed between the two parties by firstly using the concept of offer and acceptance of the classical model of a contract. There was an intention to create legal relations when the offer was made by Anthony to buy five hundred DeskJet printers. This offer was accepted by Komputall Ltd when they sent a letter of acceptance upon receipt of the offer letter from Anthony, stating the delivery date for the printers and without making any changes to the original offer. Since the acceptance letter was sent by post, the postal rule applies. Lord Herschell in Henthorn v Fraser [1892] 2 Ch 27 held that as soon as a letter is posted, whether it is received or not, a contract is formed.

“Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.” 1

Another case in which the postal rule was applied was in that of Adams v Lindsell 106 ER 250. In this case the court concluded again that a contract came into force when the letter of acceptance was posted and that the defendants were in breach of the contract. Komputall Ltd could further support this argument by saying that by withdrawing his offer, Anthony, acted to the detriment of Komputall Ltd since they had already made arrangements for the DeskJet printers to be delivered on the 25th of April and following the withdrawal, the company could well suffer from losses. Another rule likely to be applied here is the ‘Mirror- Image’ rule, used to conclude whether there has been an acceptance. Acceptance has to match all the terms of the offer. Unlike in Hyde v Wrench (1840) 3 Beav 334, Komputall Ltd made an acceptance which matched the offer made by Anthony. An English Court would most likely go with the postal rule and the mirror image rule, concluding that a contract was in fact formed when the letter of acceptance was posted.

On the other hand, the classical model of a contract can be used by Anthony to stipulate that there was no contract between Komputall Ltd and himself on the basis that his offer was only an invitation to treat since he asked about the ‘likely date of delivery’ of the DeskJet printers while making the offer, showing that he was not really prepared to buy the DeskJet printers but was requesting more information i.e. the delivery date. An invitation to treat does not constitute an offer but a willingness to enter into negotiations. Parties are not legally bound when negotiating; Spencer v Harding (1870) LR 5 CP 561.To support this, we can have a look at a problem that keeps arising in contract law; the use of modern technology in the communication of an acceptance. It has led to an exception to the general rule that acceptance must be personally delivered to the offeror. In the absence of specific instruction to the contrary by the offeror, a person may mail an acceptance to the offeror and the contract is said to be perfected when the acceptor places this acceptance in the mail box for return mail even if, in fact, it never reaches the offeror. In Holwell Securities v Hughes [1974] 1 WLR 155 the postal rule was bypassed. A similar principle can be applied to this case here, insisting on the fact that delivery of acceptance must reach the offeror for a contract to be formed.

‘the postal rule does not apply in all cases where both parties expect the post to be used to communicated acceptance’ – Lawton LJ 2

A contract is a binding legal agreement made up of an offer and an acceptance. It can be between two people or more. The English court usually adopts the objective test when deciding whether a contract exists between two parties. In Smith v Hughes (1871) LR 6 QB 597, Lord Blackburn said:

‘If, whatever a man’s real intentions may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms’ 3

When deciding this case, the court would look at the classical model of a contract to see if there is a contract as well as apply the objective test, the postal rule, the mirror image rule, have a look at whether each party has been unjustly enriched at the other’s detriment. There is definitely an offer and an acceptance. The postal rule does apply. Any reasonable person would clearly see that a contract was formed when the acceptance was made. There was a clear and unequivocal acceptance of the offer. Therefore, to conclude, there is a contract between Anthony and Komputall Ltd, Anthony being in breach of the contract by making the withdrawal when acceptance was already made.

Bibliography:

1. Ewan McKendrick, Contract Law, Palgrave MacMillan Law Masters, 7th Edition 2007
2. C. Elliott & F. Quinn Contract Law 7th ed. (Longman, 2009)
3. http://0-login.westlaw.co.uk.serlib0.essex.ac.uk/maf/wluk/app/tocectory?stnew=true&sp=ukessex-247
4. Partridge v Crittenden [1969] 1 WLR 1204
5. Carlill v Carbolic Smoke Ball Co. [1892] 2 QB 484
6. Dawson v. Helicopter Exploration Co. (1955)
7. Hyde v Wrench (1840) 3 Beav 334
8. Byrne v Van Tienhoven (1880) CPD 344
9. Spencer v Harding (1870) LR 5 CP 561
10. Adams v Lindsell 106 ER 250
11. Holwell Securities v Hughes [1974] 1 WLR 155
12. Smith v Hughes (1871) LR 6 QB 597