Advise the parties whether there is a contract between Hettie and Barbara for the sale of the piano.

Contract Law

Practice Assignment

Hettie is elderly and has taught the piano privately for many years. Recently Hettie has suffered some health problems and so she has decided to give up teaching and to move into a small flat. She has been forced to find another home for her grand piano.

Several weeks ago she offered the piano for £2,500 to one of her favourite former pupils, Barbara, who said that she would have to think about it. Hettie said that she must know by Friday and instructed Barbara to drop a note through her front door by hand as she did not trust the postal services.

On Tuesday Barbara sent a letter to Hettie by post as she’d not have time to go over to the other side of town to Hettie’s house. In the letter Barbara said that she would like to buy the piano but asked whether she could pay by five instalments of £500 over a one-year period. Barbara went on to say that she assumed that the adjustable music stool and the piano music would be included.

Hettie put the letter, which arrived on Wednesday, to one side and went shopping in town. Whilst she was out she met Philip and offered the piano to him. He immediately accepted and made arrangements to collect it the following week. On Thursday Barbara was in town when she met another former pupil of Hettie’s, Joyce, who told her that Hettie was planning to sell the piano to Philip. Barbara was extremely anxious to buy the piano so immediately went into Dogger Bank to arrange a personal loan for the full amount (£2,500). She put a note in Hettie’s door stating that she would definitely like to buy the piano (as already agreed) and would pay the full amount.

Advise the parties whether there is a contract between Hettie and Barbara for the sale of the piano.

A contract can be defined as an agreement between two or more people, which is legally binding. It could be an oral contract, where a contract is made during conversation; or a written contract, which includes a set of clauses and conditions of the contract written out. In order for a contract to be made, both parties must have agreed on the specific terms of the contract. Terms in a contract can include time limits for building work, certain payment dates, or any other ‘rules’, which both parties must follow. In this case, the term of the contract is that of the price of the piano, which is £2,500 and in order for a contract to be formed, both parties must agree on this term.

A contract can be seen as a promise, in many situations, to do something in exchange for something else. It can be argued that an agreement is a simple concept and is made up of two main elements – an offer and an acceptance. This would mean that one party would offer a good or service and the other(s) would either accept or not. This is the basic concept of what a contract is, however there are more aspects that need to be considered before a contract is formed and I will discuss some of them here.

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The foundation of any agreement is an offer. This is the start of any contract and can be made either expressly - either orally (this can also be over the telephone) or in a written document or impliedly – through the persons conduct. In our case, Hettie has expressed her offer to Barbara and Philip. She has verbally made an offer and it is obvious to the offerees that she is offering her piano in exchange for £2,500. Offers can be made to different numbers of people and include different things. As well as making offers to individuals or groups of people, an offer can be made to ‘the whole world’ as shown in Carlill v Carbolic Smoke Ball [1983] 1 QB 256 where an advertisement was not an offer to an individual or small group of people but to whoever saw the advert and wished to accept the offer, i.e. everyone.

In response to an offer, the other party must consider the terms of the offer and decide whether to accept or not. McKendrick’s definition of an acceptance in Contract Law (2003) is ‘an unqualified expression of assent to the terms proposed by the offeror.’ The same way that an offer can be expressed or implied, an acceptance to an offer can also be done the same way, orally/written or by conduct. In the above case of Carlill v Carbolic Smoke Ball, the acceptance was implied, as Mrs. Carlill did an act to accept the offer. Usually, an acceptance needs to be communicated to the offeror, however this is not a fixed rule. Even though the Carbolic Smoke Ball Company argued that Mrs. Carlill did not communicate the acceptance, the court held that she did not need to as it was an offer ‘to the world’ and it would not be practical for all those who accept the offer to communicate it to the company. When a situation such as this arises, where the acceptance does not need to be effectively communicated through any certain medium back to the offeror, a unilateral contract is formed. The offeree’s conduct or an act will suffice as an acceptance of the offer.

When there are two parties or a small group of people involved, and there is an ‘exchange of promises’, an acceptance needs to be either written or oral. The offeror must acknowledge that the offer has been accepted by whichever means the contract states. This type of contract is called a bilateral contract. In some cases, the offeror can specify a medium that the acceptance must be communicated along, i.e. by post, by phone, e-mail, etc and in order for the offer to be accepted the acceptance must be communicated in the exact way the offeror states. In Yates Building Co. Ltd v Pulleyn & Sons (York) Ltd (1975) 237 EG 183; (1975) 119 SJ 370 (CA), the offeror stated that the acceptance was ‘…to be sent by registered or recorded delivery post’. Although the court held that this instruction was not ‘clearly stated to be mandatory’, an acceptance would only be made if the instructions were followed.

In the case of Hettie and Barbara, Hettie did specify an instruction for the acceptance to be made, and that was to deliver the acceptance by hand. If Barbara had accepted Hettie’s offer, she would have needed to deliver it in person. However, I think that in this case, it was not stated that hand-delivery was the only method of accepting the offer and so it was OK for Barbara to send it by post, as it still arrived to Hettie in time.

In his Contract Law (2003), McKendrick writes that the ‘test for existence and the scope for an agreement’ is that of an objective manner. When a test is objective it takes account of what the two or more parties actually did or say in order to make an offer and agreement. It looks at each parties’ conduct (Smith v. Hughes (1987) LR 6 QB 597). On the other hand, a subjective approach does not consider the actions of the parties, but only the intention that they had in respect of creating a binding contract. There are advantages and disadvantages about both approaches to the ‘test’ but can usually be resolved with ease. A disadvantage of the objective approach is that if one does not want to be in a contract after it has been made, he can say that he had no intention of binding himself legally with the other party. However, this was resolved in Storer v Manchester City Council [1974] 3 All ER 824 where Lord Denning MR claimed that ‘A man cannot get out of a contract by saying: ‘I did not intend to contract’ if by his words he has done so’.

At first glance, Barbara could have argued that Hettie intended a contract to be made as her conduct implied it. However, I will explain why this would not be a valid argument later on.

When Hettie offered to sell her piano to Barbara for £2,500, she also mentioned that in order to accept it, Barbara must reply by Friday by dropping a note through her front door. This can be seen as a specific instruction for Barbara to follow in order for the acceptance to be valid. If Hettie really only wanted the acceptance in writing, an oral acceptance would not have been valid and therefore would not have bound her in a contract. However, as the case of Yates Building Co. Ltd v Pulleyn & Sons (York) Ltd showed, even though Hettie specified a mode of acceptance she did not say that it was ‘compulsory’ for the offeree to follow it. In order for Hettie’s preferred method of acceptance to be binding, she must have mentioned that that was the only way to accept her offer.

Barbara can argue that although she didn’t post her acceptance, it did reach Hettie before Friday, like she had asked and so a contract was made. There is a rule, which applies to acceptances that are posted. ‘The postal rule’ indicates that an acceptance via post is effectively communicated as soon as it is posted by the offeree. The acceptance is made when it is posted, not when the offeror receives it. The postal rule in action is shown in the case of Adams v Lindsell (1818) 1 B & Ald 681; 106 ER 250 (KB).

However, although Barbara satisfied the criteria that the acceptance was made by Friday, there was no binding contract made between Hettie and Barbara. This is because Barbara changed the offer, which was originally made to her, making her reply a counter-offer.

A counter-offer is when the offeree replies with an acceptance but has changed parts of the offer, thus creating new terms. This introduces a new offer, which must be accepted by the original offeror (McKendrick, 2003). When a counter-offer is made, the original offer is made void and cannot be accepted if the counter-offer is rejected. In the case of Hyde v Wrench (1840) 49 ER 132 (Rolls Court), the concept of a counter-offer is shown as the acceptance had changes made to the terms of the original offer, making it a counter-offer.

When Hettie made the offer to buy her piano for £2,500 to Philip, she did not mention any specific date or method of acceptance. Philip accepted immediately and so she did not need to specify any special instructions. As both Hettie and Philip agreed on all the terms of the agreement, a bilateral contract was formed between Hettie and Philip on the Wednesday which she received Barbara’s counter-offer. When Barbara heard about the agreement between Hettie and Philip, her acceptance of the original offer made to her by Barbara was not legally binding as she had countered that offer and the previous terms were no longer valid. If, however, Barbara had accepted Hettie’s offer without changing the terms (i.e. to pay over one year) then there would have been a contract created as Barbara posted the acceptance note and Hettie would have been bound to it, even if she had offered it to Philip too.

In conclusion, the offer that was made to Barbara in the first place was void because in the acceptance note, Barbara changed some of the terms, creating new terms and therefore creating a new offer for Hettie to accept or reject. This was a counter-offer, which cancelled out the previous offer. There was, however, a binding bilateral contract between Hettie and Philip for the sale of the piano.

Word Count (Excluding case citations and references): 1,554