Contract Law and Precedent

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In the proposed scenario there are many factors which potentially affect whether an actual contract would exist. These include the distinction between an invitation to treat and an offer, the application of the postal rule and the circumstances when revocation may or may not be appropriate. There are also relevant case precedents that can be applied to the facts, which on occasion predict a conflicting resolution to the same circumstances.

If Charlie’s letter was an offer, Dotty’s first message was a counter offer and the case would end there. If it was an invitation to treat, the question is when did Dotty accept it? The postal rule is a complicating element of this topic, with the theoretical postal strike contriving to make it more difficult to understand. A further point of interest is regarding whether Charlie was legitimately able to revoke his offer, and if so, when revocation became effective. Another contentious area concerns Dotty’s knowledge or otherwise of the true value of the clock.

The initial point to consider is whether Charlie’s first letter was itself an offer or an invitation to treat. This has a significant bearing upon how the subsequent actions of the two parties can be interpreted. How to categorise it is dependent partly upon the precise wording of the letter, which although described as an ‘offer’, may realistically not constitute an offer at all. This is emphasised by Halson’s example, which refers to a company offering its shares for sale to the public; “such offers are in fact treated as invitations to members of the public to themselves offer to buy the shares” (Halson, 2001, p122).

If Charlie’s letter is understood to be an invitation to treat, Dotty’s first telephone message on the Tuesday is simply a continuance of the bargaining process. This is due to the nature of the words used, which can be construed to be an enquiry of the terms, and not a firm offer.

However, if Charlie’s original letter is to be perceived expressly as an offer, Dotty’s telephone message may be concluded to be a counter offer. If this is the direction taken, the original offer, of sale for �6,000 no longer stands. This was found to apply in the case of Hyde V Wrench 49 E.R. 132. In a similar situation the party making the counter offer was no longer able to accept the terms of the original offer. Using this case as a precedent, once Dotty’s counter offer was made, Charlie was able to cease negotiations if he wished to do so, as his first offer of sale had been rejected.

As the letter Charlie wrote stipulated a date by which he required an acceptance, it is the latter of the two situations discussed that it would be reasonable to assume is the more appropriate, and Charlie’s letter clearly was an offer. He did not issue invitation to treat as the consideration required was clearly stated. By requesting acceptance before a specific date, it could be argued that any reasonable person would objectively believe that he was genuinely intending to sell the grandfather clock. However, the sale was offered with a collateral contract as a condition, which was that the written acceptance arrived by Thursday. As this acceptance had not reached Charlie on time, the offer would end here, providing there were no extenuating circumstances, such as the postal strike.

As the postal strike did occur, Charlie’s time specification comes under scrutiny. The postal rule in basic terms means that once acceptance of a contract is posted, the contract is complete. This rule has been enforced for many years, a point emphasised by the age of Byrne & co V Van Tienhoven & co (1880) 5 C.P.D 344. There are also various other cases in which the postal rule has been used to enforce a contract, but the difficulty in simply applying this rule to the problem case is created by the postal strike.

The impact of the postal strike must not be taken into account if the decision reached in Holwell Securities V Hughes (1974) 1 All E.R. 161 is followed. There was a deadline in this case, which was not met due to factors outside of the control of both parties involved, as the acceptance was ‘lost’ in the post. Lawton LJ said in his judgement that the postal rule “does not apply when the express terms of the offer specify that the acceptance must reach the offeror” (Smith, 2000, p83). In the hypothetical situation under observation, Charlie did identify a date by which he required written acceptance, and if this wasn’t complied with for any reason, there is no contract.

In Bal V Van Staden (1902) TS 128, the conclusion reached was that “it will not be acceptable to accept by post when the postal service is in a state of disruption” (Halson, 2001, p150). In Holwell Securities there ware no reasons to predict that there would be a problem with the post. For Charlie and Dotty this is not likely to have been true, as the publicity surrounding a postal strike will have been substantial, and it is reasonable to assume that one or more parties were aware of the disruption.

The possibility that either party was aware of the strike produces relevance to Dotty’s telephone messages. In Dickinson V Dodds (1876) 2 Ch.D. 463, Mellish LJ commented regarding the two parties of a contract that “the two minds must be in agreement at some one time, that is, at the time of acceptance” (Smith, 2000, p84). Presuming that Charlie heard Dotty’s message agreeing to the sum of �6,000 on the Tuesday, when he still wished to sell the clock for that figure, then both parties minds were in agreement at the same time. This has more importance due to the strikes, as either party with knowledge of the strikes could not be at all certain that the acceptance would arrive at Charlie’s residence by Thursday.

Once again assuming that Charlie heard the telephone messages, and taking into account the postal strike, could Charlie’s silence be interpreted as acceptance? It would appear not if Felthouse V Bindley (1862) 11 C.B. (N.S.) 869 is taken as binding precedent. In this case silence was indicated in the offer as a welcome form of acceptance, yet was not recognised as such by the courts. However, in Rust V Abbey Life (1979) 2 Lloyd’s Rep 334, silence was judged to be acceptance due to the lapse of a significant time period. The general rule has been stated as “silence cannot be regarded as evidence of acceptance when this would involve forcing a contract upon an unwilling party” (Halson, 2001, p154). Using this statement as guidance, Charlies silence could justifiably be regarded as acceptance.

A further issue to contemplate is the way in which Charlie revoked, or attempted to revoke his offer. An offer cannot generally be revoked once it has been accepted, so assuming Charlie did not hear the recorded messages, and therefore has no idea regarding Dotty’s intentions, Charlie can lawfully revoke his original offer. The problem that arises is that Dotty had physically posted her acceptance of the offer before receiving Charlies revocation, which has previously meant that the contract is enforceable.

As the letters of acceptance and revocation eventually arrived simultaneously, the contract would be enforceable, due to the rule that an offer cannot be revoked once accepted. Dotty’s letter would therefore supersede the revocation. It is also dubious if Charlie had a proper reason to withdraw his offer. By offering an item for sale, Charlie has obliged himself to complete the sale, unless he has ‘proper reason’ to revoke. On this basis, it was Charlie’s own responsibility to offer the clock at the correct value. His mistake does not provide suitable grounds for him to withdraw his offer.

Charlie would be able to withdraw his offer however, if he was able to show that Dotty had been attempting to ‘snap up’ his mistakenly priced offer of the clock. As in Hartog V Colin & Shields (1939) All ER 566, the courts do not allow parties to take advantage of another parties mistaken offer. This is only relevant if Charlie was able to prove Dotty’s awareness of the true value of the clock, which would probably prove extremely troublesome.

There are numerous routes that may be taken with this scenario, and one clear response does not emerge. There are many diverging factors. These include determining if Charlies letter was an invitation to treat or an offer, the repercussions of the telephone messages, and if revocation occurred at all, if it happened prior or subsequent to acceptance. Using as evidence the results of various cases does not guide towards a conclusive answer. The cases may give an indication of the resolution of one of the problem areas at a time, but it would be impossible to predict which precedent the courts would follow in the given scenario.

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