In the case of Betty v Anne it is necessary to establish that an offer was made to Betty. It can be distinguished that the letter Anne posted to Betty was in fact an offer and not an invitation to treat. This is due to the fact the letter stated the terms on which Anne was willing to be legally bound. The terms being that Betty paid Anne £200 cash for her present washing machine and that Betty accepted her offer within 7 days by return of post. The offer made to Betty was a bilateral offer. The offer was communicated successfully to Betty, as she received the letter.
The next stage in establishing a contract is acceptance.
Right and obligations under a contract generally begin from the moment of acceptance. When identifying an acceptance it is important to determine that the response is in fact an acceptance and it has been communicated appropriately to the offeror. An acceptance that is valid is a statement of intention to be legally bound by the terms of the offer. The offer must be accepted exactly as the offer stands. This is known as the mirror image rule. Any attempt to vary the terms of the original offer will be seen as a counter-offer. When a counter-offer is made then the original offer is terminated. This means that the original offer can no longer be accepted by the offeree. In Hyde v Wrench (1840) 49 ER 132, the defendant offered to sell his farm to the claimant for £1000. The claimant rejected this offer and offered to pay £950. The defendant proceeded to reject this price. The claimant then proceeded to try and accept the original offer of £1000. The defendant had decided to sell the farm to another party. The claimant then tried to sue for breach of contract. Lord Langdale stated in his judgement on the case:
‘if [the offer] had at once been unconditionally been accepted, there would undoubtedly have been a perfect binding contract; instead of that, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby rejected the offer previously made by the defendant.’
It can be difficult to distinguish a counter offer from negotiations. Mere enquiries about the offer that do not seek to change the terms of the contract are not counter-offers. This means the offer is still open for acceptance by the offeree. In Stevenson v Mclean (1880) 5 QBD 346, the offeree had accepted the price and quantity in a response to an offer selling iron. The offeree wished to know if delivery of the iron could be staggered, as if not he would have to make arrangements in order to accept delivery of the total. As the claimant had heard nothing further from the offeror he sent his letter of acceptance. Upon discovering that the iron had been sold to a third party the claimant then proceeded to sue for breach of contract. The defendants claim that there had been a failed counter-offer. The courts however held that it was not a rejection of the offer, but merely an enquiry about details. Therefore the offer was still open for acceptance.
When Betty received Anne’s letter she immediately telephoned Anne and left a message on the answering machine. Betty said that she wished to purchase the washing machine but she could not afford to pay the £200 all at once and would Anne be able to accept instalments. As Anne had not stipulated the method of payment in the original offer, Betty’s telephone message was merely an enquiry about details.
Acceptance of an offer must be communicated to the offeror. It is the sole responsibility of the offeree to ensure the offeror receives knowledge of acceptance. Only the offeree, the one to whom the original offer has been made, can accept the offer.
Unless the offeror stipulates a particular method of acceptance then there no set rules as to how an acceptance must be communicated. An offer can be accepted in writing, by words or by conduct.
However if the offeror specifies a particular method of acceptance than the acceptance must be in that form in order to be valid. In Yates v Pulleyn (1975) 119 SJ 370 one party was offered a plot of land for a price. The terms of the offer stated that the acceptance must be sent by registered or recorded delivery post. The acceptance was sent by ordinary post and the courts ruled the acceptance invalid.
Anne’s letter to Betty, stipulated that acceptance must be given in writing. The requested method was carried out but as the letter never arrived Anne sold her washing machine to a third party. For this Anne is in breach of contract due to the ‘postal’ rule.
The ‘postal’ rule allows an acceptance to be valid from the moment it is posted, even if it never arrives. Where the use of the ordinary postal system is the normal, anticipated or agreed method of accepting the offer than the acceptance is valid from the time the acceptance was posted. Not the time it is received. The rule was formed in the case of Adams v Lindsell [1818] 106 ER 250 where the court stated that due to possible injustices that could be caused by delays in the postal system, a letter of acceptance would be effective from its time of posting.
On looking at the facts of the case it would appear that Betty could bring a claim against Anne for breach of contract. Betty’s letter of acceptance was valid from the moment she posted it, thus creating a contract. Her telephone message regarding the payment by instalments was an enquiry about details not a counter-offer. Anne has also breached the terms of her own offer by selling her washing machine to Carol on the Friday, when her terms stated that Betty had 7 days to accept her offer which was made on the Monday. In conclusion Anne is in breach of contract and may be liable for damages.
Section B
3. The terms of a contract will each have a different significance to the contract.
Due to the difference in importance of terms, the significance of the breach of those terms will also vary. With this in mind the common law system has had to distinguish between terms in accordance with their importance. Terms of a contract are classified as conditions, warranties and more recently innominate terms.
A condition is considered the more important of the classifications. A condition is a term of a contract that is seen as of such importance that if it were not performed the contract would be rendered worthless. If this should happen the courts will allow the injured party to not only sue for damages but they will also enable the claimant to lawfully dismiss his own obligations under the contract (repudiate).
This means that the claimant is free to contract with an alternative party and the defendant cannot then pursue a claim against the claimant for breach of contract. As seen in Poussard v Spiers and Pond (1876) 1 QBD 410. In this case an actress was contracted to appear as the lead in an opera. The actress was taken ill and unable to perform in the opening shows. The producers gave her role to her understudy. The actress then sued for breach of contract but lost. The court held that she was in breach of contract for turning up to the show after the first night. As the lead singer in the show her presence was imperative to the production and so this was a condition enabling the producers to repudiate and terminate her contract for her non-attendance at the early performances.
Warranties are the terms in a contract that are regarded as minor. These are terms that are not at the root of the contract and if beached, the contract may still continue and the only remedy available is an action for damages. Warranties are the category of terms that deal with the obligations under a contract that are either ancillary or secondary to the major purpose. An example of this can be found in the case of Bettini v Gye (1876) 1 QBD 183. Here a singer was contracted to appear at various theatres for a whole season of concerts. It was written into his contract that he was required to attend rehearsals six days before the start of the season. The singer only appeared 3 days in advance to the start of the season. When he arrived his role had been replaced. The producers claimed that the obligation to attend rehearsal was a failed condition, thus allowing them to repudiate and terminate his contract. The court held that the obligation to attend rehearsals was only ancillary to the main purpose of the contract. This meant that the obligation was a warranty and the producers were therefore entitled to sue for damages only. It can be seen from the examples of the cases above that the classification of the terms is vital to establishing the outcome of a breach of those terms within contract.
The problem with classifying terms becomes apparent when there is a dispute as to what the term should be. Quite often parties to a contract will disagree as how to classify a term either as a condition or a warranty. This is due to the implication of the importance of what a breach of that term may have on the contract.
To deal with the above mentioned problem in the later half of the 20th century the courts developed an approach by which they would describe the terms as innominate.
‘These are terms whose status as conditions or warranties is not defined by the construction of the words, or the intentions of the parties, but on the effect that breach would have.’
Meaning they do not give a term a specific classification. Instead they will consider the consequence of that breach on the contract, in determining what remedy should be awarded in the circumstances. Innominate terms are often referred to as intermediate terms, those that cannot be classified as conditions or warranties.
The use of innominate terms was first decided in the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (The Hong Kong Fir Case) [1962] 2 QB 26. The defendants chartered a ship from the claimants under a 2 year charter party. Written into the contract was the term ‘in every way fitted for ordinary cargo service’. The ship broke down due to the engine room staff failing to do their jobs correctly. It was discovered that the ship was in a poor state off repair and not at all seaworthy. This was admitted by the claimants. This resulted in 18 weeks of use of the ship being lost by the defendants. They then claimed to treat the contract a repudiated and at an end. The claimants sued claiming the term was a warranty, thus only entitling the defendants to sue for damages. The Court of Appeal agreed. This case however did in fact raise some important issues. Lord Diplock in his judgement on the case felt that not all contacts could be simply divided into terms that are either conditions or warranties. This is due to the fact that many contracts are far more complex.
The courts will now determine the consequences of that breach before deciding on an appropriate remedy when a term has not been classified. This can be useful when dealing with contracts such as charters, where the results of the breach vary from one end of the scale to the other.
The problem with identifying terms as innominate means that the contractual relationship can be left in a state of uncertainty. The outcome of a particular situation involving the term can never be predicted until the term has been breached.
Regardless of the implications of classifying a term as innominate, it allows the courts more flexibility to decide the case fairly in the pursuit of justice.
Bibliography
Text Books:
Richards. Paul, Law of Contract 7th Edition (2005), Pearson Longman, Glasgow
Smith. J.C, Smith & Thomas: A casebook on contract 11th Edition, (2000) Sweet & Maxwell, London
Turner. Chris, Unlocking Legal Learning (2004) Hodder & Stoughton, London
Table of Cases:
Bettini v Gye (1876) 1 QBD 183
Carlill v The Carbolic Smoke Ball Co [1983] 1 GB 256
Hyde v Wrench (1840) 49 ER 132
Poussard v Spiers and Pond (1876) 1 QBD 410
Stevenson v Mclean (1880) 5 QBD 346
Taylor v Laird (1856) 1 H & N 266; 25 LJ Ex 329
Yates v Pulleyn (1975) 119 SJ 370
Electronic Resourses:
Carlill v The Carbolic Smoke Ball Co [1983] 1 GB 256
Taylor v Laird (1856) 1 H & N 266; 25 LJ Ex 329
Hyde v Wrench (1840) 49 ER 132
Turner. Chris, Unlocking Contract Law, 2004 Hodder & Stoughton ,pg 39
Stevenson v Mclean (1880) 5 QBD 346
Yates v Pulleyn (1975) 119 SJ 370
Adams v Lindsell [1818] 106 ER 250
Poussard v Spiers and Pond (1876) 1 QBD 410
Bettini v Gye (1876) 1 QBD 183
