contract law

Applying the above to the present situation the Anne can argue that the offer made by her to Betty was never accepted because Betty made a counter offer leaving an answering machine message saying “I’m definitely interested, but unfortunately I will not be able to give you the money all at once. Please advise whether you would be willing to accept the money in installments?” this was therefore assumed by Anne as a mere request for information and because an acceptance which is conditional or which alters the terms is a counter-offer, Butler Machine Tool Co Ltd v Ex-Cell-O Corp (1979) it terminated the offer. An acceptance needs to be absolute and unequivocal and to be effective acceptance needs to be communicated, Entores v Miles Far East Corporation (1955)  according to this rule Betty’s message left on Anne’s answering machine will not constitute effective acceptance.

 Betty could argue she confirmed her acceptance by writing and the terms of the offer made by Anne stated that Betty confirm her acceptance in writing, so therefore it was reasonable for Anne to expect the acceptance by post, Henthorn v Fraser (1892). This reflects the ‘mirror image rule’ that the offer should be accepted exactly as it is made.

The postal rule is the general rule for acceptances by post in that they take effect from the moment of posting even if the letter never arrives. The practical purpose of this rule is that it is easier to prove that a letter has been posted then to prove it has been received or brought to the attention of the offeror .the postal rule was laid down in Adams v Lindsell (1818). Use of the postal service must be reasonable, only when it is reasonable to use the post to indicate acceptance can the postal rule apply. The postal rule applies to this case because an acceptance can take effect when it is posted even if it gets lost in the post and never reaches the offeror Household fire insurance v Grant (1879) and even though Anne never received the letter because it got lost in the post, Betty still confirmed her acceptance by post therefore the proper postal methods were used Re London & Northern Bank (1900).

In conclusion, applying the postal rule and considering that Betty’s letter of acceptance is effective as soon as it is posted has Anne breached the contract by selling the washing machine to Carol?

A contract is not formed until an offer is accepted, an agreement would only exist between Anne and Betty when a avlid acceptance from Betty followed a valid offer from Anne. Betty cannot sue Anne for a Breach of contract because an offer can be revoked at any time before acceptance as stated in the case of Ramsgate Victoria Hotel v Montefiore. However, Betty could argue that the revocation of the offer needs to be communicated, Dickinson v Dodds (1876), but because Anne had no recognition of the acceptance of the offer she made to Betty revocation of the offer did not need to be communicated. A valid offer must be communicated to the offeree. It would be unfair for a Anne to be bound by an offer of which she had no knowledge, Taylor v Laird (1828).Therefore Anne was not in breach of contract when selling the washing machine to her neighbor Carol and Betty cannot sue Anne for a breach of contract.

 

Section B

(2)

‘The law seeks to classify legal terms according to their importance, with implications of a breach for the innocent party varying according to the type of term breached for these purposes there are three types of contractual terms conditions, warranties and innominate terms’

A condition is the major term which forms the basis of a contract a breach of which would have very significant consequences for the innocent party. Where a condition is breached the innocent party is entitled to regard the contract as repudiated, so it may no longer be practised, this then means the innocent party can also sue for damages. In law certain types of terms are held as conditions and previous statutes show that certain terms are regarded as conditions whenever they appear, The Mihalis Angelo (1970) . A term deemed by the courts as a condition can be found in Bunge Corp v Tradax Export SA (1981) in this case the House of Lords held that it was a clear that a buyer’s obligation to give notice was a condition. Conditions can also be described as particular terms in a written contract by parties, however the courts strive for evidence to show that the parties actually intended the term to have its precise legal meaning.in Schuler AG v Wickman Machine Tools Sales Ltd (1974) it was ststed by the house of Lords that the use of the expression ‘condition’ would tend to indicate a right of the innocent party to terminate the contract , whilst the use of the expression ‘warranty’ would tend to indicate only a rightto recover damages. In Poussard v Spiers and Pond (1876) the actress sued for a breach of contract and lost her case because it was hels that since the opening night of the operetta was regarded as the utmost importance her absence amounted to a breach of conditions which entitled the producers to terminate the contract.

 

A term which can be broken without highly important consequences describes a contractual term known as a warranty. It is known as a minor term 'if a warranty is breached the innocent party can sue for damages, but is not entitled to terminate the contract' Contract law book. The Sale of good Acts 1979 s. 61 defines a warranty as term ‘collateral to the main purpose of [a contract of sale]'.

The distinction between conditions and warranties has long been considered to be of great importance. The distinction between conditions and warranties is said to be drawn at the time the contract is made, rather than being the determined by the degree of loss or damage suffered as a result of a breach of a particular term.

A contrasting illustration of the difference between conditions and warranties may be seen in the case of Bettini v Gye (1876). In this case the singer sued fro breach of contract and was successful. The court held in this case that the term regarding the rehearsals were mainly ancillary to the main part of the contract and therefore was a warranty only. The producers whilst being entitled to sue for damages were not allowed to terminate the contract   

Where the term has not been classified as either a condition or a warranty, the courts will classify it as an innominate term and will apply the Hong Kong Fir test. Innominate terms also known as 'intermediate terms' and can only be broken with either important or trivial consequences depending on the nature of the breach. The effects of a breach of an innominate term do not depend on the status of the term in the contract when it is entered into but on the effects of a breach of the term on the contract. However if the effects of the breach are serious, the term will act as a condition if they are minor it acts as a warranty. Where a term is found by the court to be an innominate term the rights of an innocent party in the event of a breach are found by applying the test as to whether they have been substantially deprived of the whole of the benefit which was intended they should obtain from the contract. If they have been so deprived they will then be entitled to terminate the contract and sue for damages, if not they can claim damages.

The concept of innominate terms was first described in Hong Kong Fir Shipping Co Ltd v Kawaski kisen Kaisha Ltd (1962) the real importance of this case is in the Court of Appeal’s statement that some terms did not lend themselves to legal analysis; they could not be clearly defined before breach as conditions or warranties. Lord Diplock stated that

“the problem in this case was neither solved nor soluble by debating whether the ship owner’s express or implied undertaking to tender a seaworthy ship is a ‘condition’ or a ‘warranty’. He also suggested that the correct approach to be used was to look at what happened as a result of the breach and then decide if the charters had been deprived of substantially the whole benefit which it was the intention of the parties they should obtain”

Contractual terms have many advantages and disadvantages. Its advantages of flexibility, fairness and justice were all established in The Hansa Nord (1975). However flexibility and certainty has both have a wide rang of issues.

The decision in the Hong Kong Fir case does create a certain level of uncertainty and is one of the main problems with innominate term, this is because until a breach has occurred, it may not be clear what term is involved and the parties will not know what their rights are in relation to a breach of contract until an action is brought before the court. The parties involved can expressly state within the contract itself what the consequences of breaking a particular term would be. The absence of such express intentions creates substantial problems, the problems have become so wide spread that there have been attempts to limit the scope of the concept of innominate terms by courts The Mihalis Angelo (1970).It is also difficult to distinguish between conditions warranties and innominate terms.

         

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