Podcast: 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.
Podcast: the Good
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to consider what constitutes an ‘offer’ and an ‘acceptance’, when these are communicated, and whether an offer can be withdrawn.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 To be successful he will need to prove that he has accepted a valid offer from Bob, before that offer was withdrawn.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.