University of Essex
Department of Law
LW 101 - Contract Law (2003-2004)
First Term Assignment
On 14th July 2003, Wivenhoe Cycles Ltd wrote to Easy-Transport plc of London saying "We would like to buy 100 units of the Raleigh bicycles advertised in your latest catalogue; please advise us of your lowest price for 100 units to be delivered on 1st September 2003." Easy-Transport plc received the letter on 15th July 2003 and replied the same day saying: "Our lowest price for 100 units of Raleigh Bicycles to be delivered on 1st September 2003 is £10,000; any contract for sale and delivery shall be on our standard terms and conditions and we enclose a copy of those standard terms and conditions with this letter." The letter did include a copy of Easy-Transport plc's standard terms and conditions. Clause 6 of those standard terms and conditions states: "Easy-Transport plc reserves the right to charge for goods supplied at 20% beyond the quoted price to reflect any increase in costs that may occur by the dates the items are to be delivered."
Wivenhoe Cycles Ltd received that reply on 19th July 2003 and immediately wrote to Easy-Transport plc to order the 100 units of Raleigh bicycles in the following terms: "We hereby order 100 units of Raleigh bicycles at a total and final cost of £10,000. This order and the following contract shall be in accordance with our enclosed terms and conditions which shall prevail over any other terms and conditions put forward by any party to this contract. Please sign and return the tear-off acknowledgment slip at the bottom of this letter and return it to us." The acknowledgment slip says: "We, the sellers, hereby confirm the buyer's order in accordance with the buyer's terms and conditions." Wivenhoe Cycles Ltd's standard terms and conditions did not contain any provision for increasing the price beyond £10,000.
Easy-Transport plc received this letter on 22nd July 2003. They replied to Wivenhoe Cycles Ltd immediately - without signing or tearing off the acknowledgment slip - saying: "We accept your order for 100 units of Raleigh bicycles to be delivered on 1st September 2003 at the quoted price of £10,000. Please be reminded that this contract shall be in accordance with our enclosed standard terms and conditions." A copy of Easy-Transport plc's standard terms and conditions - still with the clause 6 set out above - was once again enclosed with the letter. The letter was posted the same day but it was never received by Wivenhoe Cycles Ltd. Easy-Transport delivered the bicycles duly on 1st September 2003.
Easy-Transport plc has now invoiced Wivenhoe Cycles Ltd for the bicycles at a total of £12,000 saying this includes the 20% extra reflecting additional costs. Wivenhoe Cycles Ltd is unhappy with this and they are arguing that either (a) there is no contract between the two parties at all; or (b) if there is a contract, the price for the bicycles could not be more than £10,000. Easy-Transport plc are arguing that there is a contract between the parties and that the price of the bicycles should be £12,000.
. What legal arguments can Easy-Transport plc make to support its position?
2. What legal arguments can Wivenhoe Cycles Ltd make to support its position?
3. Explain how you believe an English court is likely to decide this case?
Nominal Word Limit 2,000 - students are advised to keep their essay close to this limit but shall not be penalised for exceeding it.
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Contract Law essay- Term 1
(1) Different legal elements come in favour of Easy Transport in the present case, one being a clear intention to create legal relations. As a direct answer to the information given by the claimant, Wivenhoe Cycles ...
This is a preview of the whole essay
2. What legal arguments can Wivenhoe Cycles Ltd make to support its position?
3. Explain how you believe an English court is likely to decide this case?
Nominal Word Limit 2,000 - students are advised to keep their essay close to this limit but shall not be penalised for exceeding it.
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Contract Law essay- Term 1
(1) Different legal elements come in favour of Easy Transport in the present case, one being a clear intention to create legal relations. As a direct answer to the information given by the claimant, Wivenhoe Cycles placed an order to Easy-Transport and the terms by which it expressed itself clearly indicated its intention to create legal relations (i.e. a contract). This clearly distinguishes the case from an invitation to treat where terms such as "we may be prepared" are used. Consequently Wivenhoe Cycles had placed an offer at which Easy-Transport sent a letter of acceptance. The claimant must argue on its validity.
To understand the position of Easy Transport fully, the bystander must put himself in the place of the Claimant and consider the objective reasoning of the latter. On sending the letter of acceptance by post, which was a reasonable mean of communication seeing the whole of the correspondence had been made by post from the beginning, it was a reasonable assumption for Easy-Transport to consider the postal rule and thus conclude the agreement binding on the date of the postage (i.e. the 22nd of July 2003). The postal rule applies though the Offeror never receives the letter of acceptance. At this stage the defendant will argue the price variation clause was not included in the offer they had sent and thus considered the acceptance void as it was in truth a counter-offer and as it was never received by the defendant, was never replied to. On the other hand the claimant had clearly notified clause 6 would apply in all its contracts for delivery as the company is subject to cost increases by the time the delivery is made (September first 2003). What we have here is a battle of the forms and Easy-Transport has in its favour Lord Denning's statement: "The battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions and if they are not objected to by the other party, he may be taken to have agreed to them". The claimant cannot know the letter had never been received, and reasoning on the statement above the silence of the defendant amounted to an acceptance of the clause. Furthermore, if we consider the Arbitration Act 1996 s4(3) the rule of "silence doesn't amount to acceptance" isn't an absolute one where the party thinks there is a contract and acts upon that assumption, which is clearly the case in the present situation.
If, however, the price variation clause makes it a clear-counter offer not capable of making the letter an acceptance, Easy-Transport can still argue on an acceptance by conduct by considering the case of Brogden v. Metropolitain Railway (1877). The invoice sent to the defendant confirmed the making of the bicycles, the cost of the construction and materials as a result of Wivenhoe Cycle's order. In the case mentioned above there was a similar issue of counter-offer not accepted due to the addition of an arbitrator in the agreement and silence on behalf of the defendant. However it was concluded that there was a binding contract on the grounds of an acceptance by conduct when the defendant placed an order and delivery was made. It can thus be inferred there was acceptance by conduct when Wivenhoe Cycles placed its order (making the letter sent by Easy-Transport on the 15th of July 2003 an offer) and the claimant sent an invoice, indicating delivery had been made.
The clear intention to create legal relations supported by the battle of the forms made it a legitimate reasoning for Easy-Transport to consider the acceptance valid in applying the postal rule. In negating this argument by the counter-offer principle it still has the support of an acceptance by conduct making the agreement binding, notwithstanding it had clearly notified from the beginning all its contracts would include a price variation clause, thus not taking the defendant by surprise.
(2) On the other hand, Wivenhoe Cycles will argue it had first sent an invitation to enter into negotiations (i.e. an invitation to treat) and not a contract. The claimant had thus merely advised the defendant on the conditions in which it was prepared to enter into an agreement. Those stated conditions were previous to Wivenhoe Cycle's intention to create legal relations and thus did not form a binding element.
On the contrary, when Wivenhoe Cycles did place an order on the 19th of July, it had not mentioned clause 6 and its reluctance to bind itself to a contract where the price could vary was clearly expressed by the slip it included. Consequently, it is clear the defendant would not enter a binding agreement with a price variation clause. As a result, the acceptance sent by Easy Transport needed to match the offer placed by Wivenhoe Cycles - which did not include clause 6 - to constitute an acceptance of the offer. Indeed similarity of the terms included in an agreement is a fundamental element to form a contract. In fact, Lord Diplock submitted that "What is important is that the intention of each party as it has been communicated to and understood by the other should coincide".
Therefore, when Easy-Transport sent its letter of acceptance it had deliberately included the clause, which as a result altered significantly the offer. It is different from a mere query in which case the offer would still have been valid.
In such circumstances, where there is no mirror image between the offer and the "acceptance", the latter becomes a purported acceptance. This means it becomes a counter-offer (e.g. a fresh offer) on the terms of the claimant to which Wivenhoe Cycles had yet to agree to. Thus, the letter sent by Easy-Transport needed to reach the offeree because the postal rule does not apply for offers where there needs to be an acceptance before a contract is concluded. In the present case there was no reply by the defendant as it never received the letter and in Law, silence does not amount to acceptance. Indeed, there cannot be assent without knowledge and it would be unfair to put the offeree through time and expenses of unwanted arrangements (i.e. clause6). Without an acceptance, there can be no binding agreement. Conclusively, there was no contract.
Furthermore, Easy-Transport didn't tear of the acknowledgement slip and thus impliedly refused the defendant's offer as it represented an express method of acceptance. Indeed, the method used by the defendant included the price variation clause, which is clearly disadvantageous to Wivenhoe Cycles. Thus, not signing the slip made it obvious there was no contract. A similar disagreement between the parties on the existence of a price variation clause is found in the case of Butler machine Tool ltd v. Ex-cell-o corpn (1979). The reason why the counter-offer lead to a contract and the disagreement was settled was because the offeree replied to this counter-offer and signed the slip indicating the price variation clause should not form a part of the contract. In our present case, the slip was not signed so there was no acceptance of the counter-offer.
Finally, the defendant will seek to rebut the acceptance by conduct argument stated by the claimant. The present situation can be distinguished from the one mentioned by the claimant. Indeed, the order was placed in absence of clause 6, whereas in the authority submitted by Easy Transport, the defendant had knowledge of the additional clause as it had received the counter-offer before placing the order. Though Wivenhoe Cycle knew of the clause, the order was made previous to the counter-offer.
Thus, Wivenhoe Cycle's offer required an acceptance by which the claimant would accept the terms. Easy-Transport has by two occasions refused it. First, by adding a term to the contract, it billed of the original offer, leaving a fresh offer with no acceptance. Secondly, by not filling the slip it subjected the agreement to substantial changes which would be clearly disadvantageous to the defendant. Additionally, there could be no acceptance by conduct as the defendant placed an order which was not subject to price variation and the delivery, in fact, had been. Thus either there was acceptance by conduct to an order of £10 000 maximum or there was no acceptance at all.
(3) To reach to a fair and balanced conclusion, the English courts must be able to find a clear and unequivocal offer matched (mirrored) by an equally clear and unequivocal acceptance. Thus, it will start by establishing where the offer and the acceptance are.
First, the courts will find there has been an offer made by Wivenhoe Cycle to Easy-Transport under its terms and conditions, which did not include a price variation clause. Thus, it will infer the acceptance must be from the claimant to the defendant.
The dispute arose as to the terms of the contract when Easy-Transport added a price variation clause and ignored the slip. This billed off the offer as they constituted significant changes to the terms of the agreement. The acceptance (as seen in (2)) had thus become a counter-offer. Therefore a second offer was to be accepted by Wivnehoe Cycles on behalf on Easy-Transport. Failing to receive the letter, there was no response and in applying the principle of silence in acceptance, there was no contract. Clearly, the English courts were likely to rule in favour of Wivenhoe Cycle.
However, the delivery of the order duly placed by the defendant created a second matter for the courts to consider. As a matter of fact, there resides clear uncertainty as regard to acceptance by conduct which plays in favour of the defendant. "To be a good contract there must be a concluded bargain and a concluded contract is one which settles everything which is necessary to be settled and leaves nothing to be settled in the agreement between parties. If things still have to be determined it must be a determination which does not depend upon agreement between the parties" As inferred in (2) the order place did not consider the price variation clause, thus "critical elements of the agreement" had yet to be settled.
Similarly, in the case of Butler machine Tool ltd v. Ex-cell-o corpn (1979), the courts concluded there was a contract though it was still not clear in the parties mind whether they had agreed on the clause. The courts took in consideration the written proof giving certainty as to the non existence of the clause. Indeed, the courts will not make a decision based on the subjective intention of the parties but on the clear, objective evidence they have before them. In British Steel corpn v. Engineering co ltd (1984), the claimant sued to get money for delivery -it was clear in their mind they had made a binding agreement with the buyer- but since there was no contract delivery had been received for consideration that had totally failed. This situation can be applied to Easy Transport; the delivery was only made on the assumption of an existing contract which was, in fact, non-existent.
There being no contract, the parties can rely upon no contractual provision. This creates an issue on unfairness when one party has already obtained benefits and the other suffered detriment. Clearly, Easy-Transport, reasoning upon the assumption of an existing contract, had gone through time and expenses to deliver the order in time. This is when the Judges discretion comes into place. Indeed, the courts will always strive to strike a balance between certainty and a just result. It may be possible that the courts will acknowledge the existence of a quasi-contract (this will depend on the judges as some are more willing than others to consider there is a contract). There is, with no doubt, a case of unjust enrichment in which it would be possible for the claimants to sue under the law of Restitution. In this case Easy-Transport could get the quantum meruit of the loss it suffered. If the delivery has been accepted this will depend on how severe the inflation was between the date of the order and the delivery. Otherwise the damages will be as regard to the cost the claimant went through in completing the order. However it will not be entitled to recover the total sum of the £12 000 as it would have, had the price variation clause been a term of the contract.
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