Contract law Analysis

The assessment of a legal problem question needs to consider all the essentials relevant to the area of law. In regard to contract law, the fundamentals of offer and acceptance remain to be paramount features to the development of a binding contract. Although they may be seen at the preliminary stages of forming the contract, the contract would be invalid if either of these requirements were not met. Theoretically, it therefore makes a strong starting point to identify these legal concepts.

They can be drawn from analysing the facts, there after if both points are satisfactory other contractual issues maybe considered, and the legal implications outlined accordingly. In addition to this, it is important to evaluate any defences available to the alleged breaching party, or whether there is any contrary law which sides with the defending party. In order to advise clients accurately, both sides of the argument must be measured, so that the solicitors may interpret the legal impact of their actions, and provide a balanced judgment of the likelihood of the stronger argument.

The general facts of the scenario are only in brief, and are presented in a lay form without any discussion of the law’s perspective. Therefore it is necessary to: identify the legal issues raised, apply the relevant case and statute law, relate the law to the facts of the case and finally conclude on which division of the law the courts will be more likely to accept. The facts of the extract appear to raise two main areas of contract law.

Advising Byron and Alsion will centre on the concepts of: what amounts to an invitation to treat, when is a tender valid, whether tenders can be accepted, and whether the inviter is obliged to accept the lowest tender. The second part of the extract is focused on a dispute over 250 plates. The legal consequences for Demetri is covered by: what amounts to an invitation to treat, under what circumstances can an ITT be regarded as an offer, what are the legal implications of an offer, and the effect of a counter offer. The first section refers to the issuing of tender created for the ‘Last Laugh’ wine bar.

The tender requested a cooking and serving service for an unspecific number of lunchtime buffets. In general, the law does not presume an ‘invitation to tender’ to constitute a legitimate offer, as outlined in the case of Spencer v Harding1. Typically an invitation to tender is regarded as an invitation to treat. It is the creator of the tender whom produces an offer, the invitor is therefore free to accept or reject any of the received tenders. However, the law also acknowledges scenarios where a tender may establish contractual obligations between the parties.

For a tender to have a legally binding affect, the author of the invitation to tender must have clearly expressed an intention; to either accept the most affordable price or the highest bid. If the courts can conclude that the author did include an express statement of that kind, the author may be bound to accept. In this circumstance the invitation to tender would be considered to be an offer and thereby the best tender would act as acceptance forming a unilateral contract2. The promise to consider all tenders submitted on time may also have a legal effect.

The author of the invitation tender may be bound to consider a tender, if such a condition was included in the invitation. This was illustrated in the case of Blackpool and Fylde Aero Club Ltd v Blackpool B. C 3 1990. In review of the facts of “Last Laugh’ wine bar scenario, there appears to be no mention of any express previsions made in relation to an acceptance of the cheapest offer. There are details however, emphasising that tenders would be ‘considered only’ if submitted on time.

The expressed promise to consider the tenders does not affect Alsion’s right to accept or reject the tender subject to her own discretion, as Bingham L. J suggests: ‘ … the invitor does not commit himself to proceed with the project, whatever it is; he need not accept the highest tender… ; he need not give reasons to justify his acceptance or rejection of any tender received. ‘4 Although the facts do not disclose any information on whether an express intention to accept any bid was included, this is not to say that Alsion is free from any contractual obligations. There still is a potential for a unilateral contract to exist, as a result of the promise to consider all tenders submitted before the deadline.

In the light of a unilateral agreement5, the invitation to tender would be considered to be a offer, and the satisfying of the condition would be treated as the acceptance. In a unilateral agreement it is often the conduct that establishes the acceptance, and the need to communicate it is impliedly waived. However this form of contract does not operate automatically. Fundamentally there are two main issues which have to be discussed for Byron to successfully argue that a unilateral contract was reached.

Firstly, an expressed statement displaying an intention to consider all the tenders (which arrived during the specified time) would have to be identified. In relations to the facts the courts would have a good reason to believe that this was the intention of the invitor, as the facts clearly show a statement declaring: “Tenders… would only be considered if they were submitted in time. ” It would be a weak argument to deny this intention, as the courts will not accept anything less than an explicit term in order to dismiss it.

Potentially an mere implication may suffice, as LJ Bingham explained (in the case of Blackpool and Fylde Aero Club Ltd v Blackpool B. C) ‘It is of course true that the invitation to tender does not explicitly state that the council will consider timely and conforming tenders. But the council does not either say that it does not bind itself to do so, and in the context, a reasonable invitee would understand the invitation to be saying quite clearly, that if he submitted a timely and conforming tender it would be considered… ‘6

The decision also exemplifies how the courts may use ‘promissee objectivity’ to calculate what a reasonable person being made a promise would have believed was indented. 7 The application of this law to Byron’s circumstance would solidify the foundation of a claim regarding a breach of a unilateral contract. The next issue is whether or not Demetri’s tender met the requirements outlined in the invitation. Although the tender was hand delivered to Clive at 8:00am on the 24th of December, the document was left unattended till 3:00 pm as Clive failed to remember that the tender was left in the typing tray.

The courts would therefore have to determine whether the tender was submitted on time or not. In Alison’s defence, she may argue that she believed to tender to be late and accordingly failed to consider it. However the initial hand delivery at 8:00am was within the time condition, making it an exceptional circumstance. Due to the complexities involved in the receiving of the tender, the general principle that an acceptance must be communicated to the offeror8 cannot be strictly applied here. The problem of when an acceptance is validated was discussed in the leading case of Entores9.

Here it was established that an acceptance sent by telex took effect from when it was received, not when it was sent. A subsequent case addressing a similar circumstance was that of Brimnes10. The case was concerned with a notice of withdrawal; the courts held the withdrawal was effective when received by the telex machine during office hours, even though it was not read until the following morning. In both cases the communication was validated despite the offeror never receiving the acceptance personally.

It remains unclear whether the courts would apply this to the receiving of a tender, nonetheless it does exhibit a potential disadvantage for the receipting party. This also leads to a secondary issue; whether an acceptance delivered to an agent is effective. The law does make for allowances for acceptances which are received by agents or representatives of the offeror, yet the law also takes into account the nature of the agent’s authority11. The ‘… acceptance need not be communicated to the offeror personally. It is sufficient to communicate it to an agent authorised to receive it, such as a company’s senior official. 12 If the agent has the authority to receive the acceptance on behalf on the offeror, it is effective when communicated to him. Yet if the agent only has a duty to transmit the acceptance, it is not effective till it is received by the offeror.

The facts of the extract do describe Clive as the manager’s secretary, possibly this role lacks the authority to legally receive the acceptance; however this decision would ultimately be at the courts’ discretion. The case law in this particular field is not by any means extensive. However, a similar situation arose in Blackpool and Fylde Aero Club Ltd v Blackpool B. C13. In this case the tender was placed in the Town Hall letter box prior to the deadline yet the staff failed to empty out on time as they were ought to. This resulted in the tender being mistaken for a late arrival. In this instance the courts held the tender was a cause for contractual obligations on the grounds that the conditions outlined in the invitation to tender were met. There is an alternative type of tender which has been titled a standing offer. This occurs when the supply of goods or services are of an unspecified quantity14.

On this occasion the invitation to tender remains free of contractual consequences and, the best tender takes the form of a standing offer. From that point order each order of goods or services amounts to an acceptance, yet no orders of any kind are referred to in Alison’s dispute. For the reasons stated earlier, Alsion was under no obligation to accept the tender, only to consider it. Although Demetri complied with the terms of the invitation, there was no explicit term express an intention to accept the lowest bid, therefore Alsion would have been perfectly able to reject it, yet she may have been obligated to consider it.

Byron may also be able to claim a breach of a unilateral courts, this would depend on whether the courts agreed with the tender arriving on time. If the tender is approved it would be likely that Alsion would be in breach for failing to consider Byron’s tender. The fact that Demetri had now received a notification of acceptance means that the communication has met the offeror and the contract has come into existence, and therefore Alsion will be obligated to fulfil her part of the agreement.

Our attention should now be drawn to the second part of the problem which is centred on the sale of ‘bona china’ plates. A good starting point will be to identify the parties. Eleanor simply places an advertisement where as Demetri and Ferdinand are both offerors. The first stage is trying to identify an offer. An advertisement of any kind would generally not amount to an offer, and merely suffices as an invitation to treat. 15 An invitation to treat may not be accepted, yet it does welcome a party to make an offer.

Similar to an invitation to tender, there are exceptions where an invitation to treat may amount to an offer. In the case of Carlil v Carbolic smoke ball16, it was held that the newspaper advertisement may constitute a valid offer in specific circumstances. The grounds given were that a unilateral contract was formed. The advertisement included specific conditions to follow (constructing a unilateral offer), and the adhering to them would amount to an acceptance through conduct. Yet in the facts we are given, there is no mention of any conditions in the advertisement.

With regard to this it would be difficult to argue that the advert amounted to anything other than an invitation to treat. In response to the invitation, it is logical that a reader of the advertisement may respond with an offer17. Some offers may also stipulate a condition attached to it, this gives rise to different legal implications when compared to those of a basic offer. A term expressed in the offer which specifies a condition necessary for the contract to operate is known as a condition precedent. In regard to legal liability there are two possible interpretations of this rule18.

The first being that: until the condition is complied with neither party has entered into contractual obligations. 19 The second suggests that until the condition was met, nether party was bound to complete the contract yet they may not intentionally obstruct the occurrence of the condition. 20 If either of these interpretations were applied to the facts off this case: Demetri’s request to the checking of the fine bone china plates may constitute a condition precedent (assuming the offer was communicated to the offeree), and therefore accordingly no contract would potentially exist unless the check occurred.

Complications begin to arise when there is no initial response to an offer, yet the acceptor rejects other offers from third parties on the grounds that an agreement was reached with the initial offeror. The main weakness of this preposition is that although the acceptor may have indicated an acceptance to a third party, generally acceptance must be communicated to offeror for a contract to come into effect21. As far as Demetri is concerned, Alison’s indication of acceptance to a third party is of little relevance and the courts would be too hard stretched to declare the acceptance was communicated.

Alison’s response (prior to the meeting at the shop the next the day) was one of silence which is highly unlikely to constitute acceptance. 22 When an offer is met by a new set of new terms it is referred to as a counter offer. These new set of terms lead to two specific legal consequences. Firstly the original offer is destroyed and it becomes unable of acceptance. Furthermore, it amounts a new offer capable of acceptance, subject to the limits of any ordinary offer23. This can be seen to occur between Elanor and Demetri. No acceptance was communicated to Demetri’s offer, as a substitution Eleanor offered a higher price.

It is significant to note at this point that there is a difference between a counter offer and a request for further knowledge. The main difference being that a counter offer fails to mirror the terms of the original offer, where as the request for information merely aims at clarifying the terms24. In this scenario Elanor met Demetri’s offer with a different price, not reflecting the terms of the offer, therefore it is likely to be interpreted as a counter offer. The effect of this is that Demetri has now becomes the offeree, and has the option to enter into contract if he agrees with the new terms, or create new terms of his own.

In review of the relevant law, it is unlikely that Demetri will successfully draw a contractual link between himself and Elanor. Demterti’s conditional offer was not addressed. The reply which did eventually surface was a counter offer, resulting in the termination of the previous offer. Demetri than rejected the counter offer by insisting he would not pay above the price mention in the invitation the treat (Eleanor’s advertisement). The facts fail to disclose any information that would support a reasonable suggestion of a valid acceptance taking effect, meaning that a contract for either party would be unattainable.