Gumtree Offering a Second Hand iPhone 6 - Law of Contract - Case Study Example

1. Facts Bob sees an online advertisement on Gumtree offering a second hand iPhone 6 for sale at £300. The advert contains Cecil’s name as the seller together with his address. Bob sees this as an ideal replacement for his aging iPhone 4 and hence he visits the seller after work. He gives £300 to Cecil for the iPhone. Cecil doesn’t want to sell the phone to Bob since he has already accepted a $350 offer for the iPhone from his mother. Issue The issue is whether the online advert by Cecil constitutes a valid offer and thus if he is bound by it to sell the iPhone to Bob. Rule The law of contract states that an offer is an indication (expression) of willingness to enter into a contract on the precise terms with no other negotiation such that a binding contract can be formed only with acceptance. It may be made expressly or impliedly by the offeror on the precise terms with an assurance to be bound by it if the offeree accepts the offer. Whether a valid offer has been made is determined using the subjective test as held in Smith v. Hughes1 case depending on how reasonable person would view the particular situation. An offer is to be distinguished from an invitation to treat which is an indication of one’s willingness to negotiate a contract as was held in Harvey v Facey2. Advertisements are generally considered invitations to treat on the basis of the party’s intentions as held in Partridge v Crittenden3 as the one who advertised could not have intended to be bound to sell to everyone who would accept unless it is advertised to a specific Peron or for instance if the advert stated that the item would be sold only to the first person accepting. Analysis The advert that Bob sees is placed on an online platform. It is expected that many people (Bob included) accessing the online platform would be able to see the advert and if interested make an offer to Cecil to buy the iPhone whether at the same price or at a different price. In other words, the advert is intended to draw people’s attention that Cecil is selling the iPhone and at how much he would be willing to sell it so that people can make offers for purchase and if Cecil accepts, a contract of sale is put in place. This is an invitation to treat since a reasonable person would not expect that the advert is an offer made to him unless it is specifically addressed to him. As such it is reasonable to treat the advert an invitation to treat rather than an offer. Conclusion Based on the facts of the case, relevant laws and decided cases, it would be reasonable to treat Cecil’s advert as an invitation to treat as opposed to an offer. Cecil is therefore not bound to sell the phone to anyone but only to the one who makes an offer to him and he accepts the offer. In this case, he has already accepted his mother’s offer and is therefore not bound to sell the phone to Bob as he has not accepted his offer. 2. Facts Les offers to sell his four year old Jaguar X-type motor car for £8,000 to Dvina his former wife on 21st September stating that a notice in writing is required. Davina sends a letter to less on 22nd September accepting his offer but the letter does not arrive until 29 September. On 28th September, Les having not heard from Davina sells the car to Rex, his civil partner for £8,500. Issue The issue is whether a valid offer existed between the two parties and whether the letter by Davina to Less constituted a valid acceptance and hence whether Davina can sue Les for breach of contract for failing to sell the car to her. Rule The law of contract states that an offer is an indication (expression) of willingness to enter into a contract on the precise terms with no other negotiation such that a binding contract can be formed only with acceptance. It may be made expressly or impliedly by the offeror on the precise terms with an assurance to be bound by it if the offeree accepts the offer. On the other hand, acceptance is an indication by the offeree of readiness to be bound by the terms and conditions of the offer. In Powell v Lee (1908) it was held that acceptance has to be communicated by the person to whom it is made4. An offer must not include a clause of acceptance by silence as was held in Felthouse v Bindley. Where an offer has specified a method of acceptance say by post, acceptance has to be through that means as was held in Co. Ltd v R. J. Pulleyn & Sons (York) ltd (1975)5. Where acceptance is through post, the contract will come into being the very moment the acceptance letter is posted as was held in Adams v. Lindsell (1818)6. The post rule applies when the parties either expressly or impliedly contemplated post as the means of acceptance. Analysis Les communicates his offer to sell the car specifically to Davina his former wife at £8,000 on 21st September. He goes ahead to specify that Davina is to communicate acceptance through writing (post). Davina accepts Les offer and as a result writes a letter of acceptance to Les and posts it on 22nd September. Not that post in this case is the contemplated means of communicating offer since Les has stated that he is to be notified in writing. Thus, according to the Post rule, Davina communicates acceptance on this day despite the fact that the acceptance letter delays at the post office and only arrives on 29th. Unfortunately by the time it arrives, Les has already sold the car. Conclusion Based on the relevant law, cases and the analysis above, Les makes a valid offer to Davina. The fact that it is in writing and is specific as to Car type, selling price and means of acceptance makes it valid and indicates willingness to be bound. According to the post rule, acceptance is also valid since it is done through post as specified by Les and is communicated by Davina the offeror. Based on post rule, acceptance happens on 22nd September when the letter is posted and hence by the time Les is selling the car to another party, a contract of sale already exists between him and Davina. As such, he is bound to sell the car to Davina and not to any other party since the offer was specifically addressed to her. As such, Davina could sue Les for damages since he has breached the contract between them. 3. Meaning of the terms ‘counter offer’ and ‘battle of forms’ In explaining the meaning of the above terms, it is worth noting that a contract is only formed when an offer made by one party is accepted by the other contacting party. Others requirements for a valid contract include intention to create a contract and consideration. However, it should be noted that the party that accepts the offer must do so unequivocally. Where the other party fails to accept the other’s offer unequivocally, this gives rise to a counter offer. In other words, a counter offer arises when the accepting party seeks to vary the standard terms of the offer or puts forwards its own terms and hence does not accept the offer unequivocally. This is deemed an implied rejection of the original party’s offer. Situations arise when the two contracting parties in their attempt to incorporate their own standard terms often throw into question which terms govern the contract and whether a contract exists at all. This is called battle of the forms. Battle of the forms occur unwittingly and only when a dispute arises and the contracting parties seek to rely upon a particular contractual term that the issue of which of the different sets of terms are operative comes into question hence giving rise to the battle of forms. It can thus be concluded that a counter offer will lead to the battle of forms. The terms’ counter offer’ and ‘battle of forms’ can be illustrated by court cases. Such cases include the decision in Butler Machine Tool v Ex-Cell-O Corporation (1977)7 where parties were involved in the battle of forms as to which terms guided the contract. It was argued that in such a situation, it has to be established whether a contract existed in the first place and secondly which terms apply to the contract. In this regard, it was determined that the binding terms will be found by looking for a point where one party gives the other the impression that they have agreed to the other party’s terms. In this case, it happened when the suppliers sent back a signed tear off slip from the buyer implying that by signing the slip, the parties would be bound by the buyer’s terms. In this case, the last party that puts forward their standard terms that are not explicitly rejected by the recipient wins the battle though this is not always the case. In Tekdata interconnections Ltd v Amphenol (2009)8, the seller acknowledged the buyer’s terms but included its own terms in the note before delivering the goods (counter offer). On accepting the goods delivered by the seller, it was deemed to have accepted the seller’s standard terms since it did not challenge the terms on accepting the order. Thus, though the battle of forms arose as to which terms were applicable to the contract, the decision confirmed that the offer and acceptance analysis has to be applied to battle of forms situations. Read More