Consideration may be a benefit, or it might be a detriment meaning that is removes something or is not beneficial. Consideration might be executory (future) or executed (present). Consideration cannot be from the past and it must be sufficient, have economic value and must move from the promisee.
In the contract above the consideration has economic value to both parties; money being the case in Temuulen industrials and the 2 different types of bricks in Amersham & Wycombe limited’s. These both have economical value to both parties. If Temuulen industrial failed to pay Amersham & Wycombe limited after the one months then this could cause detriment to Amersham & Wycombe because they haven’t received any money after the £320,000 pound deposit therefore causing them to lose out on money and this will affect their cashflow records, because they would assume that under the terms of the contract £5,000 would be coming in from Temuulen in the next one months. It may also affect Amersham & Wycombe limited’s revenue and profits, or they may have been relying on the money to pay off a loan or debt. In the example above Amersham & Wycombe limited would be looking to enforce the contract because they completed their side of the contract.
Capacity in a contract is the ability for both the parties to be able to perform their duties within the contract. In the contract and scenario above, if Temuulen industrial did not pay the outstanding £5,000 then this shows lack of capacity within the contract. Amersham & Wycombe limited who would be looking to enforce the contract would have to plead (Present and argue their position).
TASK 2
Explain the position of each of the parties, with regard to contract law.
Identify the features that are important in deciding whether a contract has been formed and fully explain any principles that are operating in the dealings between the parties.
Scenario 1
At the auction the first item, a large sculpture, reaches £8000. Henry, an art dealer, thinks the sculpture is worth more than this so he bids £8100. The auctioneer closes the bidding by bringing down his gavel after Henry’s bid. Henry is very pleased and makes his way to the cash desk to pay for his purchase.
Meanwhile, Henry had got to the cash desk only to be told that because Ben King, the owner had wanted at least £10,000, Henry would have to pay the extra £2000 if he still wanted the sculpture. Henry was furious but was not sure of his rights, so he left without the sculpture.
An unreserved auction is where the auctioneer is required to sell the item on offer to the highest bidder. The contract is made when the bid offer is accepted on the fall of the auctioneer’s gavel .The auctioneer cannot accept any offer until he bangs his gavel, and this marks the end of the bidding. In the case above the contract was binding when the auctioneer’s gavel fell after Henry made the highest bid offer of £8000. Henry was the highest bidder in the case above, however Ben has refused to sell it to him at the price of £8100 because this is not Ben wanted. Ben has not reserved the auction therefore its Ben’s fault in this case. In a reserved auction the offers have to exceed the reserve price before they can be accepted. If the reserve price is not met, then the seller has a right to refuse. The sculpture however was not a reserved item in the auction and Ben refusing to sell it breaches the terms of the contract and shows failure of performance on Ben’s behalf. The contract does have consideration because the sculpture has economic value to both Ben as well as Henry and therefore Ben’s failure to perform allows Henry to claim damages because a fundamental condition in the contract has been breached. If Henry knew his rights he would be able to take Ben to court to claim damages. Ben as the seller cannot refuse to sell the sculpture because once the acceptance is made neither party is allowed to back out of the contract or terminate it.
Scenario 2
Ben’s second item is put up for sale by the auctioneers. It is an antique writing desk, used by Napoleon Bonaparte when drawing up plans for his battles. After some initial bidding by several interested people, the auctioneer settled on the bid of Mrs. Hamilton, who was particularly fond of the desk as it reminded her of a dear friend who had since passed away. Her final bid was £5000. Monsieur Nielsen, a specialist in antiques of the Napoleonic period, arrived too late to bid on the desk and was bitterly disappointed. He had travelled some distance to but the piece which he knew was worth at least £9000.
Mrs. Hamilton arrived at the cash desk shortly afterwards. She was told that unfortunately, because Ben King had received an offer of £7000 for the desk from Monsieur Nielsen he had decided to sell it to him instead.
In the case of the second item, Mrs. Hamilton had the highest bid offer when the auctioneers gavel fell. She offered £5000 for the writing desk and the auctioneer accepted therefore binding the contract between the two parties. At this point Ben and Mrs. Hamilton both have the capacity to perform their parts of the contract and have the contract. At this point Ben cannot pull out of the contract and cannot make a counter offer because these don’t happen at auctions. He has to sell his item to the highest bidder present at the auction. Therefore he breaches the contract when he decides to sell to Monsieur Nielsen for £7000 because him and his item are already in a binding contract with Mrs. Hamilton. Question is Had Monsieur Nielsen been at the auction? and placed his bid? If yes then he would have entered into a binding contract with Ben. But he was not there when the contract was made between Ben and Mrs Hamilton and therefore he has a duty to perform his part of the contract by selling at the writing desk to Mrs Hamilton. By selling the writing desk to Monsieur Nielsen he fundamentally breached the contract he had with Mrs Hamilton and she being the innocent party has the right to take Ben King to court because he had breached the contract and claim damages which in this case would be not damages for not receiving the sculpture at the end of the auction.
Scenario 3
The third of Ben’s items, a famous contemporary painting called the ‘Sniggering Roundhead’ went up for auction next. Ben knew this was worth at least £20,000 so he told the auctioneer not to sell it for less than that. Tracy, a modern artist herself, thought the painting would look very nice in her hallway. Her bid of £19,000 was the highest at the close of the bidding.
Tracy was also disappointed when she was told by the lady at the cash desk that her bid for the painting was too low and she would have to pay another £1000 on her original bid to buy the item. Tracy was furious and told the lady she would be taking Ben King to court because it was the law that he had to sell to the highest bidder and she was the highest bidder today.
In this case Ben knew that the painting was worth at least £20,000, and therefore he reserved the painting before it went on auction. This required the auctioneer to meet the reserve price before any bid offer was accepted. Putting the painting into the auction was only an “invitation to treat”. This meant that it was an invitation for the bidders to make an offer and it is up to the auctioneer to accept or reject the offers Therefore when the gavel falls it does not necessarily mean that. The bid of £19000 made by Tracy did not meet the reserve price and therefore Ben had a right to reject the price offered. There was no contract made between the two parties because Ben didn’t accept the bid offer and therefore Tracy cannot take Ben to court because there wasn’t a binding contract formed between the two parties. Question is had she met the reserve price? If yes then she would be able to buy the painting. But she didn’t and Ben has the right NOT to sell his painting.
Task 3
Explain the position of each of the parties, with regard to contract law.
Identify the features that are important in deciding whether a contract has been formed and fully explain any principles that are operating in the dealings between the parties.
In Marks case Andy once again posted a letter to Mark, another manager. Mark received the letter but he didn’t accept the offer, he instead put in a counter offer because he asked “will you pay me a bonus if I get the team to the top of the league next season?” this is a counter offer and not an acceptance of the offer. Therefore when Andy says to mark that its too late he is wrong because the letter received by Andy from mark was a letter not of acceptance, but a letter with a counter offer and this means that mark has the right to not accept the job if he knew he wasn’t first choice. Therefore in Alex’s case Andy has not breached any contract because no contract was formed because he revoked his offer, however he is wrong for assuming that mark accepted his offer because what he received in the post wasn’t an acceptance letter but was a letter stating a counter offer. These are the positions of each party in the scenario.
The rule of acceptances by post is that they take effect when why are posted, rather than when they received. In this scenario postal rules apply to each of the cases and individuals. In the first case the offer was made when Andy wrote the letter to Alex asking him to be manager; however the offer was made when the letter was put into the post and this refers only to the royal mail and not other services. Alex received the letter and accepted the job. He posted an acceptance letter that night saying that he would be the manager and accept the job.
However Andy wrote a letter saying how he was withdrawing his offer or revoking his offer because of the reasons stated and this letter was posted in the evening. Therefore his letter of withdrawal from the contract was posted before Alex’s acceptance to the contract and makes his withdrawal valid. Therefore he did have the right to call Alex and not offer him the job because he had already revoked his offer that evening when the letter got into the post.
Andy is an offeror. He is the person who is offering the job to Alex. Once he had considered offering the job to Alex and he had posted to letter to him and he received it, the offer has been made so therefore Andy cannot go back and change his mind and offer the job to Mark or anyone else.
The offer is valid when Alex receives it. Alex sent his acceptance back before he received Andy’s revocation. The acceptance was valid, forming a binding contract as soon as it was posted. A revocation is not valid until it is received, so it was not valid before the contract had been formed
2nd contract Marks case Andy once again posted a letter to Mark, another potential manager. Mark received the letter but he didn’t accept the offer, he instead put in a counter offer because he asked “will you pay me a bonus if I get the team to the top of the league next season?” this is a counter offer and not an acceptance of the offer.
Therefore when Andy says to Mark that it’s too late “he has already accepted it in the letter” Andy is in the wrong because the letter received by Andy from Mark was not letter of acceptance, but a letter with a counter offer and this means that mark has the right to not accept the job if he knew he wasn’t first choice.
Therefore in Alex’s case Andy has not breached any contract because no contract was formed because he revoked his offer, however he is wrong for assuming that mark accepted his offer because what he received in the post wasn’t an acceptance letter but was a letter stating a counter offer.
Alex can take Andy to court as he isn’t giving him the job that he offered him in the first place, so Alex can get his damages; and Andy cannot take action against Mark as no contract was formed
