DEAKINUNIVERSITY SCHOOLOFLAW MLL111CONTRACTLAW

Question (Agreement)
On15September,AlanofferedtosellhisvintagecartoHubertfor$5000.Hubert, after inspecting the car, said The car is in excellent condition and Im very interested.IwouldbepreparedtobuyitifIcouldpayinthreeinstalmentsoverthe next three months. Nothing more was said. Three days later, Hubert sent a letter acceptingAlansoriginaloffer. Thefollowingday(19September)HubertlearntthatAlanhassoldthecartoTerry for$6000.Onthe20SeptemberAlanreceivedtheletterofacceptance. HasHubertanactionagainstAlanforbreachofcontract?

SuggestedAnswer
Introduction The issue here is whether a contract exists between Hubert and Alan. There are severalelementswhichmustbesatisfiedinordertoformacontract[forpurposesof thisquestionwefocusonlyonagreementbutinanexamquestionifyouareasked whether there is a contract you would need to go through the other formation elementsaswell] Offer We are told by the question that Alan made an offer to sell his car to Hubert for $5,000 on 15 September. We should therefore assume that this is a valid offer. [Note:weneednotconsiderwhetherornotitcouldbeainvitationtotreatbecause wearetoldinthequestionthatitisanofferitwouldbedifferentifweweretold AlansaidtoHubertIoffertosellyoumycarinthatsituationwewouldneedto assesswhetheritwasinlawanoffer.] CounterofferorRequestforInformation Hubert did not simply say yes or no. He said he was interested and started talking about instalments. Our first (sub) issue is, how do we classify this communication? A counteroffer is a response to an offer, on different terms to the offer, and amountstoarejectionoftheoriginaloffer:HydevWrench;Stevenson,Jaquesand CovMcLean.Itbecomesanewoffer.

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 A mere request for further information does not amount to a rejection of the original offer and it is not capable of acceptance: Harvey v Facey; Gibson v ManchesterCityCouncil. Appliedhere,itisunclearwhetherthestatementthatHubertcouldaffordtobuyby instalmentswasapurportedacceptanceondifferenttermsandthereforeacounter offer or whether it was merely a request for further information try to discern whetherAlanwouldbelikelytoconsidersuchanoffer. If it was a purported acceptance, then it was clearly on different terms to those originally proposed by Alan (because the method of payment suggested was different)andthereforeconstitutedacounterofferandthusrejectionoftheoriginal offer. However,thebetterviewisprobablythatitwasmerelyacommentmadebyHubert abouthisabilitytopayintendedtoindicatetoAlanthathewasinterestedinthecar and endeavouring to discern the likelihood of Alan offering it to him on more favourable financial terms a request for information rather than a counteroffer. Provided this was the case the original offer remained open after Hubert's comments. Morefactsaboutthewayinwhichthecommentwasmade(toneofvoice,formality of the conversation, prior dealings between the parties etc) would be required to reachafirmerconclusionaboutthisissue. [Note: it is quite possible to reach different conclusions about whether this was a counter offer or request for further information. The important thing is for you to identifythedifferencebetweenthetwoandapplyittothefactswithanexplanation oftheeffectineithercaseandyourreasonsastowhyoneviewisthebetterview.If you reach the conclusion that it was a counteroffer, do not stop answering the question deal with the other issues on the assumption that the original offer remained on foot. In your final conclusion you may reiterate that you believe the offer was rejected by way of a counteroffer made by Hubert and could not thereafter be accepted. But do not fail to deal with all the issues that arise in the question.] Acceptance In order for an agreement to be reached, an offer must be accepted. On 18 SeptemberHubertsentaletteracceptingAlansoffer. Acceptancemustbecommunicatedtotheofferor.Whenisalettercommunicated whenitisposted?Whenitisreceived?Thegeneralruleisthatacceptanceoccurs at the time and place it is received: Felthouse v Bindley. However, there is an exceptiontothisgeneralrulethepostalruleexception.

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Thepostalruleexceptionstatesthatifacceptancebypostisclearlycontemplatedby the parties, acceptance will occur when and where posted: Nunin Holdings; Brinkibon. Whether there was a valid acceptance on 18 September therefore depends on whetherthegeneralruleofacceptanceappliesinwhichcaseacceptanceiswhen the letter is received on 20 September or whether the postal rule applies in whichcaseacceptanceoccursatthemomenttheletterwasposted.Thisisacrucial distinctionherebecauseofthepurportedrevocation(discussedbelow). Wedonothavemanyfactsonwhichtobaseourobjectiveassessmentastowhether the parties contemplated acceptance by post. To be certain, more information wouldberequiredaboutanypriordealingsthepartieshad(hadpostbeenusedin thepast?),theformalitywithwhichtheofferwasmade(wouldithaveledHubertto believetheofferwouldremainopenforsometime?)andwhatthenormalmethod ofacceptingofferstopurchasemotorvehicleswouldbe. Onthefactswehaveitislikelythatpostwouldnothavebeencontemplatedbythe parties.Althoughthisisnotclearfromthefacts,itappearsthattheoffermayhave been made verbally. In this case this could indicate that an instantaneous acceptance either on the spot, or by telephone, would have been contemplated. Thenormfortheindustryisalsolikelytobeacceptanceinpersonorbytelephone. [Note: as above, you can express different opinions on this issue but remember to explaintheoutcomeineithercaseandprovidereasonsforyourview.] [Note:youmayalsowishtocommentthattheoffermayhavelapsedinanyevent.] AsaconsequencethepostalrulewouldnotapplytoHubert'sletterofacceptance. Referring back to the general rule, there was no acceptance until the letter was receivedonSeptember20. Provided the offer was still on foot, a contract would have been concluded on 20 SeptemberwhenAlanreceivedHubertsletter. However,acceptanceisonlyeffectivewhenitoccursinresponsetoanofferthatis stillopen,notonethathasbeenvalidlyrevoked. Revocation On19SeptemberHubertlearntthatAlansoldthecartoTerryfor$6,000.Doesthis constituterevocationofAlansofferon15September? Revocation is the withdrawal of an offer. It may occur at any time before acceptance. In order to be effective, revocation must be communicated to the offeree.Nospeciallanguageneedbeused,andanyconductconveyingtheofferor's intentinthisrespectwillbesufficient.Itneednotbecommunicatedbytheofferor. ByrnevVanTienhoven;DickinsonvDodds.

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 Appliedhere,thesaleofthecartoTerryisclearlyanactinconsistentwiththeoffer remaining open it can therefore be considered conduct purporting to revoke his offer to Hubert. However, this revocation will only become effective if/when it is communicatedtoHubert.SinceHubertlearntthatAlansoldthecartoTerryon19 September,atthispointAlansrevocationbecameeffective.

MLL111ContractLaw

Conclusion WhetherHuberthasanactionagainstAlanforbreachofcontractfirstdependson whetheracontractactuallycameintoexistence. ThisdependsonwhetherHubert'sstatementregardinginstalmentsisconstruedasa request for further information (in which case the offer remained open for acceptance or later revocation) or a counteroffer (which would have immediately meant no contract on these facts). Assuming the offer remained open, whether a contract was formed will depend on whether the parties contemplated the use of post or not. If they did not the postal rule will not apply and Huberts purported acceptancewouldnotoccuruntil20Septemberwhentheletterwasreceived(not on 18 September when it was posted as would be the case if the parties contemplated using the post and the postal rule thus applied). By then, however, AlanhadeffectivelyrevokedtheoffertoHubertbyhisconductinsellingthecarto Terry,communicatedtoHuberton19September. Inconclusion,itappearsthatHubertdoesnothaveanactionagainstAlanforbreach ofcontractbecausenocontractcameintoexistence. Suggestedplan

MLL111ContractLaw