BLAW204 Business Law from Capital Motors Mary Issue

Bob Broke runs a company which manufactures and sells computer equipment. He relates the following set of facts to you: On 1 January Bob receives an email from Mike Jones which reads: I offer to purchase 30 Toshiba Satellite laptops for $ 300 each, inclusive of GST, delivery and insurance. In response, on 2 January Bob sent an email to Mike saying I accept your offer, but the price would have to be $ 300 plus GST. On 3 January Mike sends an email back saying â€œNo, I can't agree to that. On 5 January Bob then sends an email saying â€œOK, I accept your offer of 1 January, however when he sends the computers to Mike with an invoice for $ 9 000, Mike sends the computers back and refuses to pay for them, saying that he has purchased computers elsewhere.

On 10 January, Bob sends a letter to Tom stating Please send me 200 Pentium 5 hard-drives at $ 50 each. On 12 January Tom puts a letter into the post stating OK I will deliver the hard-drives before the end of the month. Bob subsequently finds that he no longer needs the hard drives, and on 14 January sends Tom an email saying Please cancel my order of 10 January. Tom's letter reaches Bob on 15 January, and the hard-drives are delivered a few days later with an invoice for $ 10 000, which Bob refuses to pay.

Steve has done favours for Bob, such as looking after Bob's cat when he (Bob) went on holiday. On 1 February, Steve says to Bob I need a new computer for my travel agency. Bob says OK, because you looked after my cat, I'll give you a new computer. Bob then changes his mind and says to Steve: Sorry, mate, trading has been bad these last few weeks I just can't afford to give you the computers.

Bob is thinking of buying a delivery van. He has been in negotiations with Capital Motors, whose sales manager is Mary. One Monday morning he sees a form sent by Mary in which she offers to sell him a Toyota Hilux 3000 automatic with airconditioning for $ 33 000. The top sheet of the form contains a line which says I agree to the purchase of this vehicle as specified in this document and with a space for a signature and date. Bob sets the document aside on his desk, and it soon gets mixed up with piles of other paperwork. Later during the day, he signs the form, thinking that it was the front page of another contract he had been sent by a supplier of microchips. He gives it to his office manager, Tim, and says Send this by fax. A few days later he receives a call from Mary asking him when he will pick up the vehicle. He tells Mary that he did not order a vehicle from her. When Mary tells him about the fax, he realizes what happened and tells her that he had sent it by accident and that he never intended to agree to the contract. She says Too bad, we have a deal I have already ordered another vehicle to replenish my stock.

Answer

Mike Jones

Issue

Whether or not, a valid contract was formulated in this case?

Law

When an exchange of promise takes place amongst parties which are more than two in number, for a consideration. There are two broad manners in which a contract can be drawn, i.e., a verbal and a written. Even though, the formation of these two is different, but both of these are equally binding (Mau, 2010, p. 5).

The first element to form any contract is the offer. The offer presents that the parties of the contract have the intent of forming legal relationship. The offer is completed when it is accepted by the party to which it was made (Helewitz, 2010, p. 28). Also, the acceptance has to be made to the offer as it was made. If any change is made in the offer that has been made, it is considered as a counter offer, instead of an acceptance. This was held in the case of Hyde v. Wrench (1840) 49 ER 132 (E-law Resources, 2017).

There are postal rules of acceptance as per which the acceptance can be communicated through post. And the date of acceptance is considered as the date of posting the acceptance letter (Andrews, 2015, p. 51). This is because the postal office is the implied agent of the posting party and an acceptance by them is deemed as the acceptance of the other party. Furthermore, electronic communication is deemed as the digital equivalent of post, and so, the postal rules of acceptance, regarding the date of communication, apply to electronic communication (Stone & Devenney, 2015, p.63).

Along with these two elements, the contract needs to have the elements of consideration, clarity regarding the contracting terms, the intent to formulate lawful relationship, and the contractual capacity of the parties (The Law Handbook, 2016).

Application

On Jan 1, the offer was made. The communication of Jan 2 would be deemed as a counter offer, since the contracting terms were different from the offer. This counter offer was rejected on Jan 3 by Mike. And he stated that the acceptance is made for Jan 1 offer. But, once a counter offer is drawn, the original offer expires. The offer here would be the communication of Jan 5, which remained unaccepted by Bob. Due to lack of acceptance, no contract was formed, and the Mike can rightly refuse the computers.

Conclusion

A valid contract was not formulated in this case.

Tom

Issue

Whether or not, a valid contract was formulated in this case?

Law

(Same as that of Mike)

Application

Through the letter of Jan 10, an offer was made by Bob. And through this very mode, the offer was accepted by Tom on Jan 12. This would be the date of acceptance. The offer had valid consideration. And there is nothing to suggest that the other elements of the contract are not present. Hence, a contract was formed.

Unless the contracting parties mutually decide to rescind the contract, it cannot be done and so the later email of cancellation of letter remained inapplicable. The delivery date of letter, i.e., Jan 15 is irrelevant. Hence, to save from a breach of contract, Bob would have to pay the requisite amount.

Conclusion

A valid contract was formulated in this case.

Steve

Issue

Whether or not, a valid contract was formulated in this case?

Law

As highlighted earlier, consideration is one of the essential elements of a contract. It can be any amount which is decided by the contract parties. Though, there has to be an economic value in it, as was seen in the case of Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1 (British and Irish Legal Information Institute, 2017). The judges accepted the three wrappers as valid consideration due to their economic value. Hence, the consideration has to be sufficient. Also, the consideration cannot be past, or old (Currier and Eimermann, 2010, p. 178).

Application

Applying the law, the cat cannot be deemed as a valid consideration, as in this particular case, it has no economic value. Further, the cat here is a past consideration as Steve looked after the cat whilst Bob was away for a holiday. This means that Bob is not under any obligation to give the computer to Steve, due to lack of a valid contract, for the reasons of presence of past consideration.

Conclusion

A valid contract was not formulated in this case.

Capital Motors- Mary

Issue

Whether or not, a valid contract was formulated in this case?

Law

Only when all the essential elements are present in case, can a valid and legally binding contract be formed (Miller & Cross, 2015, p. 257). Though, once a contract is formed, it can still be challenged on some specified grounds. One of such grounds is mistake, which occurs in case where the contracting parties sign a contract due to the belief that the particular thing was true, even though it was not. When only one of the contracting parties makes a mistake, it is considered as a unilateral mistake. Such mistakes cannot however, invalidate the contract (Lawyers, 2017).

Application

Through the given case study, it can be clearly established that an offer was made by a party, which was later on accepted by the party to which the particular offer was made, and a contract was signed. There was clarity in terms of contract and there was a valid consideration of $33,000. Though, Bob had no intention of forming legal relations. Also, the consent was for the contract with supplier of microchips, and not regarding the Toyota Hilux 3000 automatic. Hence, no contract was formed in this case.

Assuming that a valid contract was formed in this case, it can be rescinded by Bob due to his mistake. He had clearly entered into the contract for the microchips and not for the vehicle. But being a unilateral contract, it cannot be used to invalidate the contract. So, due to the refusal of Mary through Capital Motors, for rolling back the contract, the contract would have to be completed or else would be a breach of the same.

Conclusion

A valid contract was not formulated in this case. Assuming that a contract was formed, a mistake cannot be used as the defense to rescind it.

References

Statutes

Contract Law

Cases

Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1

Hyde v. Wrench (1840) 49 ER 132

Books / Articles / On-Line Modules

Andrews, N. (2015). Contract Law, 2^nd ed, Cambridge: Cambridge University Press, p. 51.

British and Irish Legal Information Institute. (2016). Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1 (18 June 1959). Retrieved from: https://www.bailii.org/uk/cases/UKHL/1959/1.html

Currier, K A, and Eimermann, T E (2010). Introduction to Paralegal Studies: A Critical Thinking Approach, 4^th ed, New York: Aspen Publishers, p. 178.

E-Law Resources. (2017). Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR). Retrieved from: https://www.e-lawresources.co.uk/Hyde-v-Wrench.php

Helewitz, J A (2010). Basic Contract Law for Paralegals, 6^th ed, New York: Aspen Publishers, p. 28.

Mau, S D (2010). Contract Law in Hong Kong: An Introductory Guide, Hong Kong: Hong Kong University Press, p. 5.

Miller, P L, and Cross, FB (2015). The Legal Environment Today, 8^th ed, Stanford, CT: Cengage Learning, p. 257.

Stone, R, and Devenney, J (2014). Text, Cases and Materials on Contract Law, 3^rd ed, Oxon: Routledge, p. 63.

The Law Handbook. (2016). Elements of a contract. Retrieved from: https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/

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