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2010 Contract Answer Guides

2010 Contract answer guides




    ITC/ATC – Law of Contract Revision 2009/2010 Supplementary Material   - 0 - Prepared by:Suresh Kumar Raman [email protected]  Law of  Law of  Law of  Law of Contract Contract Contract Contract Supplementary Material  Supplementary Material  Supplementary Material  Supplementary Material  (Answer Guides (Answer Guides (Answer Guides (Answer Guides I II I)  ))  ) Revision 2010 Revision 2010 Revision 2010 Revision 2010  Prepared by: Suresh Kumar Raman Prepared by: Suresh Kumar Raman Prepared by: Suresh Kumar Raman Prepared by: Suresh Kumar Raman suresh@ suresh@ suresh@ suresh@i ii     ITC/ATC – Law of Contract Revision 2009/2010 Supplementary Material   - 1 - Prepared by:Suresh Kumar Raman [email protected]  Offer & Acceptance Question 1 May 2009 (Zone A) [1] A may want to argue that B had breached a contract that was purportedly entered into by thetwo of them. However, before A can argue that there was a breach of contract, he need toestablish the existence of a valid contract.- What is a valid contract? Lord Wilberforce in The Eurymedon  : 4 requirements to besatisfied: Agreement; Consideration; ITCLR; and no vitiating factor(s) such asmisrepresentation, mistake, etc. to set the contract aside.- Q: Whether there was a valid agreement between the parties? Definition: promise /sets ofpromises which is binding in law; which consists of an offer and acceptance; and that givesrise to consensus ad idem (meeting of the minds) of the offeror and the offeree[2] Whether a valid offer was made?- An offer is an intimation (viewed from an objective standpoint) by words or conduct of awillingness to enter into a legally binding contract, specifying the terms of the bindingagreement which will be formed should the offer be accepted by the party to whom it isaddressed.- Definition: Prof. Treitel  – an expression of willingness to be bound. Thus this will beobjectively assessed by the courts where the judge looks at the external evidence to see if the‘reasonable man’ would have said there was a contract. In Storer v Manchester City Council  Lord Denning said, ‘In contracts you do not look into the actual intent in a man’smind. You look at what he said and did … a man cannot get out of a contract by saying, “I didnot intend to contract” if by his words he has done so.’- As such it must be distinguished from an ITT – an expression of willingness to negotiate withthe hope to enter into a contract at much later stage(s).- Whether there was an offer or ITT - examine the status of A’s statement on Monday whooffered to pay £10000 for B’s car.[3] Can this amount to an offer? This depends purely on A’s intention - which the courts, asmentioned above, would assess objectively following Gibson v Manchester and Moran v University College. - In Gibson, it was held by the HOL that Mr. Gibson’s letter lack the force of an offer since thewords “may be prepared” was considered to be precatory and such it merely indicates onintention to negotiate further.- However, the case of Gibson can be distinguished from the present facts because – A’sstatement was very precise/certain – that it is safe to be concluded as an offer - Scammel v Ouston.  - Why? – A was very specific about intending to buy B’s car; he made the statement afterhaving inspected the car; he also indicated the price that he was willing the pay.- Hence there was nothing to indicate that he had a further intention to negotiate with B – ThusA made an offer and as such he is the offeror.[4] Next task/requirement - valid acceptance- Definition – an unqualified assent to all the terms of the offer which was communicated to theofferor (by the offeree) – which forms a mirror image of the offer- In deciding whether there was a valid acceptance – 2 further requirements need to be fulfilled:that it was an unconditional assent; and it was communicated to the offeror.- In considering whether there was an unconditional assent/valid acceptance - examine B’sstatement. B indicated that she wanted £12000 for the car- Q: Can this qualify as an unconditional assent which means that the offeree (B) accepted theterms of the offer unconditionally i.e. without introducing any new term(s) into the offer.- If B’s statement purports to introduce a new term – this will in turn be considered as a counteroffer following Hyde v Wrench  and the effect of a counter offer is to terminate/reject thesrcinal offer.- From the given facts, said/wanted £12000 in response to A’s offer (of £10000)    ITC/ATC – Law of Contract Revision 2009/2010 Supplementary Material   - 2 - Prepared by:Suresh Kumar Raman [email protected]  [5] Note: a counter offer should be distinguished from a request for more information as per Stevenson v Mclean  (also known as mere inquiry)- From the given facts – it can be suggested that B’s statement should amount to a counteroffer – thus terminating A’s offer and at this point – it can safely be submitted that there wasNO valid agreement concluded between A and B.- However was there a potential agreement from the fact that B wrote a letter to A suggestingthat she would take £11000? It could be noted at this point that - even if B’s earlier statementof wanting £12000 is not a counter offer – this letter that stated that she would take £11000can be treated as a counter offer and kills the srcinal offer.- Alternatively, B’s letter (on the basis that A’s offer was terminated by B’s statement to accept£12000) is submitted being capable of amounting to a fresh/new offer. This would in turnmake B the offeror – since this statement now is very certain that she was willing to sell thecar to A £11000.- Assuming that B’s letter is unambiguous – it is by no means uncertain – since the wordings ofthe letter suggest that it does constitute an offer –  Scammel v Ouston c/f Harvey v Facey.  - Even though it could constitute an offer - B’s offer is only valid if it was communicated andfrom the given facts, it was clear that A received B’s letter (offer) at his home on Tuesdaymorning.[6] Since a valid offer could be proven – next issue is whether A has validly accepted B’s offer?To determine the above one would now have to examine the status of B’s letter (on Tuesday).The facts indicated that A wrote a letter to B accepting her offer and this could be interpretedas an unconditional assent to the terms of the offer.- However the contentious issue is whether the acceptance was communicated to B? So inorder for there to be a valid acceptance – the offeree must communicate his or heracceptance to the offeror/his authorised agent(s). In general terms an acceptance has nocontractual effect until it is communicated, that is brought to the attention of the offeror.- The facts can however invite a discussion of the recognised exceptions to the rule ofcommunication of acceptance - Postal Rule. Based on Adam v Lindsell  – an acceptance isdeemed valid upon the posting of the letter regardless of whether the letter was lost, delayedor destroyed in the post.- However the postal rule is merely a rule of convenience and will apply whenever:-[a] the use of post is, or s deemed to be contemplated by the parties. The presumption that is socontemplated will arise when the offeror makes his offer by post –  Henthorn v Fraser. On thefacts B made the offer by post. Lord Herschell: "Where the circumstances are such that itmust have been within the contemplation of the parties that, according to ordinary usage ofmankind, the post must be used as a means of communicating the acceptance of an offer, theacceptance is complete as soon as it is posted."[b] The postal rule must not have been excluded. From the facts there was no indication by Bthat A has to communicate by other means than post. Holwell Securities v Hughes.  [c] Postal rule does not apply to instantaneous mode of communication –  Lord Denning in Entores v Miles Far East. - Since the 3 requirements can be proven – by virtue of the postal rule there was a validagreement at this point. As such an agreement conclude for the sale of the car at £11000 (onTuesday) Household Fire v Grant   [7] In order to rebut the above argument – B will raise the argument that she has already revokedthe offer by:-[a] sending/leaving a message on A’s answer phone – indicating “I withdraw my offer” at 3pm; oralternatively[b] when C informed A that B has sold the car.- Consider whether there was a valid revocation? To determine this one would have to considerthe status of the phone message and the following 2 requirements must be complied with:- revocation must be communicated- before a valid acceptance takes place- Even though – A retrieved the message upon returning home – the communication of therevocation took place subsequent to the postal acceptance. Therefore – there was no validrevocation at this stage. Byrne v Van Tien Hoven     ITC/ATC – Law of Contract Revision 2009/2010 Supplementary Material   - 3 - Prepared by:Suresh Kumar Raman [email protected]  - In Dickinson v Dodds  it was held that the revocation need not be communicated directly butit is sufficient that offeror knew of revocation before purported acceptance - James, L.J:  - Was there a valid revocation when C informed A the fact that B had sold the car? Can acommunication by a third party be admitted as a communication of the revocation?- Dickinson v Dodds  – appears to have been held either the sale of the subject matter of theoffer, or at any rate of communication of the fact of the sale by a 3 rd party to the offeree – operates to revoke the offer.- Whatever the true ratio of that case, which has been much criticised – it is very unlikely that acourt would hope that the information given by C to A constituted revocation of B’s offer.Although A may have suspected it – he could not have known that the information was strictlycorrect.- Since a contract may have been formed between A and B, the fact that B sold the car toanother person – and also the fact that A purchased another car at £12500 – he may be ableto claim the loss(es) that he could have suffered. Question 1 May 2008 (Zone A) [1] Consider whether a valid contract had been entered into between Z and X, V, Y, or W. Theremust be a valid contract between the parties - which has been defined by Professor Treitel   as ‘A contract is an agreement giving rise to obligations which are enforced or recognised bylaw. The factor which distinguishes contractual from other legal obligations is that they arebased on the agreement of the contracting parties.'- An agreement - consists of an offer followed by an acceptance; which would then give rise toconsensus ad idem- Issue: whether a valid offer exists from the facts?Definition – a statement by one party of a willingness to enter into a contract on stated terms,provided that these terms are, in turn accepted by the party or parties to whom the offer isaddressed.- An offer must be distinguished from an Invitation to Treat (ITT) – which is simply anexpression of willingness to enter into negotiations which, it is hoped, will lead to theconclusion of a contract at a later date.[2] Whether there was an offer or ITT – consider the status of the advertisement. The generalrule is that a newspaper advertisement is an ITT – rather than an offer. In Partridge v Crittenden – Lord Parker CJ  stated that there was ‘business sense’ in treating suchadvertisements as an ITT because if they were treated as offers the advertiser might findhimself contractually obliged to sell more than he in fact owned.- Consider whether Z intended the advertisement as an Invitation to Treat/Offer? This dependson intention of Z which would be objectively determined - Gibson v Manchester CC; Moran v University College  - Note: an ITT is an indication that the invitor is willing to enter into negotiation but is notprepared to be bound immediately. In respect to an ITT it does not lead to an agreement butin some circumstances, if contrary intention is proven – then it may however be treated as anoffer.- Conclude: The advertisement placed by Z – ITT. The next question to be considered wouldbe: who made the offer then?[3] Xavier asked Z to reserve the smallest of the kitten and will return in 3 weeks. Q: Is this apotential offer? – Yes, because Xavier would have exhibited his intention to be bound, andthere was no such indication that he would want to further negotiate –  Scammel v Ouston   - Next requirement - Acceptance: did Z accept Xavier’s offer? An acceptance is an unqualifiedexpression of assent to the terms proposed by the offeror.- Z could have accepted the offer by words, i.e. when she agreed to reserve the smallest kittento Xavier. As such it was unconditional and communicated to the offeror. Or alternatively, itcould be argued that by the fact that Z reserved the kitten; it could be argued as anacceptance by conduct – based on Brogden v Metropolitan Railway       ITC/ATC – Law of Contract Revision 2009/2010 Supplementary Material   - 4 - Prepared by:Suresh Kumar Raman [email protected]  - But the problem now: is whether Z is under an obligation to hold the kittens for 3 weeks? Canshe sue Xavier for not returning after 3 weeks? Yes, since the offer was conditional that hewill return in 3 weeks to takes the kitten – there was an express obligation/condition attachedto the offer- Alternatively it could be submitted that Z cannot enforce Xavier’s promise as it was notsupported by any consideration. A gratuitous promise to keep an offer open for a fixed periodof time is NOT binding on the offeror – as per Routledge v Grant  . Therefore such offer canbe revoked at any time.- Hence as mentioned above the only way an offer may be irrevocable for a fixed time is if theofferee furnishes consideration for the offeror’s promise not to revoke.- Consider whether Z has provided consideration based on Currie v Misa  since she hassuffered a detriment i.e. she lost the opportunity to make £300 that could have been madeearlier. She could have sold it to another potential purchaser if not for X’s promise.- Conclude: - Xavier’s promise is enforceable; and Xavier is bound to pay £300.[4] Z v V – whether a valid contract entered into? Since the advertisement was considered as anITT – consider whether V’s statement – “I’ll think about it” – is a valid offer or not?- Submit: It is not an offer but merely an ITT/ negotiation- Since the earlier statement was not an offer – can V’s subsequent letter amount to an offer?From the letter – there was a clear indication of an intention to be bound and therefore therewas a valid offer- The contentious issue would be as to when was the offer communicated to Z? It should besubmitted very clearly that the Postal Rule does not apply on the facts – because such ruleonly applies to letters of acceptance; and not to letters of offers- V’s letter – will only be a valid offer – once communicated (only upon actual notice). It can beconcluded: that the offer – was indeed communicated before the email was received by Z.- What is the effect of the email then? Could it be considered as a valid revocation of the offer?In order for it to be a valid revocation – it must be communicated; before the acceptance tookplace. Q: Did V communicate the revocation? - Yes- But the issue would be whether it was communicated before the acceptance took place?When Z received V’s letter, has she replied V’s letter? Yes; and therefore there was already avalid acceptance.- However if the email only came after Z replied V’ letter, then the revocation – came after theacceptance was made and as such it was not valid. Can the Postal Rule be applied to thecurrent situation following Adams v Lindsell  ? No- If there was no valid acceptance; the Email communication – will be effective. Therefore -Submit: Valid revocation.[5] Yvonne- As mentioned above the Advertisement – will still be maintained as an ITT. Q: Is Y’s emailcapable of being treated as a valid offer? It should be noted that Z refused / did not accept theoffer made by Y. Therefore submit: No agreement based on email.- What is the status Y’s letter – accepting the kitten for £300? Since it expresses a willingnessto be bound – it can be treated as an offer. If Z accepted the offer made by Z – then there willbe a valid agreement; and If Z did not accept the offer – then there will be no agreementconcluded between them[6] In relation to the position of Walter – there was clearly an agreement between them but therecould be a potential argument that there was a breach of term of the contract Also considerthe action for Misrepresentation for the fact that the kitten was not a pure bred.