Contract Law Case Study Assessment Answer

Key Topics

• Facts
• Issue
• Rule of Law
• Analysis
• Conclusion
• References

Case Study Analysis

Facts

Alan is a rare stamp collector and found that Bob have stamps which he thinks to be of high value and on payment of certain amount he wants to collect those from Bob. Charles informed Bob that the stamps are the forged ones, and Bob then tells some other bigger amount to Alan, than what Alan previously told. Alan was not in a position to pay that hefty amount and seeks Debbie’s help. Debbie was with the exact amount Bob asked for, but Bob did not want to sell the stamps to Debbie. 

Issue

Whether Debbie have any legal rights against Bob and Alan and can she be remedied against them. Whether, Debbie can bring any legal action against Bob and Alan and what will be the possible defenses that could be raised by Alan and Bob.

Rule of Law

In order to form a contract there are certain elements which need to be look into at the very onset of it. The requirements for a valid contract is that, there must be an offer or a promise by the offeror or the promisor, secondly there should be the acceptance of such offer, thirdly there must be a consideration moving from the offeree to the offeror, 4thly there must be an intention to create legal relation, 5thly the parties to the contract must have the capacity to enter into the contract, 6thly the object of the contract must be a valid and a legal one. Again, there is another part of Contract Law, which covers the third-party beneficiary. A third-party beneficiary is an aspect of contract law, where the two parties enter into certain agreement to benefit a third person. Under common law system, this is called the privity of contracts, where the third party is the beneficiary, but that did not allow the third party to enforce the contract, due to the fact that the third party is not at all party to the original contract. But, as of today the Courts do allow the third parties to enforce the agreement, if the agreement was made for their benefit. The 1st Restatement of Contracts (Restatement (First) of Contracts § 133 , 1932), recognized that the third parties have separate and independent rights for certain contracts (IGNACIO MARTINEZ v. SOCOMA COMPANIES, INC., 1974), and defined two categories of third party, namely the creditors and the donees, but this categorical exclusion led the Court in to interpretive difficulties. The Restatement (2nd) of Contracts (RESTATEMENT (SECOND) OF CONTRACTS § 302 , 1979), applied the intent to benefit test to resolve the dispute arising out of the claims by the third party which are not vested but specifically stated (Central Nat'l Bank v. Hume, 1888).

Analysis

In the present facts of the case, Alan offered Bob a sum of $500 for stamps, then Bob upon consultation with Charles, informed that he will sell only for $8000, which amounted to counter offer, which extinguishes the previous offer so made by Alan was held in (Michael M. NORMILE and Wawie Kurniawan and Lawrence J. SEGAL v. Hazel Elizabeth MILLER, 1985). Thus, based on this there is no contract between Alan and Bob. But, Alan accepted the new offer so put forth by Bob, not expressly but is a constructive or implied acceptance, since Alan in furtherance to the offer so put forth by Bob, sought Debbie’s help in paying the sum Bob asked for, which amounts to valid acceptance, done by Alan was held in (BROGDEN V METROPOLITAN RAILWAY CO, 1877) and (Butler Machine Tool v Ex-Cell-O Corporation , 1979). So, there is an offer and that offer is accepted, and there is also the presence of the consideration, which will move from Alan to Bob, and intention to create legal relation is also present between Alan and Bob. But, as soon as Debbie comes into the picture, she becomes either the creditor or the donor, which is unclear from the facts of the case. The facts state that Debbie pays $1000 to Alan, but do not state the purpose, so it is not clear and thus Debbie can either be a creditor or can also be a donor, but whatever may be her position, her sole intention is to help Alan out of the situation, and thus benefitting him. So, here Alan is the beneficiary and the Debbie’ intention to benefit Alan also supports the test put forward by the Restatement (2nd) of Contracts (RESTATEMENT (SECOND) OF CONTRACTS § 302 , 1979). Hence, Debbie voluntarily undertook the obligation to benefit Alan, and so both Alan as a third- party beneficiary and also Debbie being the new can bring legal action as against Bob, subject to satisfaction that the original offer by Bob do not get extinguished by the passage of time, which did not happen in the present facts of the case, since Debbie did turn up on 1st July as mentioned by Bob. So, Debbie will have an action as against Bob and on the same balance Alan too will have a cause of action as against Bob. But, as against Alan, Debbie cannot have a case, however she can always claim the amount of $1000 she already paid Alan, if the amount was not in the form of gift. So, both Alan and Debbie from individual stand point can sue Bob due to the breaches on his part in doing the performance for the promise so made. 
The possible defenses which can be raised by Bob is that if the contract is enforced then there can be violation of public policy (Mario DiGESU and Catherine Digesu v. Wilfred Weingardt, 1978), and Bob can also raise the defense that the performance of the contract was not possible and the contract has become frustrated or the contract cannot be performed due to the illegality or that it was obtained by means of fraudulent activities. Bob can also defy his case stating that there was a mistake, and can also raise unilateral mistake as against Alan. 

Conclusion

So, based on the facts of the case, Debbie will have an action as against Bob and on the same balance Alan too will have a cause of action as against Bob. But, as against Alan, Debbie cannot have a case, however she can always claim the amount of $1000 she already paid Alan, if the amount was not in the form of gift. So, both Alan and Debbie from individual stand point can sue Bob due to the breaches on his part in doing the performance for the promise so made and the defenses can also be raised by Bob, and will range from contract which if enforced can be subjected to the violation of public policy and Bob can also raise the defense that the performance of the contract was not possible and the contract has become frustrated or the contract cannot be performed due to the illegality or that it was obtained by means of fraudulent activities. Bob can also defy his case stating that there was a mistake, and can also raise unilateral mistake as against Alan. Despite the fact that the benefits test is as yet utilized and enables the promisor and the promisee to release or adjust an obligation to an expected recipient unless an express term in the first contract gives actually, the privilege of the lender recipient to recuperate is currently entrenched. So, a coincidental recipient can't recoup on an agreement, since the gatherings did not mean to profit him. This is basically another method for saying that the parties to the agreement had no goal of vesting rights in the agreement in the claimed recipient. In the event that the agreement is quiet, in any case, such an energy to alter or release ends when the recipient, changes the position, and moving toward this issue from the perspective of the goal of the gatherings, as opposed to from the expectation to profit edge, would deter this trouble and substantially changes the situation in reasonable dependence on the guarantee or expedites suit it or shows consent to it at the demand of the promisor or promisee. Despite the fact that the guarantee may have never wish to advantage him, still, he wanted and expected, for solid and great reasons, that execution ought to be rendered to the lender. 

References

BROGDEN V METROPOLITAN RAILWAY CO, [1877] 2 AC 666 (HL 1877).
Butler Machine Tool v Ex-Cell-O Corporation , [1979] 1 WLR 401 (Court of Appeal 1979).
Central Nat'l Bank v. Hume, 128 U.S. 195, 206 (1888) (1888).
IGNACIO MARTINEZ v. SOCOMA COMPANIES, INC., 11 Cal. 3d 394, 521 P. 2d 841, 113 Cal. Rptr. 585 (1974) (Supreme Court of California 1974).
Mario DiGESU and Catherine Digesu v. Wilfred Weingardt, 91 N.M. 441, 575 P.2d 950 (1978) (Supreme Court of New Mexico 1978).
Michael M. NORMILE and Wawie Kurniawan and Lawrence J. SEGAL v. Hazel Elizabeth MILLER, 326 S.E.2d 11 (1985) (North Carolina Supreme Court 1985).
Restatement (First) of Contracts § 133 . (1932). Retrieved from https://www.law.cornell.edu/wex/third-party_beneficiary
RESTATEMENT (SECOND) OF CONTRACTS § 302 . (1979). Retrieved from https://www.nylitigationfirm.com/files/restat.pdf