Who Was in Breach of the Contract?

A contract is between two parties, an offeror and an offeree. If a contract is to be enforceable, it must have all the required elements such as offer, acceptance, consideration, intention to enter into legal relations, etc. The issue of this case is to determine whether there was a contract between Bob and Jack and if there was one, who was in breach of the contract.

Bob has a boat that he wants to sell and has been negotiating with Jack for a few weeks. Bob negotiated with Jack to sell his boat for $40,000. At that point in time, Bob and Jack were still in pre-contractual negotiation and no contract has been formalised. On December 1, Bob wrote to Jack saying that he was prepared to sell his boat to Jack for $40,000. Since this offer was only made to Jack, it is considered a bilateral offer. This case is similar to Boulton v Jones (1857) 2 H & N 564 whereby only the person to whom the offer is made can accept it. Therefore, Bob was communicating to make an offer to Jack. An offer is a proposal and when accepted, it creates a legally binding agreement – contract. This can be found in the case of Taylor v Laird (1856) 56 LJ Ex239.

At the same time on December 1, Jack wrote to Bob saying that he was prepared to buy Bob’s boat for $40,000. The offer that was made to Jack by Bob was not accepted by Jack because he was not aware of Bob’s offer at that time. A party cannot accept an offer if the party is not aware of it. This can be found in the case of Entores Ltd v Miles Far East Corp [1955] 2 QB 327. Therefore, Bob’s offer to Jack and Jack’s offer to Bob can be considered to be cross-offers. This is similar to the case of Tinn v Hoffman & Co (1873) LT 271. At that point in time, there was no contract between both parties.

On December 3, Bob received Jack’s letter of offer and Jack also received Bob’s letter of offer. However, when Bob received Jack’s letter of offer, he rang Jack to tell him that he had changed his mind and would sell his boat for $45,000. This implies that Bob has in fact revoked Jack’s offer. Revocation must be made before the offeree accepts the offer and if the revocation is made after acceptance, it would be considered a breach of contract. A similar case would be Payne v Cave (1789) 3 TR 148. Therefore, Bob communicated his revocation to Jack before he accepted the offer.

Looking at the case from a different perspective, when Bob indicated to Jack that he had changed his mind and would accept $45,000 for the boat, Bob had in fact made a counter-offer to Jack. By making a counter-offer, it is a type of rejection by Bob to Jack’s offer. Thus, this will eliminate the previous offer made by Jack to Bob. This case is similar the one found in Hyde v Wrench (1840) 49 ER 132. After further discussion, Jack made a counter-offer of $42,000 to Bob to buy his boat. Bob agreed but told Jack that he could only deliver the boat after Christmas. As the terms of acceptance do not match the terms of offer, in other words, there is no mirror image of the two, thus, there is no contract. This is similar to the case of Jones v Daniel [1894] 2 Ch 332. Therefore, acceptance must be absolute and unqualified. Jack who was angry after hearing what Bob had proposed, decided to issue an ultimatum to Bob stating that Bob either sell his boat to Jack at the original price or to find another buyer. The mere fact that Bob added a new term by saying that he can only deliver the boat after Christmas indicated that he had rejected Jack’s offer. Therefore, it can be concluded that there was no contract.

In conclusion, neither Bob nor Jack were in the wrong because Bob rejected Jack’s offer when he added new terms and thus, no contract was ever formed. Therefore, there is no breach of contract by either party.