Law of contract - Case Study Example

LAW OF CONTRACT ASSIGNMENT Introduction In this scenario, there are two questions which arise. First, is the price of 100 listed in the newspaper advertisement binding on Wedding Heaven in the event that they sell the dress Secondly, does the delay or acquiescence of John cause him in law to have accepted the contract offer of the lower amount of 150 In order to give effective analysis to this question it is important to look at relevant Irish case law on this issue in order to determine whether or not such actions constitute a binding contract enforceable in law. There are a number of leading cases in both the Irish jurisdiction and other common law jurisdictions, notably England, which need to be assessed in order to consider this question. This essay shall first analyse the formative components which are necessary for the formation of a contract. Secondly, after assessing the relevant law, these principles will be applied to the current scenario above. Finally, and in conclusion, this paper shall decide whether or not a claim exists in contract law in the scenario again either Wedding Heaven, or John the DJ. We now turn to the basic contract law principles which currently exist in Ireland. Contract Law: Basic Principles First, we must look at the relevant contract law principles on order to ascertain the current state of the law in Ireland. There are a number of requirements necessary for the formation of a valid contract. This includes offer and acceptance, an intention to create legal relations; and finally consideration. It is the first two elements which this paper shall concentrate on. Offer It is important at the outset to distinguish between and offer and a mere invitation to treat. An offer is when the seller sets out in certain terms what they propose to sell to the potential buyer. In essence, it is the final set of terms which, if accepted by the buyer, would create a valid contract. However, an invitation to treat is not a formal offer, but rather an indication of intent to enter negotiations. It is not possible to accept a mere invitation to treat in order to create a binding contract. Therefore it is important to ascertain the exact intent of any representation as to whether it is a formal offer or simply a declaration of intent. Such declarations may be considered as offers under statute1 or common law2. In general, advertisements are considered to be an invitation to treat. In the English case of C.A. Norgren Co. v Tech-nomarketing,3 Walton J refused a committal order against one of the defendants for allegedly breaching an undertaking given to the High Court that the defendants would not "make, offer for sale, sell or distribute" items that were subject to copyright.4 The defendants distributed a price list and brochure, including an item covered by the undertaking. Walton J. upheld the contention of the defendant that, generally, the distribution of advertising material constituted an invitation to treat and was therefore not an offer. In order to gauge the intention of the seller, this can either be express by way of direct words, or implied by his actions. It has previously been held in case law that a personal quotation of the price of goods was merely an invitation to treat.5 Further, it has also been held that a display of goods for sale with the price labels attached is in all probability only an invitation to treat, whether the products are in a shop window, on a store shelf or indeed in a self-service store6. One of the leading cases is that of Fisher v Bell7 where a shopkeeper displayed in a knife with a price ticket in his shop window. He was charged with offering a flick knife for sale in contravention of the Restriction of Offensive Weapons Act 1959 s1. It was however held that the shopkeeper was not guilty because displaying the knife in the shop window amounted merely to an invitation to treat. Accordingly, the shopkeeper had not offered the knife for sale within the 1959 Act. Further, In the leading English case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd, the Court of Appeal held that where a shopper takes goods from a shelf, at that point he does not accept an offer made by the storekeeper when he displays the goods on offer. The acts of appropriation and actually approaching the cash counter constitute an offer by the prospective purchaser which is then accepted by the cashier.8 Alternatively, where a quotation for the price of goods has been given, the courts have also found that it is possible, usually from previous discussions, that the offeror did have the requisite intention and accordingly the quotation amounted to an offer9. Acceptance In commercial scenarios, it is generally a rule that an offer should be communicated to the other party so that its acceptance may create a binding contract10. The offeree, by accepting an offer, either expressly or impliedly, indicates that the offeree is willing to be bound11 to a contract with the offeror on the terms originally stated. Where the offeree is silent following an offer, this of itself does not prevent the creation of the contract, but there must be some conduct or act to indicate acceptance. In Brennan v Lockyer12 an offer was posted in whereby the applicant requested certain benefits be made available to him by his trade union on enrolment. The union sent a certificate of enrolment which was originally posted in London and arrived in Dublin, recording the fact of enrolment in London. The question arose whether the contract was completed in London, when the certificate was posted, or in Dublin, when it was communicated to the applicant13. A distinction was drawn between an acceptance regarding an offer asking for information and that which requests an act be done. When the acceptance is that of a promise this must be validly communicated, but if the offeror requests action, such as posting goods, no further communication is necessary. Generally, where an offer is followed by silence from the offeree, there is no valid acceptance. Therefore the offeree cannot be bound against the offeror due to the fact that the offeror has done nothing since the offer has been made. The offerree in such circumstances would not be bound to any contract, as no valid acceptance had been made for the existence of legally binding contract. Alternatively, if the offeree decides to accept an offer and complies accordingly with the offer by remaining silent, in this scenario the courts would be more willing to accept the existence of a binding contract. This would usually be ascertained from the course of negotiations or in the contractual terms offered, if it is stated explicitly that silence shall be a valid form of acceptance. Accordingly, such actions would constitute acceptance in law. In general, mere silence alone does not constitute acceptance of an offer. However, certain facts and conditions, taken in tandem with the offeree's silence, can constitute a valid acceptance. In the case of a counter offer, mere silence is usually insufficient for the purposes of acceptance, unless it was explicit from the course of dealings that silence in such circumstances would be considered as sufficient acceptance for the purposes of creating a valid contract. One of the leading Irish cases is that of Wheeler v Jeffrey.14 The parties were negotiating a contract whereby theplaintiffs were to act as agent in order to sell goods to the defendants. During negotiations no mention of a commencement date was stated. On June 10th, the plaintiffs wrote to the defendants "we agree to carry on your agency as from 1st July next." On June 12th, the defendants replied with their written acceptance. Accordingly, the issue was whether a contract was formed on June 10th or the 12th. The Court of Appeal, reversing the decision at first instance, held that the contract was formed on June 12th, as the mention of a commencement date added a new, additional term to the negotiations being held.15 If it was not for this, the letter of June 10th would have constituted an acceptance, the law therefore implying commencement within a reasonable time. It was possible that the defendants could have replied to say that July 1st was not acceptable; if they had done so there would have been no contract, unless there was some later agreement. Intention to Create Legal Relations It is now an established common law rule16 that an agreement will not be enforceable unless it conveys an intention to create legal relations. Generally, the test for deciding whether or not the requisite intention exists is an objective one i.e. would a reasonable person consider the offer to be one which was intended to create legal relations The general presumption that parties to a commercial arrangement intend to create legal relations, despite being considerable, may still be displaced either expressly or impliedly, although "the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one."17 The presumption will be impliedly negated where e.g. a statement is made to induce a party to enter a contract but the statement is clearly not seriously meant. Accordingly, the law will not give effect to it,18 or it may simply amount to a mere invitation to treat or a representation. Wedding Heaven Case In this case, in light of the foregoing analysis, the newspaper offer was merely an invitation to treat rather than an offer to the customer, under the principles outlined in Pharmaceutical Society and Fisher. It is still within the seller's rights to decide which of his products he wants to sell and at what price. Further, it cannot be said that the seller intends to create legal relations, as he does not which to contract at the price that is being suggested, and therefore they are not ad idem. Accordingly, it is impossible for Aisling to make acceptance as no valid contractual offer has been made. Further, in taking all of the circumstances into account, it is unlikely that the court would consider that a reasonable consumer would believe the offer to be a genuine one. 99% reductions are almost unheard of, and further enquiry would be expected of a shopper in such unusual circumstances. DJ Case Once again, in keeping with current contract law principles in Ireland evinced in Wheeler v Jeffery, although silence in certain specific circumstances can be deemed to constitute acceptance, this is not the case here. No contract was ever concluded, as they initially refused the 250 fee. When they replied with an offer of 150, this was a counter offer which then cancelled out the original offer from John to Paul. Accordingly, for the contract to be accepted John would either have to accept it expressly by replying to the message with his acceptance, or impliedly by some other action i.e. sending a request for a deposit. The fact remains that at no time during he negotiations did the parties reach an agreement as to the fee, and as such no valid contract was ever concluded. In any case, the assertion that Paul had not sufficient time to find another DJ and therefore John is bound by the contract is unlikely to be entertained by the court, as at the date of November 15th there are still three weeks to go until the wedding date, meaning that although inconvenient, it is still feasible to hire another DJ in that period. Conclusion In conclusion, John and Aisling would not have any contractual claim again either Wedding Heaven or John the DJ as in neither instance did the necessary requirements exist to create a valid contract under current Irish law contract law principles of offer and acceptance. It is also important to note that in commercial scenarios, it is essential to ensure that communications are at all times clear and precise, in order to ensure that scenarios such as the above do not arise. Any breakdown in communication, if sufficiently serious, can be enough to render the contract void, which is a scenario which works against all parties. BIBLIOGRAPHY AND SOURCES Boyers v Duke [1905] 2 IR 617 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 at 261, 266, CA, obiter per Lindley and Bowen LJJ. Dalrymple v Scott (1892) 19 OAR 477, Ont CA. Edwards v Skyways Ltd [1964] 1 All ER 494 at 500, [1964] 1 WLR 349 at 355 per Megaw J. Martin v Puttick [1968] 2 QB 82, [1967] 1 All ER 899, DC Morrison Shipping Co Ltd v R (1925) 20 Ll L Rep 283 at 285, HL, obiter per Viscount Cave LC. Philp & Co v Knoblauch 1907 SC 994. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401, [1953] 1 All ER 482, Court of Appeal. Rapalli v KL Take Ltd [1958] 2 Lloyd's Rep 469, Court of Appeal. Sale of Goods and Supply of Services Act 1980. The Times, March 3, 1983 Taylor v Allon [1966] 1 QB 304, [1965] 1 All ER 557. Williston, Law of Contract (3rd Edn) (1957) s21. Read More