Contract law - case study

The other key contractual element is consideration. In the bilateral contract between Lisa and Hannah consideration is present for both parties, the defendant promised to sell the guitar to the first person to contact her, and the claimant promised to pay for it £50.

The agreement between the parties needs to be sufficiently certain to amount to a contract. An evidence for this could be indicated from Scammell and Nephew Ltd v Ouston where there was no contract because the terms were vague and ambiguous. Applying this principle, it could be held that the contract terms between Lisa and Hannah were reasonable and clear, therefore a good contract was formed.

Hannah is the ''first person to contact the seller'' and according to the offer Lisa was supposed to sell the guitar to her for £50. When selling the guitar to another purchaser, Lisa broke a condition, so the injured party is entitled to claim damages. As held in Poussard v Spiers breaking a serious term allows the plaintiff to treat the contract as repudiated.

However, in the events between Lisa and Hannah there is no specified instruction about how an acceptance of the offer should be made, whether written or oral one.  The case of Entores where the court held that when ''a contract is made by instantaneous communication the contract is complete only when the acceptance is received by the offeror''. Acceptance must be communicated. In the case given, the offeror is Lisa and the offeree is Hannah. So, by giving a confirmation of the deal to Hannah, Lisa stated her acceptance and a contact between the two is made. Although, Lisa received a better offer for the item (£55) she did not have the legal right to sell the guitar to anyone else but Hannah. Nevertheless, she sold the guitar to another purchaser – Katie for £55 on the day after she had made an agreement with Hannah. Therefore, it could be said that Lisa has breached the bilateral contract between her and Hannah. As a result, Hannah could bring legal actions against Lisa.

The advertisement for the two front row tickets that Lisa placed is merely an invitation to treat and not an offer, so at this stage there is no legally binding contract formed yet. The case of Harris v Nickerson can be applied here, in which was held that an advert did not amount to a direct offer and it was simply an invitation to treat. The lack of exact price (''offers around £200'') states as a provocation to other people to make offers for the tickets. Lucy made an offer of £180 for the tickets, thus showing she had an intention to create legal relations and purchase the tickets. However, Lucy's offer cannot be considered as a counter offer simply because Lisa's advert is an invitation to treat, not a direct offer. Lucy is the offeree but she did not try to express a rejection or change the term of the original offer, simply because Lisa's advert is a starting point of negotiation. Lisa accepted Lucy's offer of £180 but her letter of acceptance has not been properly addressed. The key issue here is whether the postal rule applies or not. The postal rule states an acceptance is complete immediately the letter is put in the post box, but in order for the rule to apply the letter of acceptance must be properly posted and addressed. In the case of Adams v Lindsell the defendants were held to be bound by an offer despite the fact that the answer was misdirected and arrived later. The same principle could be applied in the situation between Lisa and Lucy. It is the defendant's fault that the letter was addressed incorrectly, therefore Lucy could seek her rights and claim damages. In addition, Section 8(1) of the Sale of Goods Act 1979 states that the price ''may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties'' which is an evidence that in the circumstances between Lisa and Lucy a binding contract was formed. Moreover, looking at the case of Holwell Securities v Hughes the court held the parties did not intend to form a contract until an acceptance was received ''in writing''. However, neither Lisa nor Lucy set a term that the acceptance had to reach the offeror to become effective. Thus, given the above mentioned cases which show there was a binding contract, Lucy could sue Lisa for breach of contract.

As advising Lucy to her contractual rights, it is also important to mention that there seems to be no chance that her offer could be revoked, because the withdrawal of an offer is possible only before the acceptance. A case relating to a similar situation is Byrne & Co v Van Tienhoven & Co where the revocation was not effective. Lisa already sent her acceptance, indicating her intentions to create legal relations, and although her letter was not received by Monday (15th) it is due from the time posted. In other words, Lisa did not honor the binding contract by her performance and Lucy could bring legal actions against her and claim for damages.  

In conclusion, law is open to different interpretations, so giving a proper advise to Hannah and Lucy the available opposing arguments need to be recognized. For example, the defendant could argue that she misdirected the letter of acceptance and the postal rule could not be applied. However, looking at the cases analyzed above and applying the law to the facts, it could be summarized that both Hannah and Lucy have their legal rights to sue Lisa for breaching a contract.

Bibliography

MacIntyre, E., (2010) Law for Management. 5th ed. Harlow: Pearson Education Limited.

Slorach, J. S., (2009) Business Law. 17th ed. Oxford: Oxford University Press.

Treitel, G. H., The Law of Contract. 10th ed., p.8

Cases:

Adams v Lindsell (1818) 1 B & Ald 681

Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344

Carlill v Carbolic Smoke Ball Company [1983] 1 QB 525

Entores Ltd v Miles Far East Corporation [1955] 2 QB 327

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 WLR1

Harris v Nickerson (1873) LR 8 QB 286

Holwell Securities v Hughes [1974] 1 WLR 155

Parker v Clark [1960] 1 WLR 286

Partridge v Crittenden [1968] 1 WLR 1204

Poussard v Spiers (1876) 1 QB 410

Scammell and Nephew Ltd v Ouston [1941] AC 251

Statutes:

Sale of Goods Act 1979, Section 8 (1)