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Questions & Answers
The Good, the Fair and the Ugly
Good essays are the gateway to top marks. The Good, The Fair, and The Ugly shows you the style of essay which works well in exams, as well as the simple errors that can cost you essential marks. Written by our Q&A authors, each of these interactive essay-based tutorials highlights key themes and common errors and illustrates essays of specific standards:
Whilst marking criteria will vary, as a general guide, the Good answer will be based on a general mark of a first or upper second class; the Fair answer will be based on a lower second or third class and the Ugly answer would result in a fail.
The Good
Bob is a stamp dealer. On Monday he puts an advert on his website stating, ‘Utopian Penny Red Stamp, one only, £2,000’.
Later that day, Alan, a stamp collector, telephones Bob and says, ‘The Utopian Red for sale, I’ll give you £1,500 for it’. Bob replies, ‘I cannot accept less than £1,750, but since you’ve been a good customer in the past, I won’t sell it to anybody else before Saturday. Let me have a reply by Friday if you want it.’ Alan says, ‘Thanks, that’s good of you – remind me to buy you a drink when I see you. I’ll think about it and let you know.’
At 7.30 am on Wednesday, Alan sends Bob an email saying, ‘Ok, I accept your offer to sell the Utopian Red for £1,750 – when can I pick it up?’ Unfortunately Bob’s email system diverts this email to his ‘junk mail’ folder, so that he does not read it. At 2 pm on Wednesday Bob sells the stamp to Charles for £1,800.
On Thursday Alan’s wife meets Charles’s wife at the supermarket. Charles’s wife complains about the amount of money Charles has been spending on stamps, including a Utopian Red, which he has just bought from a dealer. Alan’s wife reports this to Alan, who immediately sends a further email to Bob, confirming his previous message. Once he has sent this he notices an email from Bob in his inbox. In this email Bob says that he is having to withdraw his offer to Alan, because he has accepted a better offer from Charles.
Advise Alan.
This problem raises issues in relation to the formation of contracts. A valid contract in English law requires a matching ‘offer’ and ‘acceptance’. In answering this problem it will be necessary to consider what constitutes an ‘offer’ and an ‘acceptance’, when these are communicated, and whether an offer can be withdrawn. Alan wishes to claim that he has a valid contract for the purchase of the Utopian Red stamp from Bob. To be successful he will need to prove that he has accepted a valid offer from Bob, before that offer was withdrawn. (1) This is a good introductory paragraph, identifying the general area to be considered, and then focussing on the more specific issues raised by the facts of the problem. This shows the examiner that you have thought about what you are going to write, and have probably planned your essay carefully.
The first ‘communication’ to be considered is Bob’s advertisement. There is no doubt that the courts would treat this as an ‘invitation to treat’ rather than an offer. The situation is similar to that of Partridge v Crittenden (1968), where a magazine advertisement for bramblefinches was held not to constitute the offence of ‘offering’ wild birds for sale. One of the main reasons for the decision was that the advertiser did not have an unlimited supply of the birds, and so could not have intended to contract with everyone who replied to the advert. Similarly here, Bob only has the one stamp and so, in the absence of a statement such as ‘first come, first served’ (as in the American case of Lefkowitz v Great Minneapolis Surplus Store (1957)), he must be intending his advert simply to encourage potential customers to make offers to buy the stamp, which he may then accept or reject. (2) A little more might be made of the 'limited supply' argument, but the general approach is sound. The reference to Lefkowitz is good, showing knowledge of relevant case law from another jurisdiction.
Alan’s telephone call to Bob is an offer to buy the stamp. But he is only prepared to pay £1,500, which is less than Bob is prepared to accept. Bob says that he would be prepared to sell at £1,750. This is clearly a counter offer. A counter offer has the effect of making the previous offer no longer available for acceptance – Hyde v Wrench (1840) – so Alan’s original offer to buy at £1,500 is no longer of any significance. More important here is Bob’s statement that he will, in effect, keep his offer to Alan open until Friday. Is this binding on Bob? The general rule is that an offer can be revoked at any point before it has been accepted, provided the revocation is communicated to the offeree. This was established in Payne v Cave (1789). In Routledge v Grant (1828) it was confirmed that this rule applies even where the offeror has promised to keep the offer open. This is because the offeree will generally have provided no consideration for the promise. If the offeree “buys” the promise, by agreeing to pay, say £5, in exchange for the offeror’s agreement to keep the offer open, then the promise would be enforceable. Does Alan provide any consideration? The reason that Bob gives for keeping the offer open is that Alan has been a good customer in the past. This cannot be consideration, however, because it is ‘past’ (as was, for example, the alleged consideration in Re McArdle (1951)) and is, in any case, probably too vague. Alan offers to buy Bob a drink, but it is unlikely that a court would regard this as sufficient to indicate a clear mutual intention to make a binding agreement. It seems more like a social arrangement. The most likely conclusion, then, is that Bob’s promise to keep the offer open is not binding on him. (3) Given that this is primarily an 'offer and acceptance' problem it is good to spot that there is an, albeit minor, consideration point to be taken. It shows an awareness of the whole subject, and ability to make good points on areas falling outside the main topic of the answer.
On Wednesday, Alan tries to accept Bob’s offer by sending him an email, but it seems that this email is never read by Bob. Can it, nevertheless, be regarded as a valid acceptance of Bob’s offer? There is no direct authority on when email communications take effect in the context of contractual negotiations, and the Electronic Commerce (EC) Directive) Regulations 2002, which might be expected to assist, apply only to web-based contracts and explicitly do not apply to contracts made by exchange of emails. As a result, the point must be argued by analogy with other forms of communication. If email were treated in the same way as the post, then it could be argued that Alan’s acceptance took effect as soon as it was sent, applying the rule derived from Adams v Lindsell (1818). In Entores v Miles Far East Corporation (1955), however, it was held that “instantaneous” forms of communication (in that case, telex) should be regarded as taking effect when they are received rather than when they are sent, and this has been confirmed in later cases, such as Brinkibon Ltd v Stahag Stahal (1983). It seems likely that email would be treated as falling into the category of instantaneous communication, so that Alan’s acceptance will not be taken as effective at the point when he sent it. (4) The law on emailed acceptances is not clear, but it is important to come to a decision, with reasons, for adopting a particular approach, as is done here. The reference to the Electronic Commerce (EC Directive) Regulations 2002 again shows an ability to drawn on a broad range of material, without letting this interrupt the general flow of the argument.
The problem is that none of the cases determine precisely when an acceptance by means of instantaneous electronic communication should be regarded as effective – is it when it is received on the offeror’s machine (in this case, Bob’s computer), or when it is read by the offeror, or at some other point in between? In Brinkibon Ltd v Stahag Stahal (1983) the House of Lords refused to lay down any universal rule, holding that it must depend on the intentions of the parties, and the surrounding circumstances of the particular case. It seems, however, that business communications sent during office hours should normally be regarded as effective as soon as they are received on the recipient’s machine (The Brimnes (1975)). If that is the case, then Alan may have a good argument that his acceptance of Bob’s offer was effective on the Wednesday morning, so that he would be able to sue Bob for breach of contract for not selling it to him. His damages would be based on how much more than £1,750 it would cost to acquire a Utopian Red from another source. (5) The discussion of when electronic acceptances take effect could have been expanded a little, but what is written is clear and accurate. The reference to the likely remedy for Alan if he is successful, while not essential for a good answer to this problem, shows in a few words that this aspect of the situation has been properly understood.
If, however, the view is taken that Alan’s email of Wednesday morning is ineffective because it has not been read by Bob, what are the effects of the subsequent events? The significant actions are the sale of the stamp by Bob to Charlie at 2 pm on Wednesday; the revocation email sent by Bob to Alan at some point on Wednesday or Thursday; the communication to Alan by his wife of her conversation with Charlie’s wife, which may be taken to indicate that Bob has sold the stamp to Charlie; and finally, Alan’s second ‘acceptance’ email, sent on Thursday. The question that needs to be determined is whether Bob has effectively withdrawn his offer to Alan before Alan has accepted it by means of this Thursday email. (6) It is sensible to set out the issues in this way, given the complications of the situation, before starting to try to apply the law.
As we have noted above, the general rule is that an offer can be withdrawn at any point before acceptance. Such revocation must, however, be communicated to the offeree (Byrne v van Tienhoven (1880)). Has there been such communication by Bob? The first possibility is the communication via Alan’s wife. Indirect communication of a revocation by a third party is possible, as is shown by Dickinson v Dodds (1876). In this case, a third party, who was involved in the offeror’s business, told the offeree that the offeror had decided to sell certain property, which he had offered to the offeree, to someone else. It was held that the offeree, having received this information from a reliable source, was no longer able to accept the offer. Its withdrawal had been effectively communicated via the third party. Would the same view be taken here? Alan might legitimately point out that information passed on via a casual conversation in a supermarket, and which does not even mention Bob’s name as the seller to Charlie, is rather different from the specific inside information provided in Dickinson v Dodds. The source in this case is not necessarily reliable, and there is always the possibility that the sale was by another dealer. On this basis, Alan has reasonable grounds to claim that his second email should be regarded as effective, unless Bob’s withdrawal email takes precedence. (7) This paragraph shows how it may be important to distinguish a case, in this instance Dickinson v Dodds. This requires you to think carefully about the differences between the reported case and the facts of the problem, and to come to a conclusion as to whether it does apply.
It is at this point that timings become crucial. As has been argued above, Alan’s second email is only of any relevance if his first acceptance was ineffective because the court takes the view that emailed acceptances only take effect on being read by the offeror. The same rule must, therefore, apply to his second email – it will be effective when read by Bob. Similarly, Bob’s emailed revocation of his offer only takes effect when read by Alan. The determining question will, therefore, be whether Bob read Alan’s second acceptance email before Alan read Bob’s revocation. We are not given sufficient information to determine these timings. A review of the relevant computer files to show which email was opened first will be the only way to determine the outcome. If Bob opened Alan’s email first, then Alan’s acceptance is effective and he will be able to sue for breach; if Alan opened Bob’s email first, then the revocation is effective, and Alan will be without a remedy. (8) There is not much law in this part of the answer, but the careful analysis of the facts is important in demonstrating the ability to work through a complex situation in a logical way.
In conclusion, Alan may well be able to argue that he has a contract with Bob on the basis of his first acceptance email, assuming that this is taken to be effective once it has been received on Bob’s computer. If that assumption is incorrect then, on the basis that Dickinson v Dodds can be distinguished, the rights of the parties will depend on the exact timings of the last two emails, and who read which email first. (9) It is important that an answer has a conclusion, summing up the position. It need not be lengthy as long as it covers the main points, as is shown here.
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The Fair
Bob is a stamp dealer. On Monday he puts an advert on his website stating, ‘Utopian Penny Red Stamp, one only, £2,000’.
Later that day, Alan, a stamp collector, telephones Bob and says, ‘The Utopian Red for sale, I’ll give you £1,500 for it’. Bob replies, ‘I cannot accept less than £1,750, but since you’ve been a good customer in the past, I won’t sell it to anybody else before Saturday. Let me have a reply by Friday if you want it.’ Alan says, ‘Thanks, that’s good of you – remind me to buy you a drink when I see you. I’ll think about it and let you know.’
At 7.30 am on Wednesday, Alan sends Bob an email saying, ‘Ok, I accept your offer to sell the Utopian Red for £1,750 – when can I pick it up?’ Unfortunately Bob’s email system diverts this email to his ‘junk mail’ folder, so that he does not read it. At 2 pm on Wednesday Bob sells the stamp to Charles for £1,800.
On Thursday Alan’s wife meets Charles’s wife at the supermarket. Charles’s wife complains about the amount of money Charles has been spending on stamps, including a Utopian Red, which he has just bought from a dealer. Alan’s wife reports this to Alan, who immediately sends a further email to Bob, confirming his previous message. Once he has sent this he notices an email from Bob in his inbox. In this email Bob says that he is having to withdraw his offer to Alan, because he has accepted a better offer from Charles.
Advise Alan.
The first question to consider in advising Alan is whether Bob’s advertisement is an offer. Advertisements can be offers, as is shown by Carlill v Carbolic Smoke Ball Co (1893). In this case, the Smoke Ball Co advertised its smoke balls as able to prevent the ‘flu, and offered £100 to anyone who caught the ‘flu after using them. Mrs Cargill used the balls but then caught the ‘flu. She sued the company. The court held that the advertisement was intended to be an offer, as shown by the company’s statement that it had deposited £1,000 with a bank to meet any claims. Mrs Cargill was successful in her claim. (1) The status of the advertisement is a good place to start, but the essay would benefit from a short introductory paragraph, rather than plunging straight in to the first issue. Too much space is given to describing Carlill v Carbolic Smoke Ball Co, which, as the next paragraph recognises, is clearly distinguishable.
A case that is more relevant to Bob’s advertisement is Fisher v Bell (1961), in which the display of a flick-knife in window was held to be an invitation to treat rather than an offer. This approach was applied in Partridge v Crittenden (1968), where a newspaper advertiser offered bramblefinches for sale at 25 shillings each, and was charged with an offence under the Protection of Birds Act 1954 of offering a wild bird for sale, but he was not convicted because the court held that this advertisement was not an ‘offer’ but an ‘invitation to treat’, because the offeror did not have an unlimited supply of wild birds, and so couldn’t have intended to sell one to everyone who replied ‘accepting’ his ‘offer’. (2) This paragraph gets to the right point (Partridge v Crittenden) after an unnecessary reference to Fisher v Bell. The second sentence is far too long – it is much better to write in shorter sentences, as this is likely to make your meaning clearer.
Assuming that Bob’s advertisement is an invitation to treat, the next point to consider is the telephone conversation between Alan and Bob. Alan says that he will pay £1,500 for the stamp, but Bob replies that he is only prepared to accept £1,750. Alan has made an offer to buy, and Bob has responded with a counter offer. Offers and counter offers are dealt with by Hyde v Wrench (1840), in which a farm was offered for sale at £1,000. A prospective buyer offered £900, which was rejected by the owner. The buyer later tried to accept the original offer to sell at £1,000. It was held that he could not, because his counter offer of £900 had destroyed the original offer, so that it could no longer be accepted. From this it can be seen that Alan and Bob have made an offer and counter offer, but that neither of these has been accepted as yet. (3) Space is wasted here on a description of Hyde v Wrench, which will gain limited credit from the examiner. The concept of offer and counter offer is clearly important to the problem, but the particular issue dealt with by Hyde v Wrench (inability to accept previously rejected offers) is not
Bob says that he will keep his offer to sell at £1,750 open until the end of the week. On Wednesday, Alan sends Bob an email accepting this offer. The rule for posted acceptances is that they take effect on posting, as is shown by Adams v Lindsell (1818). In this case a letter offering to sell wool was misdirected. The offerees replied as soon as they received the letter, but because of the delays the owners sold the wool to someone else. It was held that a contract was made as soon as the letter of acceptance was posted. This was because, otherwise, the parties could go on for ever exchanging letters waiting for confirmation that their last letter had been received. The postal rule applies even where the letter is never delivered (Household Fire and Carriage Accident Insurance v Grant (1879)). So, if Alan had posted his acceptance to Bob, he would have a contract as soon as his letter was posted. But he sent an email rather than a letter and we must now consider whether the postal rule applies to emails. In Entores v Miles Far East Corporation (1955) Lord Denning held that making a contract by telex or fax was like shouting across a river. As a result the postal rule should not apply. So the postal rule will not apply to emails, assuming that it is treated in the same way as telex and fax messages. (4) Once again too much space is given to describing the facts of a case, Adams v Lindsell, which is of limited relevance, because it is unlikely to apply to the problem. More space should be given to Entores v Miles Far East Corporation, which is dealt with briefly and not very clearly.
Alan’s email is never read by Bob, so it cannot operate as an acceptance, though Alan may argue that Bob should have checked his junk mail folder, because it is not uncommon for emails to be misdirected as spam when they are not, and Bob should have been looking out for replies to his advert, especially from Alan. This is not a very strong argument, though, and I would not advise Alan to pursue it further. (5) This is a weak paragraph. It sets up an argument that is not based on any legal principle, only to reject it. It adds nothing to the answer, and would not gain any marks.
Another argument Alan could use is to say that his email should take effect once it is received on Bob’s computer, even though Bob does not read it. This would be using the decision in The Brimnes (1975), where it was suggested that instantaneous communications sent in office hours should be taken to be effective as soon as they are received. (6) This is a good point, which would have benefited from being dealt with at greater length. The case of Brinkibon v Stahag Stahal could also have been mentioned.
On Wednesday afternoon Bob sells the stamp to Charles, so he cannot now sell it to Alan. He has not, however, withdrawn his offer to sell to Alan at £1,750. So Alan is still entitled to accept that offer, if he does so before he is informed of Bob’s sale to Charles, which would clearly imply that Bob has withdrawn his offer to Alan. An offer can generally be revoked at any time until it has been accepted. This was established by Payne v Cave (1789). The revocation must be communicated to be effective. This was held in Byrne v van Tienhoven (1880), which was concerned with a revocation sent by telegram. It was held that it only took effect when it was communicated to the offeree, not when it was sent. (7) This is a generally good paragraph, which makes its points succinctly. On this occasion the answer rightly avoids giving too much detail on the facts of the cases.
We must now consider whether Alan’s second email, again accepting Bob’s offer to sell the stamp to him at £1,750, is effective before Bob has revoked his offer to Alan.
Before he sends this email he is told by his wife of her conversation with Charles’ wife to the effect that Charles has just bought a Utopian Red stamp from a dealer. This is a very vague statement and it should not be regarded as having any direct legal effect, though clearly it raises Alan’s concern that Bob may not have received his previous acceptance, and that is why he sends his second email. Once he has sent this he notices an email from Bob in his inbox. In this email Bob says that he is withdrawing his offer to Alan, because he has accepted a better offer from Charles. Because Alan only reads this email after he has sent his second acceptance to Bob, it comes too late to withdraw Bob’s offer. Alan has already accepted, and so has a contract for the stamp. (8) What is needed here is a reference to Dickinson v Dodds, and an explanation of why that case can be distinguished. As it stands the paragraph consists of unsupported assertions, which are inconsistent with the earlier view that emailed acceptances only take effect when read. He can claim the stamp from Charles, because he started negotiations with Bob before Charles had any dealings with Bob, and so his contract should take priority. (9) The final sentence of this paragraph is incorrect. Alan's remedy would be in damages against Bob; he would not be able to claim the stamp from Charles. Unless you are sure of your ground on remedies, it is probably better to say nothing, given that the problem is really about offer and acceptance.
As we have seen, the dealings between Bob and Alan have probably resulted in a contract, which Alan can enforce, but the final result would have to be determined by the court. (10) This is a weak conclusion, which adds nothing to the essay. Saying that the matter has to be decided by a court appears to be trying to avoid your obligation to come to a conclusion on the issues, and to give advice to Alan.
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The Ugly
Bob is a stamp dealer. On Monday he puts an advert on his website stating, ‘Utopian Penny Red Stamp, one only, £2,000’.
Later that day, Alan, a stamp collector, telephones Bob and says, ‘The Utopian Red for sale, I’ll give you £1,500 for it’. Bob replies, ‘I cannot accept less than £1,750, but since you’ve been a good customer in the past, I won’t sell it to anybody else before Saturday. Let me have a reply by Friday if you want it.’ Alan says, ‘Thanks, that’s good of you – remind me to buy you a drink when I see you. I’ll think about it and let you know.’
At 7.30 am on Wednesday, Alan sends Bob an email saying, ‘Ok, I accept your offer to sell the Utopian Red for £1,750 – when can I pick it up?’ Unfortunately Bob’s email system diverts this email to his ‘junk mail’ folder, so that he does not read it. At 2 pm on Wednesday Bob sells the stamp to Charles for £1,800.
On Thursday Alan’s wife meets Charles’s wife at the supermarket. Charles’s wife complains about the amount of money Charles has been spending on stamps, including a Utopian Red, which he has just bought from a dealer. Alan’s wife reports this to Alan, who immediately sends a further email to Bob, confirming his previous message. Once he has sent this he notices an email from Bob in his inbox. In this email Bob says that he is having to withdraw his offer to Alan, because he has accepted a better offer from Charles.
Advise Alan.
Alan, you have clearly got a problem in your dealings with Bob over the stamp, and you will need good legal advice to sort it out, which I shall now give you. (1) Although you are asked to "Advise Alan" you should always write your answer in the third person. This paragraph says nothing of any value, whereas it should have been the opportunity to identify the legal issues that are going to be dealt with in the rest of the answer.
Bob advertised his stamp in the paper. Alan replied to the advert offering £1,500. Bob refused to accept that, saying that he wanted £1,750. Alan wanted to think about it, but later sent an email saying he would buy at £1,750. Bob did not get this, and sold the stamp to Charles for £1,800. Can Alan do anything about this? (2) This paragraph simply repeats the facts of the problem. No marks are given for being able to copy.
For a contract you need offer, acceptance, consideration and intention to create legal relations. Consideration is defined in Currie v Misa as a detriment to one party or a benefit to the other. In this case, the consideration would be the stamp and the payment of the money for it. Consideration must not be past, and must be of some economic value. If promissory estoppel applies then consideration may not be needed, as shown by Central London Property Trust v High Trees House, where the payment of a reduced rent during the war did not mean the tenants had to pay it back afterwards. Intention to create legal relations is presumed not to apply in domestic contracts, but this seems to be a business transaction so that does not matter. So has there been an offer and acceptance between Alan and Bob? (3) Much of what is said here is accurate, but almost totally irrelevant to the problem. Consideration is not a significant issue, and promissory estoppel is not raised on these facts.
Bob's advertisement was an offer, as shown by the case about the smoke ball, but Alan did not accept this. He also makes an offer, to buy at £1,500. But Bob does not accept this, and offers to sell at £1,750. We now have three offers!! Have any of them been accepted, which is needed for there to be a contract? (4) The assertion that the advertisement is an offer, based on Carlill, is almost certainly wrong, and ignores cases, such as Partridge v Crittenden which would suggest otherwise. Referring to "the smoke ball case" is just about acceptable in an exam answer, but not in an assignment, where it is expected that the names of cases will be given. Avoid using exclamation marks in essays.
Alan sent an email on Wednesday saying that he would buy at £1,750. This seems to be an acceptance of Bob's second offer. The postal rule says that posted acceptances are complete on posting, even if they don't arrive. This is the case of Adams v Lindsell, which involved a contract for the sale of wool. The court held that it was best for everybody if posted acceptances took effect on posting, otherwise the situation would be very complicated and confusing, with no one knowing where they stood. On this basis Alan's email would be OK as soon as it was sent. (5) This is a weak explanation of Adams v Lindsell, which doesn't analyse the basis for the decision properly (i.e. business efficiency). It is also best to avoid colloquialisms, such the acceptance being 'OK', particularly as it is not clear what this actually means. But the situation is complicated here by the fact that the email is redirected to Bob's junk mail folder. Is this because Alan has previously sent spam emails to Bob? If so, this will seriously affect his chances of getting the stamp. If, however, the problem is an over-sensitive spam filter on Bob's machine, Alan can argue that his acceptance took effect as soon as it was received. This is what Lord Denning said in Entores v Miles Far East Corporation. (6) The speculation on Alan's having sent previous spam is inventing facts, which is generally to be avoided, particularly where there is no clear point of law involved. The view attributed to Lord Denning in Entores is inaccurate – the case concerned where an acceptance took effect, not when. So on this basis there is a good contract between Alan and Bob on the Wednesday morning. In any case, the postal rules probably don't apply to emails, so the Entores case is the better one to use in this situation. This was also the case in The Brimnes, and Brinkibob v Stahag Stahal, which dealt with similar circumstances. But the law is very confused, so it is hard to come to any definite conclusion. (7) The right cases are mentioned here, which will gain some credit. But there is no attempt to analyse or apply them to the problem, with the answer hiding behind the fact that the law is 'very confused'.
Even if it is held that Alan's email is not a valid acceptance, Bob should not have sold the stamp to Charles. He had told Alan that he would keep the offer open until the end of the week, but he has now gone back on his word and sold the stamp to Charles. He should not have done this without going back to Alan and giving him the chance to buy the stamp at £1,800. What he has done is very unfair and probably illegal. It might give rise to promissory estoppel, under which promises that are relied on by someone else become enforceable – as in Combe v Combe, where a wife sued to recover money promised to her by her husband. (8) This shows ignorance of the case law on promises to keep offers open (Routledge v Grant) and so comes to an inaccurate conclusion. Promissory estoppel cannot apply here because, as was held in Combe v Combe, it cannot be used as the basis of a claim, only as a 'shield'.
To be fair to Bob, he did send an email to Alan saying that he was withdrawing his offer. Also, Alan's wife told him that Charles' wife had told her that Charles had bought a Utopian Red stamp from a dealer, so Alan has probably guessed that this was the same stamp that he wanted, which is why he sent the email to Bob again accepting Bob's offer to sell at £1,750, but this was too late as Bob had already sold the stamp and so could not sell it to Alan any longer, contrary to what he had originally promised. (9) There is no law here, and the second sentence of the paragraph is far too long. Discussion of Dickinson v Dodds was required, together with a careful analysis of the timing of the email exchanges.
So, Alan, how can I advise you? Your email to Bob was an acceptance so you can say that you have a contract. You might also be able to claim promissory estoppel in relation to Bob's promise to keep the offer open. In the end, I should advise you to get a good lawyer, because it is going to be difficult to argue your case, seeing as how Charles now has the stamp you want and probably won't want to give it up. You could offer Charles £1,850 for the stamp and in that way everybody would be happy apart from Bob who hasn't got as much as he wanted for his stamp, but since he has not acted fairly towards you, that doesn't really matter. (10) As a concluding paragraph, this adds nothing to the essay, consisting as it does of a collection of random thoughts. Advising Alan to get a good lawyer is an abdication of your responsibility to give advice, and your suggestion of negotiating with Charles, while interesting, is irrelevant to the legal issues raised by the problem.
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Revision Checklist
Chapter 1: Agreement;
- greement
- Unilateral and bilateral agreements
- Offer
- Invitation to treat
- Display of goods
- Advertisements
- Auctions
- Tenders
- Termination of offer
- Acceptance
- The Postal rule
- Electronic communication
Chapter 2: Consideration;
- Definition of consideration
- Types of consideration
- Performing an existing duty
- Exceptions – Implications of Williams v Roffey Bros
- Part payment of debts – Pinnel's Case
- Promissory Estoppel
- Intention to be legally bound
Chapter 3: Contents of a Contract;
- Distinction between terms and representations
- Identification of express terms
- Parol evidence rule
- Identification of implied terms
- Implied terms of fact
- Terms implied in law
- Classification of terms
- Conditions
- Warranties
- Innominate terms
Chapter 4: Exemption (Exclusion or Limitation) Clauses;
- Incorporation
- Unfair Contract Terms Act (UCTA) 1977
- Reasonableness test
- Unfair Terms in Consumer Contracts Regulations 1999
- Unfairness
Chapter 5: Vitiating Elements which Render a Contract Voidable;
- Rescission
- Bars to rescission
- Misrepresentation – requirements
- Remedies for misrepresentation
- Damages for misrepresentation
- Duress
- Economic duress
- Remedies for duress
- Undue influence
- Effect of undue influence on a third party
Chapter 6: Mistake;
- Effect of mistake
- Common mistakes
- Mutual and unilateral mistakes
- Mutual mistakes concerning the identity of the subject matter
- Unilateral mistake concerning the terms of the contract
- Unilateral mistake as to the identity of other parties to the contract
- Mistake in equity
- Refusal of specific performance
Chapter 7: Illegality and Capacity;
- Illegality
- Effects of illegality
- Exceptions
- Contracts in restraint of trade
- Restraints on employees
- Restraints on the vendor of a business
- Exclusive dealing agreements
- Effect of restraint
- Capacity
- Minors
- Restraints on the vendor of a business
Chapter 8: Discharge;
- Performance
- Agreement
- Breach
- Anticipatory breach
- Frustration
- Limits to the doctrine of frustration
- Effect of frustration
Chapter 9: Remedies for Breach of Contract and restitution;
- Methods of compensating the claimant
- Quantification of damages
- Remoteness of damage
- Application of the remoteness rules
- Type of loss recognised – pecuniary/non-pecuniary
- Causation
- Liquidated damages
- Equitable remedies
Chapter 10: Privity of Contract;
- Doctrine of privity
- Statutory exceptions
- Agency
- Attempts to allow the promisee to enforce the contract on behalf of the third party
- Damages
- Attempts to impose obligations on third parties
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Glossary
Click on the glossary term to see the definition
Chapter 1
- Offer
- A definite promise to be bound provided that certain specified terms are accepted. An offer may be made to a particular person, to a group of persons, or to the whole world. The person making an offer is called the offeror and the person accepting the offer is called the offeree.
- Invitation to treat
- An indication that the invitor is willing to enter into negotiations but is not prepared to be bound immediately. See Pharmaceutical Society of GB v Boots Cash Chemists Ltd [1953]
- Unilateral Offer
- An offer open to acceptance by any person who performs the specified terms. For example the offer of a reward. See Carlill v The Carbolic Smoke Ball Co Ltd [1893]
- Counter offer
- Any attempt by the offeree to change the terms of an offer will amount to a counter offer. A counter offer will terminate the original offer which will no longer be open for acceptance. See Hyde v Wrench (1840). A counter offer can be accepted by the offeror.
- Acceptance
- A final and unqualified assent to all the terms of the offer. A valid acceptance must be made while the offer is still in force and exactly match the terms of the offer - sometimes referred to as the "mirror image" rule. A mere request for information will not however amount to a rejection. See Stevenson v McLean (1880)
- Postal rule
-
Acceptance takes place when a letter is posted, not when it is received. See Adams v Lindsell (1818). Note the difference between acceptance and revocation of an offer by post:
- Acceptance of an offer takes place when a letter is posted.
- Revocation of an offer takes place when the letter is received.
Chapter 2
- Consideration
- Defined in Currie v Misa (1875)) as some right, interest, profit or benefit to one party; or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.
- Past Consideration
- Consideration must not be past. A promise made after a contract has been entered into will not be enforceable as no consideration will have been provided for the promise. See Re McArdle (1951) and Roscorla v Thomas (1842)
- Performance of existing duties
- Where a party undertakes an obligation, for which he is already legally bound, the act can never be sufficient to constitute consideration for a new agreement. See Stilk v Myrick [1809]
- Williams v Roffey Bros (1991)
- provides an exception to the rule that where a person does something for which he is already contractually bound, this can never amount to consideration for a new agreement. The exception will arise where the party making the promise to pay more money is said to receive an additional benefit from the other party's agreement to complete what he was already contractually bound to fulfil under the existing agreement.
- Pinnel's Case (1602)
- provides authority for the rule that payment of a lesser sum than the amount outstanding on the due date can never provide satisfaction for the whole debt. The creditor will always be able to sue for the outstanding balance. The rule is subject to some exceptions; the main ones being where the debtor does something different, for example, where payment is made, at the creditor's request at an earlier time; at a different place; or by a different method or where payment is accompanied by an additional benefit.
- Promissory estoppel
- the doctrine provides a defence where a creditor is suing for the remainder of a debt where the creditor has previously indicated that part payment in settlement of the whole is acceptable. Where the defendant has acted in reliance on the promise to waive the remainder of the debt, the claimant will be estopped from reneging on his earlier promise. The doctrine can be used only as a "shield and not a sword". See Central London Property Trust Ltd v High Trees house ltd [1947]
Chapter 3
- Representation
- A statement made by either party which was not intended to form part of the contract, but may or may not have been intended to induce one of the parties to enter into the contract. A representation should be distinguished from a mere opinion as an opinion is not based on fact and a party will not be liable for its accuracy. See Bisset v Wilkinson [1927]. If a representation is found to be untrue it may be a misrepresentation and the contract will be voidable.
- Term
- Any statement that is intended by the parties to form part of the contract will be a term and must be complied with. If a term is broken there will be a breach of contract. Terms can be express; that is agreed by the parties or implied by custom or law. See Hutton v Warren [1836] - example of a term implied by custom and Sale of Goods Act 1979 - for terms implied by statute.
- Parol evidence rule
- oral or other evidence extrinsic to the document is not normally admissible to 'add to, vary, or contradict' the terms of the written agreement. See Jacobs v Batavia and General Plantations Trust (1924).
- Sale of Goods Act 1979
-
Statute which implies the following terms into contracts for the sale of goods:
- that the seller has the right to sell the goods
- that goods sold by description correspond with the description
- that the goods are of satisfactory quality
- that the goods are fit for any special purpose made known to the seller
- that goods sold by sample correspond with the sample
- Conditions
- Statements of fact or promises which form the essential terms of the contract. If the statement is untrue, or the promise is not fulfilled, an injured party may terminate (or treat as discharged) the contract and claim damages. See Poussard v Spiers and Pond (1876)
- Warranties
- Contractual terms concerning the less important or subsidiary statements of facts or promises. If a warranty is broken, this does not entitle the other party to terminate (or treat as discharged) the contract, it merely entitles him to sue for damages. See Bettini v Gye (1876).
- Innominate terms
- The term is not classified into a specific category, instead, in determining the outcome of a breach of term, the courts will consider the consequences of the breach rather than how it is classified when deciding the appropriate remedy. See Hong Kong Fir Shipping co Ltd v Kawasaki Kisen Kaisha Ltd (1962).
Chapter 4
- Exclusion clause
- A term of the contract which purports to exclude, wholly or in part, liability for a breach of a contract or a tort. To be valid an exemption clause must be incorporated into the contract and must satisfy the tests set by the Unfair Contract Terms Act 1977 and the Unfair Terms in consumer Contracts 1999
- Course of dealing
- where there is evidence of a course of dealing between the contacting parties, the usual terms may be incorporated into the contract even though they may not have been specifically drawn to the attention of the parties on each occasion a contract has been made. See Spurling v Bradshaw (1956).
- Unfair Contract Terms Act 1977
- The Act covers exemption clauses only. It covers both contractual and tortious liability. Under the Act certain clauses, such as exclusion of liability for death or personal injury caused by negligence are void. Other specified clauses are valid only if reasonable.
- Unfair Terms in Consumer Contracts Regulations
- The regulations cover any term in a contract between a seller or supplier and a consumer where the term has not been individually negotiated, i.e. drafted in advance. The regulations cover ALL terms, not solely exclusion clauses. The regulations operate to govern "unfair terms", which are described as "any term which contrary to good faith causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer", (Reg 5(1)). See Director General of Fair Trading v First National Bank plc [2002]
Chapter 5
- Vitiating Factors -
-
There are four categories of vitiating factors:
- Misrepresentation - contract will be voidable
- Mistake - if the mistake is operative the contract will be void
- Duress and undue influence - contract will voidable
- Illegality - contract will be void
- Rescission
-
Restoring the parties as far as is possible to the position they were in before they entered into the contract. Rescission is subject to certain bars:
- Affirmation of the contract - see Long v Lloyd (1958)
- Lapse of time - see Leaf v International Galleries (1950)
- Restitution must be possible
- Third party rights - Rescission will not be granted if third parties have acquired rights in the subject matter of the contract. See Phillips v Brooks (1919) and Lewis v Avery (1972)
- Misrepresentation
- An untrue statement of fact made by one party to the contract (representor) to the other (representee) which induces the other to enter into the contract. See Smith v Land and House Prop Corpn (1884)
- Fraudulent misrepresentation
- to be successful in a claim for fraudulent misrepresentation, (also know as the tort of deceit), the claimant must show that the defendant knew that the statement was false, or the statement was made without any belief in its truth, or the defendant was reckless or careless as to whether the statement was true or false. The defendant will not be liable if he can show that he had an honest belief in the truth of the statement. See Derry v Peek (1889).
- Negligent misrepresentation
- The claimant can sue under the common law in negligent misstatement where the misstatement has caused a financial loss. See Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]. The claimant can also sue for negligent misrepresentation under the Misrepresentation Act 1967. The Act will assist a misrepresentee who is unable to prove fraud. The misrepresentee need only prove that the statement is untrue. It is for the misrepresentor to prove that he had good grounds for making the statement, and the burden of proof is a heavy one. See Howard Marine and Dredging Co Ltd v Ogden (1978)
- Innocent misrepresentation
- a misrepresentation which is neither fraudulent nor negligent. Damages will not usually be available, but may be awarded in lieu of rescission under s 2(2) Misrepresentation Act 1967. An indemnity may also be awarded.
- Undue influence
- An equitable doctrine. Pressure not amounting to duress at common law, whereby a party is excluded from the exercise of free and independent judgment. Undue influence is based on the misuse of a relationship of trust or confidence between the parties and will render a contract voidable. See Barclays Bank v O'Brien (1993)
- Economic duress
- where one party has been forced into a contract due to illegitimate economic pressure. See Atlas Express Ltd v Kafco (Importers and Distributors) ltd (1989).
Chapter 6
- Common mistake
- Will occur when the parties are agreed, but they are both under the same misapprehension. If this misapprehension is sufficiently fundamental, it may nullify the agreement. The mistake may concern the existence of the subject matter or ownership of the property. At common law, a common mistake may render the contract void and the contract will have no legal effect; it cannot be enforced by either party and title to property cannot pass under it. See McRae v Commonwealth Disposals Commission (1950) and Associated Japanese Bank (International) Ltd v Credit du Nord SA [1988.
- Mutual mistake
- Will occur when both parties are mistaken. The parties are not mistaken about the same thing, but are at cross purposes and have a different interpretation of the terms of the contract. A mutual mistake will render the contract void. See Raffles v Wichelhaus [1864]
- Unilateral mistake
- Will occur when only one party is mistaken and the other party is aware of the mistake. The mistake can concern the identity of the other party to the contract or the terms of the contract. See Hartog v Colin & Shields [1939] and Cundy v Lindsay (1878).
- Bell v Lever Brothers Ltd [1932]
- Provides authority on mistake as to quality of a bargain. The House of Lords said that a mistake as to the quality of a contract will not effect the contract unless the mistake was as to the existence of some quality which made the thing without that quality essentially different from the thing it was believed to be. Lord Atkin gave the following example - if a horse believed to be sound turns out to be unsound, then the contract remains valid; but, if a horse believed to be a racehorse turns out to be a carthorse, then the contract is void.
- Mistaken identity
- Where the parties negotiate in person, there is a presumption that the innocent party intended to do business with the person physically in his presence. See Phillips v Brooks (1919) and Lewis v Averay (1972)
Chapter 7
- Contracts illegal by statute
- a contract can be illegal either in its formation or illegal on performance. A contract agreement which is prohibited by statute will be void. See Re Mahmoud and Ispahani [1921]. A contract which has been legitimately created but has become illegal during its performance will be unenforceable. See Marles v Philip Trant (1954)
- Contracts in restraint of trade
- A contract is in restraint of trade if it restricts a person's liberty to carry on his trade or profession. A contract should nevertheless be enforced if the restriction protects a legitimate interest and is reasonable. See Esso Petroleum v Harpers Garage (1968) and Forster v Suggett (1918).
- Capacity
-
certain categories of person will be affected by their capacity to freely enter into a contract
- Minors (under age of 18)
- Persons who are drunk (when the contract is formed)
- Mental patients (when the contract is formed)
- Contracts for necessaries
- provide an exception to the rule that contracts are unenforceable against a minor. The common law recognises that minors should pay for goods and services that are classified as necessaries. In deciding what are necessaries the court will take into account the minor's lifestyle and current needs. See Nash v Inman [1908]
- Drunkenness and its effect on capacity
- where a party is not aware of the quality of his actions on entering into the contract, and provided that the other party is aware of his condition, the contract will be voidable by the drunken person when he becomes sober again
- Discharge of contract
-
A contract is 'discharged' when there are no obligations outstanding. Despite the rule that performance must be exact, the law will allow payment to be made, on a quantum meruit basis, for incomplete performance where:
- The contract is divisible and payment can be recovered for the completed part
- Where the promisee accepts partial performance. See Sumpter v Hedges (1898)
- Where the promisee prevents complete performance. See Planché v Colburn (1831)
- Where the promisor has performed a substantial part of the contract. See Hoenig v Isaacs (1952), (the doctrine of substantial performance).
- Anticipatory breach
- Occurs before the date of performance is due. Notice will be given by one party to the other either expressly, or it may be implied from his conduct that he will not complete his obligations which will amount to a breach of contract. The other party does not have to await the date of performance; he may sue for damages immediately. See Hochster v De La Tour (1853). The innocent party may refuse to accept the repudiation and continue to perform his obligations under the contract. See White and Carter Ltd v McGregor (1962)
- Affirmation
- the party who has endured a breach of a condition in a contract may repudiate the contract, or affirm it. If he affirms the contract the contract will continue and the wronged party may sue for damages. See Fercometal SARL v Mediterranean Shipping Co (1988)
- Frustration
- Frustration occurs when there has been a change in circumstances making performance of the contract impossible, or where the contract has been deprived of its commercial purpose. See Taylor v Caldwell (1863) and National Carriers v Panalpina (1981).
- Law Reform (Frustrated Contracts) Act 1943
- This Act provides that all sums paid or payable before the frustrating event shall be recoverable or cease to be payable, but the court has a discretionary power under S1(2) to allow the payee to set off against the sum so paid in respect of expenses he has incurred before the frustrating event. Under s 1(3), where one party has obtained a valuable benefit before the time of discharge, the other party may recover from him such sums as the court considers appropriate.
Chapter 9
- Remoteness of damage
- Damages cannot be recovered for losses that are too remote. The losses must be 'within the reasonable contemplation' of the parties. The leading case on recoverability of damages is Hadley v Baxendale (1854)
- Reliance loss
- The claimant can recover for expenditure incurred in advance of a contract that has been breached. Claims on this basis are usually made when the amount of loss of profit is difficult to quantify. See Anglia Television Ltd v Reed [1972]
- Rescission
-
The court will order that the parties are returned to their pre-contractual position. Rescission is subject to certain bars:
- Affirmation of the contract - see Long v Lloyd (1958)
- Lapse of time - see Leaf v International Galleries (1950)
- Restitution must be possible
- Third party rights - There can be no rescission if third parties have acquired rights in the subject matter of the contract. See Phillips v Brooks (1919) and Lewis v Avery (1972)
- Specific performance
- an order of the court requiring the defaulting party to carry out his contractual obligations. Specific performance will only be awarded where damages are not an adequate remedy and will not usually be granted where there is a need for constant supervision. See Ryan v Mutual Tontine Association (1893).
- Injunction
- An order of the court requiring a party to do something positive, or to refrain from doing something. An injunction will be granted to enforce a negative stipulation in a contract of employment, as long as this is not an indirect way of enforcing the contract. See Warner Bros Pictures Inc v Nelson (1937) and Page One Records v Britton (1968).
Chapter 10
- Privity of contract
- no person can sue another or be sued on a contract if they have not provided consideration under the contract. See Tweddle v Atkinson [1861]
- Statutory exceptions to privity of contract
-
there are a number of statutory exceptions to the doctrine. These are:
- Price maintenance agreements
- Various insurance contracts
- Law of Property Act 1925, s 56
- Negotiable instruments
- Contracts (Rights of Third Parties) Act 1999
- under the Act, the rights of third parties will be recognised in certain limited circumstances, provided that there is an intention that a benefit was to be conferred on that party. The third party can be specifically identified in the contract or can be identified as a member of a class.