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Contract Law - offer and acceptance.

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Contract Law- Offer and Acceptance Shabana Riaz Supervision Group 10 The given problem is concerned with whether or not an agreement has come into existence between Astonia PLC, and any of the three local companies, to sell them the widget machine. A contract is generally regarded as an agreement, which the courts will treat as binding, and where necessary, may enforce. One of the basic prerequisites for the existence of a contract is an offer and an acceptance of that offer, which together form the agreement. Most contracts are usually bilateral and an agreement comes into existence where one party makes an offer to be contractually bound by specified terms to another party who accepts the terms and communicates this to the offeror. It is the communication of the acceptance that makes the agreement binding. A contract can also be unilateral, here one party makes a conditional offer to another in return for performing or refraining from a particular act. The agreement becomes binding where the offeree performs the required act. One of the first issues raised is to establish whether the letters sent by Astonia PLC to the local companies are to be regarded as being an offer or an invitation to treat? ...read more.


The submission by Optimus PLC of �2500 or �100 more than the best offer under �3500, raises the issue as to whether a tenderer can make a 'referential' bid and whether such a bid be valid? By offering to pay �100 in excess of the best offer up to �3500 Optimus PLC are making what has become known as a referential bid, that is a bid which aims to 'top up' the best tender by a specified amount. The House of Lords, in the case of Harvela Investments Ltd v. Royal Trust of Canada 1985 (facts stated above), challenged the validity of such a bid, House of Lords held that they did not consider referential bids valid in such transaction. Lord Diplock in trying to justify the House of Lords decision gave the analysis that the purpose of sale by bidding was to provoke the best price from tenderors irrespective of what other tenderors would be prepared to pay, and stated referential bids worked against this. He went on to say that such bids would cause practical problems too, he stated if only some parties who were invited to make a tender made referential bids, then those parties who did not would not have a valid opportunity to have their bids considered. ...read more.


Wrench 1840, the submission of �300 tender is not binding as it is not the highest submitted tender, even though this was a mistake the responsibility to communicate acceptance correctly, falls on the person making the acceptance (Henkel v. Pape 1870). It would also be advisable to Astonia that no binding agreement exists between Astonia and Optimus as the referential bid was invalid, as held in the case of Harvela Investments, this leaves a tender of �2500, which again is not binding as it was not acceptance through submission of the highest bid. It would be advisable to Astonia PLC that an agreement exists between themselves and Mintex PLC, as the invitation to tender would be considered an offer, as they have undertaken to sell the widget machine to the highest bid which is a unilateral contract which has been accepted by Mintex through submission of the highest tender. If we consider the submission of the tender by Mintex PLC in respect of The Brimmes 1975, the acceptance or tender would have been submitted at 6 p.m. on the 9th September, irrespective of whether it had been read by Astonia PLC, the Fault Suggestion by Denning LJ, would mean that Astonia would be culpable for the lack of communication of the tender, and the acceptance through submission of the highest bid would be binding. ...read more.

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