On 15 October 2010 East Midlands Airways (‘EMA’) advertise a second-hand Airbus 321 for sale in an aviation industry trade journal for £10.4m. Later that same day, Paul, the Chief Executive Officer of Gunnell Aviation Ltd, phones EMA’s Managing Director, Joseph. Paul says that his firm would very much like to view the Airbus 321 but that he is off on a 5 day business trip to Zurich, Switzerland and will not be able to view the aircraft until he returns. Joseph says that if another buyer comes forward he will have to sell the Airbus 321 to that buyer. Paul then says he will pay £100,000 if EMA promises not to sell the Airbus 321 to another buyer for the next 5 days. Joseph agrees to this.
Analyse whether any contract has been made between the parties and if so, what are its terms? Refer to the relevant case law to support your answer.
This case concerns the law of contract and whether a valid contract exists between EMA and Gunnell Aviation. A contract is a legally binding agreement. Every business will need to make contracts at one time or another, including EMA and Gunnell Aviation. Several points about the nature of a contract are worth noting at this stage. First, contracts are formed by agreement between the parties to the contract. Second, a contract is a bargain under which both sides give some benefit to the other. Third, contractual liability is strict.
A contract in law requires offer and acceptance. The offeror makes an offer by stating a set of terms with the intention that these terms will form a legally binding agreement if they are accepted by the offeree.
The first thing EMA does is advertise. EMA makes an ‘invitation to treat’: Partridge v Crittenden [1968] 1 WLR 1204. In this case, the defendant was charged with unlawfully offering for sale a bramblefinch contrary to s.6(1) of the Protection of Birds Act 1954,. The defendant had placed an advertisement in the classified section of a magazine. This advertisement had said, “Quality British…bramblefinch cocks, ….25 shillings each”. A customer sent a cheque for 25 shillings, requesting a bird. The bird was sent to the customer in a box by British Rail. In this case, the defendant was held to be not guilty because his advertisement was held to be an ‘ invitation to treat’ not an offer. The defendant had therefore not ‘offered for sale’ a wild bird in breach of the Act.
This contract is really about offers and acceptance. An offer to buy can be written or spoken, or it can be inferred from the conduct of the offeror. It is difficult to see who has made the offer. Paul, of Gunnell Aviation, phones Joseph to say he is considering purchasing the Airbus 321. However, money is not mentioned. If fact he says he wants to see the plane. This does not seem like an offer according to the case law.
Paul later says Paul’s he will pay £100,000 to EMA if it agrees not to sell the Airbus to another buyer for a period of 5 days. As a price is mentioned this is a solid offer to EMA.
The price of £100,000 amounts to good consideration based on the legal definition of consideration in Currie v Misa (1875) LR 10 Ex 153. In Currie v Misa a company named Lizardi & Co, then in good credit in the City, sold four bills of exchange to Mr Misa, drawn from a bank in Cadiz. Mr Currie was another of the banking firm and the plaintiff bringing the action. The bills of exchange were sold on the 11th of February, and by the custom of bill, brokers were to be paid for on the first foreign post-day following the day of the sale. That first day was the 14th of February Lizardi & Co. was much in debt to his banking firm, and being pressed to reduce his balance, gave to the banker a draft or order on Mr Misa for the amount of the four bills. This draft or order was dated on the 14th, though it was, in fact, written on the 13th, and then delivered to the banker. On the morning of the 14th the manager of Misa's business gave a cheque for the amount of the order, which was then given up to him. Lizardi failed, and on the afternoon of the 14th the manager, learning that fact, stopped payment of the cheque.
As soon as Paul’s offer is accepted by Joseph, a contract comes into existence and both sides are legally bound. EMA cannot sell the Airbus for the next five days. Gunnell Aviation must pay EMA £100,000 for EMA’s promise not to sell the Airbus to another buyer.
However, this does not mean that an actual contract for the sale of the Airbus has beebn made at this stage.
Commentary:
This is a typical contract law question that focuses on whether a contract for the sale / purchase of an Airbus has been made between the parties. While this answer addresses certain of the concerns of EMA and Gunnell Aviation, is it a rather general discussion of the law of contract rather than a focussed analysis.
Remember that there is no need to repeat the facts of the cases you cite, rather focus on the facts of the scenario.
Cite the relevant case law authority in order to use the legal principles established by the case law to support the conclusions you reach in your answer about the facts to hand.
Students are expected to analyse each of the requirements for a valid contract on not only offer, acceptance and consideration the first three elements. It is important to cover, even briefly, intention to create legal relations and to confirm that there are no facts to vitiate the contract. Students who undertake this comprehensive analysis in a logical fashion will obtain the best marks. The use of sub-headings in a written answer helps to create structure and signpost important points to the marker.