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Law : Comprising Legal Issues

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  • to formulate a valid contract between Bob and Mike?
  • Whether revocation of acceptance communicated on 14th January by Bob, can be considered binding against Tom?
  • Whether Bob was bound under a gratuitous contract to give Steve a computer?
  • Whether a valid contract could come into existence for lack of intention?

2. Law

In order to form a valid contract it is imperative for the concerned parties to make a clear offer and respond to it with an unconditional acceptance. However, in the event, that the offeree accepts the offer with alteration or additions in terms of the contract, then a counteroffer is said to have been communicated (Anson et. al., 2010, p. 133). The court in Hyde v. Wrench (1840) 49 ER 132 has explained that a counteroffer destroys the original offer made by the other party, and from that point onwards it is not available for the offeree to make an acceptance to the original offer.

Negotiations or communication for the formation of a contract undertaken through the mode of letters is governed by the Postal Rule as contained in the Contract Law. This rule was established in the case Adams v. Lindsell(1818) 106 ER 250, where it was opined that acceptance by the offeree makes the offeror bound from the moment it is put into transmission. However, it becomes bound against the offeree only when it is received by the offeror. Hence, revocation of acceptance shall be communicated to the offeror in a reasonable time period before he has acted to perform the contract (McKendrick, 2014, pp. 109-112).

Under Common Law, it is essential that a contract shall be supported by a valid consideration for making the concerned parties bound by the terms (Anson et. al., 2010, p. 91). Moreover, it is also essential that the parties shall have an intention to formulate legal relations. In the case of Jones v. Padavatton(1969) 1 WLR 328 it was held by the court that the presumption of existence of an intention to formulate a legal relation in social agreements shall not be raised.

In accordance with the law followed in the case of L'Estrange v. Graucob(1934) 2 KB 394 signature of a person on the contract has the effect of binding the respective person under the terms of the contract. However, the court in Foster v. Mackinnon(1869) LR 4 CP 704 held that in such cases the plea of non-est factum is available to the parties which essentially means 'it is not my deed'. Hence, if a person has signed a contract, believing it to be another document or contract, the court may consider the plea and repudiate the contract (Allen & Overy, 2016, p. 10). Further, in order to establish this it is essential to prove that the concerned party was not careless in signing the contract.

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3. Application

By applying the rule laid down in Hyde v. Wrench it can be stated that the negotiations between Bob and Tom could not transform into a valid contract for the absence of essential elements of a contract. Furthermore, the communication of Bob on 2nd January amounted to a counteroffer as it modified the terms of the offer and hence, in accordance with the established rule, the original offer made on 1st January was destroyed by making a counteroffer. Therefore, the acceptance communicated on 5th January by Bob in response to the offer of 1st January cannot be considered valid as at this time the offer ceased to exist.

In accordance to the Postal rule and laws established in Adams v. Lindsell, the acceptance communicated by Tom on 12th January developed a valid contractual relation between the parties. In accordance with the rule, the offeror Bob was bound by the contract from the moment Tom posted the letter and the acceptance made Tom bound by it when the acceptance letter was received by Bob. However, Common Law entitles the parties to revoke their offer and acceptance within a reasonable period of time, which infers that the other party shall not have acted relying on the said acceptance or offer. In the instant case also, the letter of revocation was received by Bob on 15th January prior to making the delivery of the hard drives. Thus, it can be stated that the acceptance was revoked within a reasonable period of time.

As stated above, it has been established through Jones v. Padavatton that in social agreements the presumption of contractual relationships cannot be raised. Therefore, the statement that Bob gives a computer to Steve, in return for certain favours, is an agreement social in nature and hence, cannot be enforced in a court of law (Turner, 2013, p. 70).

In accordance to the principle followed in Foster v. Mackinnon and the plea of non-est factum, it can be stated that Bob signed the document believing it to be some other contract and hence, the plea under non-est factum be accepted in the court of law. Moreover, it is important to state that Bob has placed the form sent by Mary, aside on the desk to keep it separate from other documents. Thus, he did not act in a careless manner while handling the documents. It got mixed with other documents for no mistake of Bob and hence plea under non est factumis maintainable in the court.

Conclusion

On the basis of laid down laws and application on the facts that a valid contract could not come into existence between Bob and Mike for lack of essential elements of a contract. In the case of Tom and Bob, the revocation of acceptance by Bob was within a reasonable time and hence, is capable of terminating the contract. Thus, Bob is not liable to make a payment of $10,000. In the case of Steve and Bob, the favours done by Steve were gratuitous in nature and the statement to give a computer by Bob was social in nature, hence, a contractual relationship does not come into existence. Lastly, in the case of Bob and Capital Motors, the document was signed by mistake and under the plea of the non-est factum, Bob shall not be bound to perform the contract.

References

Books and Journals

  • Anson, W.R. and et. al., 2010. Anson's law of contract. Oxford University Press.
  • McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
  • Turner, C., 2013. Unlocking contract law. Routledge.

Online

Allen & Overy, Basic Principles of English Contract Law, 2016. Available through: <http://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf>. [Accessed on 27th March 2017].

Cases

  • Adams v. Lindsell (1818) 106 ER 250
  • Foster v. Mackinnon (1869) LR 4 CP 704
  • Hyde v. Wrench (1840) 49 ER 132
  • Jones v. Padavatton (1969) 1 WLR 328
  • L'Estrange v. Graucob (1934) 2 KB 394
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