B-Law

SCHOOL OF LAW LW2903 Business and Law Semester B, 2010/11 Course Work Assignment | Name of lecturer: Vikki Student Name: Yeung Chun Ning Jude Student Number: 51825102 Seminar group: S01 Program: BBA QFRM Deadline of the assignment: 11 March 2011 Submission Date: 11 March 2011 (A) Tom’s promise can only be enforced when a valid contract is formed. A valid contract requires (1) an agreement; (2) an intention to create legal relations; and (3) consideration. With the presence of offer and acceptance between Tom and Jerry, the remaining issues are whether: (1) there is a counter-offer (2) consideration exists and both parties are intended to be legally bound (3) there is a concluded contract Counter-offer Both offer and acceptance can be made in writing, by verb or by conduct. Once the acceptance is communicated with the offeror, the contract is completed. A counter offer is to give a new offer, which has been modified, to the original offeror. A counter offer makes his original offer lapse. In Hyde v Wrench, the defendant offered a farm for £1000. The plaintiff offered to buy at a lower price, but was rejected by the defendant. The court held that the plaintiff has revoked the offer by giving a counter-offer. In this case, Tom made an offer to Jerry orally, requesting Jerry to do the assignment for him in exchange for taking Jerry for a movie and a good dinner. Jerry replied by giving a counter offer. Instead of watching a movie, Jerry preferred to have Tom’s favorite skates. This offer was accepted by Tom. Hence, Jerry could not enforce Tom’s promise to take him for a movie as the offer was revoked. However, we still have to discuss whether the second promise is enforceable. Consideration In a legally binding contract, both parties have an exchange of promises which known as considerations. Each party must suffer a burden to give a benefit to the other party. Otherwise, it is just an agreement. In Currie v. Misa, a valuable consideration was defined as some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility suffered or undertaken by the other. Consideration takes place in the absence of monetary exchange. In the present case, there was an exchange of benefits between Tom and Jerry. Jerry received benefit from Tom (giving him his favouriate skates) in return for offering help to complete the project assignments (Tom’s benefits). However, it is arguable that the skates given to Jerry were a mere gift and therefore, no consideration exists. Intention to create legal relations An agreement will not be enforced unless it evinces an intention to create legal relations. It follows that an agreement supported by consideration is not sufficient unless the parties evince an intention to create contractual relations. The court ascertains the intention of the parties objectively by dividing the cases into two classes: Commercial agreements and Domestic Agreements. In Balfour v Balfour, Lord Atkin said that in case of social and domestic arrangements, there was a presumption against there being an intention to create legal relations. However, such an intention is presumed in commercial agreements. In the present case, Tom promised that he would take Jerry for skates in return for his help in the project assignments. Considering that Tom and Jerry are close friends, their relationship is a domestic one. The burden of proof is rested on Tom to rebut the presumption in order to enforce his promise. In Wilson v Burnett, the court held that women’s ‘chats’ about sharing winnings at a local bingo ball was not regarded as intended to create a legally binding relationship. Applying the case, the whole of the circumstances have to be considered. The conversation is a casual one and it is so common for a friend to offer help in return of some benefits. The exchange of promises is wholly based on friendship. It is evidenced by the fact that Jerry agrees to help because he was injured and Tom was his close friend. Having considered that Tom and Jerry are close friends and their conversation is a casual one, both parties did not intend to create legal relations. Certainty of terms Further, it is too vague the regard the agreement as a valid contract. If all essential matters have not be agreed, the court would conclude that the parties are still at the negotiating stage. In British Steel Corporation v Cleveland Bridge and Corporation Co. Ltd, important matters were missing so that the court held there to be no concluded agreement. In the present case, venue and time to have skates have not been agreed between the parties. It is unlikely that there was a concluded contract. To conclude, Jerry could not enforce both the first and second promises. (B) Moon could not sue Sun for breach of contract when a contract is form. There are a number of issues to be considered. Offer made on 14 February Sun (offeror) made an offer to Moon (offeree), which was accepted by Moon by post. The issue is whether the postal rule applies. The postal rule was established in Adams v Linsell, in which the court held that the acceptance should be regarded as having taken effect when posted. However, the offeror may state the method implicitly or expressly, which is capable of being accepted by the offeree. In Holwell Securities v Huges, a ‘requirement for “notice in writing” could displace this rule. The case of Entores v Miles Far East Corporation has established that the postal rule could not be applied to instantaneous communications, such as telex. It is also submitted that this should also apply to communication by fax. In the present case, Sun had clearly indicated explicit communication methods (telephone, fax and e-mail) for acceptance to take place. Hence, the postal rule has no application. Even though Moon had accepted the offer by post on 16 February, the acceptance was not effective unless the letter was received by Sun. The acceptance is effective only when instantaneous communication methods are used. Revocation of offer Since Sun had not received any replies from Moon, he revoked the offer on 19 February. The issue is whether Sun had breach the contract by revoking his offer. The general rule is that an offer may be revoked by the offeror anytime before the offer is accepted by offeree. An acceptance will be considered as ineffective until it actually brought the notice to the offeror. Revocation is effective when communicated to the offeree through a reliable source. In Dickinson v. Dodds, the defendant sold the property to another person after an offer sent to the plaintiff. The plaintiff was told clearly about this before his acceptance. It was held the offer had been revoked. In Henthorn v Fraser, the court held that postal rule had no application in revoking an offer. In the present case, since the letter of acceptance could not reach Sun. In the absence of agreement, there was no contract. Hence, Sun could revoke the offer at any time before acceptance takes place. However, there is a requirement that revocation need to be communicated. It remains uncertain when the revocation is communicated to Moon as the facts are unclear. I safely assume that it was communicated to Moon on 19th February. Revocation was effective on that date. In conclusion, since Sun revoked the offer before receiving the letter of acceptance written by Moon, there was no contract formed. In the absence of contract, Sun was not legally bound and was entitled to revoke his offer. It is, therefore, unlikely that Sun could be sued. -------------------------------------------- [ 1 ]. [1840] EWHC Ch J90 [ 2 ]. (1875) LR 10 Ex 153 [ 3 ]. [1919] 2 KB 571 [ 4 ]. [1984] 1 All ER 504 [ 5 ]. [1818] EWHC KB J59 [ 6 ]. [1974] 1 WLR 155 [ 7 ]. [1955] EWCA Civ 3 [ 8 ]. 2 Ch. D. 463 (1876) [ 9 ]. [1892] 2 Ch 27