After 2 days Sarah replied by telegram saying:
‘Would you accept £65,000 down and the balance over one year?’
On receipt of this telegram Beth immediately sold her business to Luke.
On the same day Luke told his friend Velko of his purchase and he told his girlfriend who told her
friend Sam who told Sarah.
Sarah then immediately wrote and posted a letter to Beth accepting the original terms.
This letter was lost in the post.
The Postal rule is a rule of contract law that makes an exception to the general rule that an acceptance is only created when communicated directly to the offeror.
An acceptance is binding and the contract is said to be perfected when the acceptor places this acceptance in the mail box for return mail even if, in fact, it never reaches the offeror.
The case at hand also corresponds to the case of Adams v Lindsell 1818 in which Lindsell wrote to Adams offering wool requiring an answer in the course of business. Lindsell misdirected the letter which reached Adams on the 5th. However also on the 5th Adams posted a letter of acceptance which reached Lindsell on the 9th. Meanwhile on the 8th Lindsell had sold the wool to someone else. It was held that the contract came into being on the 5th when the letter of acceptance was sent even if it didn’t reach Lindsell. The postal rule states that any letter of acceptance activets the contract even if it doesn’t reach its intended destination. In the case at hand Sarah was already fully aware that Luke had already bought the business before she decides to send the letter of acceptance.
There was a contract between Beth and Sarah and it did come to existence when the offer of £80,000 made by Beth was accepted by Sarah on the second day of the one week period.
However the contract was breached by Beth when she misinterpreted Sarah’s question as an counter offer, therefore she had breached the contract by not following the terms set by her.
This case corresponds to the precedent of Stevenson v McClean from 1880 where it was held that a question regarding the initial offer is not a counter offer, therefore there is no breach of the contract.
Also the postal rule does not apply in this case, because the counter offer has been destroyed as in the case of Hyde v Wrench, where counter offer destroys original making it void.
This outcome could have been avoided if Beth waited the one week consideration period and then selling the business to someone else. If the Beth had informed the new oferor for the already existing arrangements , the case could have been avoided. However if the week period was too long for the new oferor Beth should have found a way to contact the original oferor and therefore avoid breach of contract.
The postal rule could have been avoided if the oferor had specified within his initial telegram that he will accept the answer for the offer only by a telegram and not by post , it would have prevented the current case.
Task 3
- Executed consideration means a promise in return for an act e.g.: “I promise Jack to give him 50p for a packet of chewing gums”.
- Executory consideration means the promise in return for another promise e.g. : “I promise to pay X company to make me 50 coffee mugs for my project”.
- Legal procedures state that consideration must be sufficient but it doesn’t need to be adequate as long as it is agreed by the parties involved.
In June 2010 John, an artist, decided to have an extension built onto his house. He agreed to pay Meg £1,000 to produce the architectural plans for the work and Adam £4,000 for carrying out the work. John provided all the materials, which he bought from Matt for an agreed price of £6,000. After the work was completed John discovered that he did not actually have the money to pay the various people concerned, Consequently he made the following arrangements with each of them:
- He gave Meg one of his paintings instead of payment
- When John failed to pay Adam, Adam threatened to sue him, until John’s friend Charlotte offered to pay him £2,000 if Adam withdrew his action, which he did.
- He told Matt that he would have to accept £3,000 as he could not afford to pay him any more money and Matt reluctantly agreed to accept it in full and final payment of the debt.
Three months later John inherited £100,000.
A painting instead of payment has been exchanged between John and Meg. An example of this is the case of Chappell & Co v Nestle 1959, in which Chappell & Co owned the rights to a record (vinyl) that nestle offered to customers who collected three chocolate bar wrappers and 1s. 6d. It was held that the chocolate bar wrappers formed part of the consideration and could have been the total consideration in return for the record. This case shows that the two items passed between the offeror and the offeree do not have to be of equal value if both parties are satisfied with the offer. After the painting was exchanged between the two parties as a form of part consideration , Meg should be completely satisfied and no further payment should be required.
Adam threatened to sue John because he failed to pay Adam, until John’s friend Charlotte offered to pay him a part of the amount due £2,000 if Adam withdrew his action, which he did. This case scenario is similar to that of Hirachand Punamchand v Temple 1911 in which an army officer owed money to a money lender. The army officers farther paid the money lender a smaller amount ‘in full and final satisfaction of the debt’ on the understanding that this would discharge his son from any further liability. So the money lender sued the son for the money. It was held that to do this the money lender was committing fraud on the farther. When a comparison between the two case is made it means that Adam would not be entitled to the full payment at a later date because attempting to receive the payment would be committing fraud on Charlotte (John’s friend).
The original agreement between the parties is that John has agreed to executor consideration in this case, the jobs were completed and the scenario corresponds to the case of DC Builders v Rees from 1965.
Meg has no fault that John is unable to pay her for the services. She has completed her part of the contract as did Adam and Matt , however John is unable to fulfil the original terms of the agreement.
A similar situation as the one in the scenario has happened in the case of DC Builders v Rees from 1965 in which the original amount due was changed by Mrs Rees as she offered a lower amount of payment to the builders and refused to pay any more. The builders were unable to refuse the money because they were held by Mrs Rees under economic duress as they were unable to risk not receiving any money from her , because they had a difficult financial situation at the time. The case here is the same as the one mentioned above because it is outlined that the service promised by Meg, Adam and Matt were delivered and John is legally required to pay them the original agreed price.
The case could have been avoided if John had calculated all of the funds that he has before the start of the project, however as I have explained above that all the debts were settled a legal action against John could not be undertaken.
He cannot be forced to pay the full amounts as he did not know that he will inherit £100,000. It will be fraudulent to Charlotte if John tries to attain the full amount and go back on his word as in the case of Hirachand Punamchand v Temple where it was held that to do this the money lender was committing fraud on the father. Therefore the above stated legal action is the only one that could be undertaken in regard with this outcome.
Task 4
A group of twenty work colleagues enter into a weekly lottery competition each paying £2 a week, All entries are made in Elyot’s name. One week they win £20,000 but Elyot refuses to share the winnings. The other members of the syndicate wish to obtain their share of the winnings so they seek your advice.
There are two types of agreements :-
- Commercial Agreements- the presumption is that they are legally binding (unless there is evidence to suggest they are not)
- Domestic Agreements – between friends/family the presumption is that they are not legally binding (unless there is evidence to suggest they are)
In this scenario as the colleagues did not make a legally binding contract however their case is considered to be more than a domestic agreement, therefore they do have a legally binding power to make Elyot pay them a portion of the £20,000 winnings. As the understanding for the entry was to share the price if there is one.
This scenario re presented in this assignment corresponds to the case of Simpkins v Pays from 1955, where a grandmother and her granddaughter took part in a weekly competition. They took it in turns to fill in the entry form and pay but all the entries were made in the grandmother’s name. One week they won £750, but the grandmother refused to pay and the granddaughter sued her.
It was held that it was more than a domestic or social agreement. They had each entered this competition on the understanding that they would share any money they have won. So the granddaughter was therefore entitled to her share of the profit.
The case could have been avoided if the colleagues have entered the lottery under an independent name such us the name of the company that they are working for or a nickname that they have made up. So that therefore there is not a person that is responsible for the winnings and he will not have any saying about the division of the profits between the participants.
If for example there has been a contract stating that winnings should be divided to “X, X , X ,X” people this could prove to be the correct and more legally binding scenario in which every participant in the lottery should receive his fair share.
Task 5
Looking at the rights and regulations that are in place for minors upon entering a contract in this task and I will also going to present the legal obligations within that contract corresponding to a precedent case.
A minor is someone under the age of 18 and can only enter certain types of contracts. The contract needs to contain goods that are suitable to the station in the life of the minor and its actual requirements at the time of sale. The main point that will be looked at for minor when entering into a contract will be is the item a necessary or a luxury, if the minor is wealthy then more categories will be represented as necessaries.
These regulations are under section 3 minors contracts act 1987- This enables a trader to apply for restitution of goods if the minor obtains them under an unenforceable contract (luxury goods) and if the goods have been exchanged for other goods the new goods can be recovered plus, if the goods have been sold by the minor and the money is clearly identifiable the money can be recovered.
A ‘voidable contract’ is where a contract can be ended. In this instance, if there is a contract with a minor in a continuous agreement such as payment for renting property. The contract is considered to be valid; however, if the minor rejects the contract before reaching the age of 18 years, this means that the minor can end the agreement in the contract. As in the case of Steinberg v Scala Ltd 1925, the contract was voided.
Brenda who was training to be a commercial artist, left school on her seventeenth birthday without having completed the course and decided to go into business as a dealer in antiques and bric-a brac. For this purpose she entered into an agreement with to rent for one year a small shop and obtained £3000 worth of stock on credit from another dealer, Mike, a personal friend. To celebrate the start up of her new business she ordered wine and food on credit from Anne and invited all her friends round to her flat to celebrate. After trading for two months Brenda found that because of inexperience she was unable to price articles at a level which would give a reasonable profit margin and she therefore decided to give up business and informed Steve that she would no longer require the shop. Brenda has not paid any rent to Steve and still owes Mike £3000; she also refuses to hand over the remainder of the original stock on the grounds that she might start another business. Anne has still not been paid for the food and drink supplied.
As in the case of Mercantile Union Guarantee Corporation v Ball 1937 where a minor purchased a lorry on hire purchase, to carry on business as a haulage contractor. The minor then defaulted on payment. It was held that this was neither a contract for his benefit nor a contract for necessaries so he did not have to pay the £3000 owed for stock cannot be presented as a contract. Because this is that the contract was not a contract for Brenda’s benefit and as Mike is a personal friend he would be aware of the fact that Brenda is a minor and may not have the means or experience needed in order to repay the money.
With the situation of the wine and food on credit, as in the case of Warton V McKenzie the food and drink obtained was a luxury item not a necessary item so Brenda will not have to pay the outstanding bill.
About the rent agreement, Brenda was in a voidable contract which means that she only would have to pay to the point when she wants to end the contract, therefore she could have ended the contract at any point of time. As in the case of Steinberg v Scala Ltd 1925, Brenda would have received all the benefits from leasing the property and this means that she would not be entitled to any of her money back.
The first legal situation Brenda could have stayed in the school, so that she could fulfil the contract terms and therefore not have a legal case at hand. She also could have researched a different way to finance her business venture in order not to be owing money to anyone.
With the case of Anne she should have been aware that Brenda is a minor and therefore because of the legislation in the United Kingdom she might not be obligated to pay the amount due for the food and drinks.
The case could have been avoided if the lender for the stock had requested a clause in the contract where a person of age should be held responsible if the minor fails to pay the amount due. Therefore the legal casus and the debt would not occur.
However as I have already stated above similiraly to the case of Steinberg v Scala Ltd 1925 Brenda would not have been entitled for any of her money back after the lease.
Task 6
An investigation of what is meant by misrepresentation and the application th the law and definition to a specific case will be carried out in this case.
Misrepresentation is a false statement of fact that includes someone to enter into a contract that they would not have normally entered into. There are different aspects of misrepresentation:
Fraudulent misrepresentation- this is a false statement of fact which when made the representor knew it to be untrue. If the representor thought it to be true at the time then this is not fraudulent but may be seen as negligent or innocent.
Negligent Misrepresentation- when this occurs the claimant can sue under common law (tort of negligence) the claimant must prove:
- Defendant owed them a duty of care
- There was a breach of that duty of care
- Damage/ loss was suffered as a result
Innocent misrepresentation- In this case only damages can be claimed.
Aragorn is considering buying Boromir’s sand quarry, in the course of
negotiations, Boromir says:
- This is the best building sand in Britain
- It’s never been used for pre-stressed concrete, but I think it would be very good for that.
- Drainage is excellent. The place never floods.
- The average output is 10 tons per day.
Boromir’s first statement where he says “This is the best building sand in Britain” is similar to the case of Smith v Landhouse Property Trust 1889. In that case a property had been sold with a sitting tenant “Mr Flack”. He was described as a “most desirable tenant”. It transpired that he had not paid the rent for the quarter and had always been late with payments. This case was held that this was not a statement of a opinion but a false statement of fact. When applied to the case at hand it can been seen that the statement made by Boromir about the building sand is not a statement of opinion but a false statement of fact.
Aragorn send an expert to check the output figures and the expert confirms Boromir’s statement. Aragorn buys the quarry and finds that the sand is of poor quality and useless for pre-stressed concrete, that the quarry is continually flooded in wet weather and that the output is only 2 tons per day and can never have been higher. This is an example of fraudulent misrepresentation as in the case of Derry v Peek 1889 where it was held that this was a statement of opinion and not a statement of fact therefore this was misrepresentation.
The second statement made is similar to the case of Bisset v Wilkinson 1927 where a farmer was selling his farm and the purchaser asked how many sheep the farm could hold. The seller had never had sheep on the farm but said “in my opinion it would hold 2000 sheep”. The farm was sold and it only held 1200 sheep. Purchaser sued on the basis of misrepresentation. It was held that this was only a statement of opinion therefore no misrepresentation was made. When Boromir says “it’s never been used for pre-stressed concrete, but I think it would be very good for that”, it can be seen that this is only an opinion and not a false statement of fact.
The third statement where Boromir says “Drainage is excellent. The place never floods” would apply to the case of Scott v Hansen 1829 where some land was described as being “uncommonly rich and fertile”. The claimant sued to have the contract set aside after his purchase of the land, on the basis that this was misrepresentation. The case was held that this was an advertising puff and not a statement of fact, therefore the contract cannot be terminated. So Boromir’s statement is an advertising puff rather than a statement of fact.
As in the case of Bisset V Wilkinson 1927, this statement ( “The average output is 10 tons per day”) made by Boromir would be seen as fraudulent mispresentation and is merely an opinion and not fact.
This would be seen as a false statement of fact as in the case of Smith V Land House Property Trust 1889.
Gandalf would be fully aware of the conditions of the quarry and no false statements of fact would have been made. As it has been checked by the expert the quarry would have no reason to misrepresent Gandalf. If Gandalf purchased the quarry in its current state it would be seen as innocent misrepresentation as in the case of Attwood V Small 1838, this means that Gandalf would only be able to claim damages under restuited integrum if the quarry could not be restored to its original position (which is impossible).
The case could have been avoided by a proper check of the quarry which should therefore show the real results of it. Therefore the sale would not have been made and there would not have been a problem between the two parties. Another person involved in the contract breach is the expert sent by Aragorn ,as it is proved that the quarry does not answer to the advertisement and therefore the “expert” is not a knowledgeable and trustworthy person, this means that the contract would be void as the opinion that the quarry covers the advertised conditions is not from a reliable source.
Velko Vatahov Unit 21 – Aspects of Contract & Business Law Page
by
vatahov91 (student)
