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Business Law Essay

On Monday, A proposed to B to buy B’s car for $12,000 by post. It is primary to distinguish between an invitation to treat and an offer, as an offer once accepted creates a legally binding contract in which does not apply to the alleged acceptance of an invitation to treat. Therefore, the issue is whether the proposal from A is an offer or an invitation to treat.

An offer is defined in Preston Corpn Sdn Bhd v Edward Leong [1982] as an intimation of willingness by an offeror to enter into a legally binding contract. Its terms either expressly or impliedly must indicate that it is to be become binding on the offeror as soon as it has been accepted by the offeree. The crucial factor that determines whether something amounts to an offer is the intention to be bound, which is usually shown by the wording.

Conversely, an invitation to treat is a proposal to negotiate or an attempt to receive proposals. The person extending the invitation is merely indicating that he/she is willing to enter into negotiations but is not bound to accept any offers made.

Nonetheless, in the English of Smith v Hughes [1871], the court emphasized that the important thing is not a party’s real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him/her blameworthy to damages.

The details of A’s letter are omitted, thus making it the more difficult to assess the express and implied terms of the proposal, which would come in handy to determine whether or not there is an intention to be bound. Although buyers may have the inclination to negotiate on the terms, rarely will there be one who will do so after initiating a proposal. Once taken the initiative and had gone through the hassle to write out a letter and have it sent, this shows an expression of willingness to buy therefore it is plausible that there is an intention to be bound. But of course this would be my personal presumptions as a reasonable person.

Wrapping up, in my opinion, this proposal from A is suggested to be an offer instead of an invitation to treat and once there is an acceptance from B, a mere agreement will be formed. Some prerequisites are mandatory to make an offer valid, thus leads on to the following case.

The letter of offer from A was misplaced by the postman and picked up by B’s neighbor, C who passes B the letter on Friday. Logically; an offer must be acknowledged by the offeree to be valid. The concern here is whether the offer from A was communicated and validated.

As stated in Barnes. et al. (2006, p.166) “The act of communicating the offer indicates that the offeror is willing to be bound by its terms. On the other hand, a non-communicated offer may be evidence that the offeror has not yet decides to enter into a binding agreement.”

The general rule of acceptance is that performance of the requested act does not amount to an acceptance unless the party performing the act did so with knowledge of the existence of an offer. If otherwise, a party could find himself bound to the terms of a contract of which he was entirely unaware. However, there is a case for making an exception in the case of a unilateral contract, at least when performance of the act cannot subject the performing party to any disadvantage.

Gibbons v Proctor [1891] is an English Contract Law case that deals with an offer, via advertisement, and whether or not a person who does not know of the offer can accept the offer if they complete the terms of the offer. The case has also been cited as authority for the proposition that acceptance in ignorance of an offer is effective: that a person who gives information for which a reward has been offered can claim it even though at the time of giving it he had no knowledge of the offer of reward.

Nevertheless, this offer from A is a sort of bilateral contract, in which A is promising to pay B $12,000 for another promise from B for his car. As the letter of offer from A was in the hands on C and it did not reached B as intended; therefore there is no actual communication and the offer is scarcely considered valid. Common sense tells us that if B had not received the offer from A, there is no way B would learn of A’s offer and let alone to reply to it. An offer made through the post will not be effective until it is received and read by the offeree.

In conclusion, my thesis is that the offer from A was neither communicated nor valid till Friday when B received the letter from C.

On Tuesday, B proposed to sell his car for $11,000 to A by post and the post reached A on the following day. In the event where B proposed the offer upon acknowledgement of the offer made by A, it would be regarded as a counter offer, which in turn would be a distinction to acceptance. But this will not apply in this case as B’s proposal was made before the awareness of A’s offer. As a result, this proposal here will be subjected to whether or not the proposed is an offer and a legitimated one.

In the previous issue, the buyer, A is making a proposal to the prospective seller, B and more often than not it would be an offer. When the roles are reversed, the proposal could be either an offer or an invitation to treat, hence, the need to highlight the differences.

As presented in page 2, the explanation of an offer is unambiguous. However, for further illustration on invitation of treat, in Partridge v Crittenden, the defendant was charged with an offence of offering wild birds for sale with the aid of advertisement contrary to the Protection of Birds Act 1954. He was found not guilty since he had not offered the birds for sale; the advertisement was simply an invitation to treat. Adding on, in Fisher v. Bell [1961], the defendant was charged with the offence of offering for sale a flick knife contrary to section 1[1] of the Restriction of Offensive Weapons Act 1959. He had displayed the knife in his shop window with a price ticket behind it. It was held that the defendant had not committed the offence as, in displaying the knife in his shop window; he had not offered it for sale. These two examples of invitation to treat opposed to the common, non legal, understanding of the term ‘offer’.

Goods in shop windows or on display and goods advertised are usually invitation to treat which invites people to make offers and where the seller may choose to or not to sell. Chances are that B’s proposal to A is an offer because if otherwise, he would not had taken the trouble to pen it down and have it sent. As previous case, this is merely my assumptions as a reasonable person.

The letter intended for A from B was clearly communicated as it reached A the following day, Wednesday.

In conclusion, my perspective is that the proposal made by B is an offer and a valid one as the offer was acknowledged by the offeree, A.

A fax of acceptance was sent by A to B in regards of the $11,000 offer for B’s car. However, was never printed out due to paper failure in B’s fax machine. This is evidently an acceptance as it mirrors the offer from B. When an acceptance is effective can be critically important as in most occurrences, the offeror has discretion to revoke the offer at any time before acceptance.

The general rule is that an acceptance has no effect until it is communicated to the offeror. In Powell v Lee [1908], the defendants who were the managers of a school had decided to appoint the plaintiff headmaster. One of the managers told the plaintiff of the decision without authorization. Subsequently however, the defendants reversed their decision and appointed a third party in which the plaintiff was suing for breach of contract. The plaintiff’s action failed as for there to be a concluded contract, it was essential that there should be a communication made by the body of the persons to the selected candidate.

By using the facsimile machine to send acceptance, it is an effective means of direct communication and no contracts will be created unless it is received by the offeror. In other words, the acceptance is not complete when the message is transmitted but only when it is received.

However, in this case, A must have reasonably believed that his acceptance was communicated but this is not so because of the fault of B, then B may be estopped from saying that he did not receive the acceptance. This is clearly the fault of B as fax is a technologically advanced method of communication and B will generally know at once that the fax has not been communicated.

The balance of faults weighs more heavily on B, hence the postal rule can be applied in which the acceptance was effective once A made the fax and an
agreement between A and B will surface.

However, in the event where A’s fax had been printed but not acknowledged by B for three days. Postal rule will not apply in this circumstance as not only is it an instantaneous form of communication but, under the traditional contract principles, if the offer or circumstances do not indicate otherwise, the means the offeror used to converse the offer is the impliedly authorized means for accepting.

In other words, unless B had specifically request for other form of communication, it is reasonable for B to assume that A would send his acceptance by post and would not be waiting by the fax machine. In this circumstance, the acceptance is only complete when B acknowledges it three days later.

However, the case of Tenax Steamship Co Ltd v Owners of the Motor vessel ‘Brimnes’ [1974] contradicts the statement above as it appears that it is not necessary for the offeror to have read the message. If this is applied, the acceptance will be completed on the day itself when A had faxed it instead of three days when B reads it.

Personally, as a reasonable person, I would not agree on the latter as it is extremely unjust for B. There are numerous methods of communication, the instantaneous kinds, e.g. via telephone, e-mail as well as the non-instantaneous kinds. No one would be able to predict the form of communication adopted by the other party so B could not possibly be hanging around the room where the fax machine was situated in, waiting for A’s reply. Thus, if B is ignorant of the acceptance, the acceptance would not be of use.

On Friday, B posted his acceptance to sell his car for the offer made by A on Monday. The letter was not received by A for two weeks.

When an acceptance is to be made through the postal system, the postal rule does apply in which will results in an agreement on Friday regardless of whether A receives it or not. This peculiar rule developed by the English Law has been first enunciated in the case of Adams v Lindsell [1818], where an acceptance is completed as soon as posted.

“In Adams v Lindsell [1818], the defendant wrote to the plaintiff offering to sell him wool and asked him to reply by post. The plaintiff replied on the 5th but the letter reached the defendant on the 9th. Meanwhile on the 8th, not hearing anything from the plaintiff, the defendant sold the wool to a third party. The plaintiff sued the defendant and the court held that the acceptance was effective when the letter was posted and so there was a contract and the defendant was in breach of it.” Cited from Chandran (p.24)

Saying as much, this contract will not be valid as there was previously an agreement made between A and B when A faxed his acceptance. The contract between A and B is where A will pay $11,000 for B’s car and B would have to let go for $11,000 as stated in page 4. No doubt it would be hard on B if he could be bound even without knowing his offer had been accepted. Nonetheless, as mentioned it was his own slip-up that results in the unknown bound.

Since the contract for $11,000 is valid, there would be no existence of subject matter of contract which is B’s car in the $12,000 contract and there is no way B will be able to sell the same car twice without breaching the contract.


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