Business Law Argumentative

The legal issue in this question is whether Jason Miao can go back on his promise of paying the extra $5,000 to Damien, for covering the additional cost of materials and additional work needed to construct the swimming pool. Principle

The underline legal principle applicable to this situation is that ‘once an offer is complete, or in this case accepted, the offer cannot be revoked’. Doing so would constitute to a breach of contract. The offer shows a clear intention (to pay additional $5,000 on top of the original agreed amount of $30,000) of the offeror (Damien) that he intends to enter into a legal relationship with the offeree (Jason Miao). There was no further bargaining expected or mentioned, and the offeree was deemed to accept the terms and conditions stated by the offeror. Thus Damien had offered Jason Miao a bilateral offer. The acceptance of the offer was communicated effectively between both parties, and the acceptance of the offer was made while the offer was still in force (before the completion of the construction of swimming pool). Furthermore, pertaining to this case, it was clear that it is an express acceptance, in which Jason Miao clearly communicates to Damien of his acceptance vocally.

Once acceptance is made, there is an agreement. Therefore, with the elements of a bilateral offer given by Damien, the express acceptance by Jason Miao, the intention to create legal relations with both parties, and the presence of ‘Consensus Ad Idem’ (meeting of minds), both parties enter into a legally binding contract. One may argue about the existing original offer of $30,000 for the construction work of building a swimming pool in Jason’s house and that constitutes to the 1st and binding legal contract. However when Damien communicated with Jason Miao in August with regards to the additional cost of materials and additional work needed to construct the swimming pool, and therefore raising the price form $30,000 to $35,000, Damien had given Jason Miao a counter-offer. A counter-offer destroys the original offer. A case illustrative of this is; Hyde v. Wrench (1840) EWHC Ch J90, (1840) 3 Bea 334, (1840) 49 ER 132 The case clearly established the issue of counter-offers and their relation to initial offers. In it the court ruled that any counter-offer cancels the original offer. Authority

The case law authority for this principle was established in the case of Entores Ltd v. Miles Far East Corporation (1955) EWCA Civ 3, (1955) 2 QB 327 With reference to the case, the court found that the regular postal rule did not apply for instantaneous means of communications such as a telex. Instead, acceptance occurs where the message of acceptance is read. The case clearly illustrates that acceptance occurs where the message of acceptance is read or effectively communicated via oral or written. Counter-Argument

The counter-argument here is that Damien may argue that the original contract was ‘discharged by frustration’. The underline legal principle that Damien may bring up in this case is that there was an interruption which prevented the performance of the contract in the form intended by the parties. This principle of law was established in the case of; Jackson v Union Marine Insurance (1874) 10 Common Pleas 125

This case argues the right to terminate an agreement. There was a contract for the charter of a ship to proceed immediately to load cargo for San Francisco. However, the ship ran aground and could not be refloated for over 1 month, thus needed to be repaired. The jury held that the delay for repairs was so long that it brought the contract in a commercial sense to an end. With reference to this case, the interruption mentioned which prevented Damien to complete his part of the contract of building a swimming pool in the premises of Jason Miao for $30,000, is that there was additional cost of materials and additional work needed. The additional cost were a result of higher material cost, which was beyond Damien’s control. Therefore the contract is discharged by frustration. Argument

However, one might also argue that a contract will not be frustrated merely because it becomes more difficult or more expensive to perform. The principle of law was established in the case of; Tsakiroglou & Co Lt v Noblee Thorl GmbH (1962) AC 93, (1961) 2 All ER 179 The case concerned a sale of groundnuts, from Port Sudan to Hamburg. The parties envisaged shipping through the Suez Canal, but the canal was closed after the contract was concluded. The court ruled that the contract was not frustrated. The fact that it was more difficult or more costly to perform is not sufficient to amount to frustration. The principle of this case is that a contract will not be frustrated merely because it becomes more difficult or expensive to perform. This is further illustrated in the book of; Force Majeure and Frustration of Contract, Second Edition by Ewan McKendrick (1995) Conclusion and Recommendation

Following this line of argument, it is not possible that Jason Miao go back on his promise of paying the extra $5,000 to Damien. Jason Miao is still legally bounded by the contract to pay the additional amount as the contract is not discharged by frustration.

Assignment Question Part B
Issue
The legal issue in this question is whether Damien’s decision having accepted the sum of $20,000 in full settlement f his account, out of the original contractual agreement of $35,000, is legally binding. In other words, can Damien take legal actions against Jason Miao to recover the balance $15,000. Principle

The general principle of law relating to this issue is that ‘payment of a lesser sum of money on the day of satisfaction for a greater debt is not good consideration’. The doctrine of Pinnel’s case is that payment of a lesser sum on the day cannot be good consideration for a promise by the creditor not to claim the rest of the money due. Part payment of a debt on or after the date the debt is due is not good consideration for the creditors promise not to claim the balance, which means that the debtor (Jason Miao) will have to pay back the creditor (Damien) whatever he balance he owes. Authority

The authority for this principle was established in the case of ; John Weston Foakes v Julia Beer (1884) UKHL 1, (1881-85) All ER Rep 106, (1884) 9 App Cas 605; 54 LJQB 130; 51 LT 833; 33 WR 233 In that case it was said that ‘payment of a lesser sum on the day or after the due date of a money debt cannot be any satisfaction of the whole.’ The reason for this rule is to protect parties, companies or anyone who have completed their contractual work agreement or contractual services but was not given full payment as stated in their legally binding contractual agreement. Counter-Argument

The counter-argument here is that Damien can claim that the promise to accept $20,000 instead of $35,000 from Jason Miao was made under the commercial pressure called ‘economic duress’. In this case, the threat was made in respect of Jason Miao’s financial difficulties and that all his investments had become worthless. If duress was established, Jason Miao could rescind the contract and Damien would not receive any payment at all for all the work done. In the case of;

Atlas Express v Kafco (Importers & Distributors ) Ltd (1989) QB 833 The court held there was economic duress in this situation, which meant the contract was voidable. When the defendant signed, he did so unwillingly and under compulsion. He had no bargaining power. With relevance to the case mentioned, Damien accepted the amount of $20,000 in order not to suffer total loss. Argument

The argument to this case is the introduction of the doctrine of ‘promissory estoppel’. ’Promissory estoppel’ is a situation whereby the parties to a contract agrees to set aside the original agreement that they made owing to an unforeseen event, that prevents them from adhering to the terms and conditions of the original agreement. In the case of;

Amalgamated Investment Co v Texas Bank (1982) Q.B. 84
It was held that the doctrine could act as a sword and not merely as a shield (that is, it could be used as a cause of action rather than merely providing a defence to an action). Therefore Damien cannot use this to commence a lawsuit against Jason Miao. This was further endorsed in the case of;

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 Where the court held that the defendant was entitled to the future but not the past rent. He was estopped from going back on his promise. With relevance to this case, Damien cannot go back on his promise to recover the balance $15,000 from Jason Miao. It should also however be noted that the equitable principle of promissory estoppel applies only to promises made voluntarily and to existing rights. In the case of;

D & C Builders Ltd v Rees (1965) EWCA Civ 3, (1965) 2 QB 617, (1966) 2 WLR 288 the court supported the statement that payment of lesser sum was no consideration for payment of full debt. Based on above three cases, it is very clear that Jason Miao should pay the full $35,000 to Damien as the $20,000 is not good consideration for discharge of the whole debt. Conclusion and Recommendation

Following this line of argument, it is clear that the promise to accept $20,000 from Jason Miao is not legally binding. Furthermore after Jason Miao inherited a large sum from his sister’s estate, Jason Miao must pay the balance of $15,000 to Damien as he is no longer in ‘economic duress’. Therefor Damien can sue Jason Miao for the payment of the full debt. However if Jason Miao had not come to this inheritance, then Damien is legally bound to accept the $20,000 from Jason and is estopped from recovering the $15,000, following the doctrine of ‘promissory estoppel’. Total word count is 1,637.

References
Assignment Question Part A
Hyde v. Wrench [1840] EWHC Ch J90, [1840] 3 Bea 334, [1840] 49 ER 132 http://www.bailii.org/ew/cases/EWHC/Ch/1840/J90.htmlEntores Ltd v. Miles Far East Corporation (1955) EWCA Civ 3, (1955) 2 QB 327 http://www.bailii.org/ew/cases/EWCA/Civ/1955/3.htmlJackson v Union Marine Insurance (1874) 10 Common Pleas 125 http://en.wikipedia.org/wiki/Jackson_v_Union_Marine_Insurance Tsakiroglou & Co Lt v Noblee Thorl GmbH (1962) AC 93, (1961) 2 All ER 179 http://pntodd.users.netlink.co.uk/cases/cases_t/tsakirog.htmForce Majeure and Frustration of Contract, Second Edition by Ewan McKendrick First published (1991) by Lloyd’s of London Press Ltd. Second Edition (1995)

Assignment Question Part B
John Weston Foakes v Julia Beer (1884) UKHL 1, (1881-85) All ER Rep 106, (1884) 9 App Cas 605; 54 LJQB 130; 51 LT 833; 33 WR 233 http://www.bailii.org/uk/cases/UKHL/1884/1.htmlAtlas Express v Kafco (Importers & Distributors ) Ltd (1989) QB 833 http://en.wikipedia.org/wiki/Atlas_Express_Ltd_v_KafcoAmalgamated Investment Co v Texas Bank (1982) Q.B. 84 http://en.wikipedia.org/wiki/Central_London_Property_Trust_Ltd_v_High_Trees_House_LtdCentral London Property Trust Ltd v High Trees House Ltd [1947] KB 130 http://en.wikipedia.org/wiki/Central_London_Property_Trust_Ltd_v_High_Trees_House_LtdD & C Builders Ltd v Rees (1965) EWCA Civ 3, (1965) 2 QB 617, (1966) 2 WLR 288 http://www.bailii.org/ew/cases/EWCA/Civ/1965/3.htmlBusiness Law, by Robert W. EmersonPublished by Barron’s Educational Series (2004)