HND BUSINESS CONTRACT LAW
Aspects of Contract and Negligence
HND BUSINESS - CONTRACT LAW
A contract is a legally binding agreement between two or more people in writing or in words that includes a valid offer and acceptance. The essential elements of a binding contract are:
1. Offer and Acceptance
2. Consideration given by both sides
3. The intention to create legal relationship
An offer is a proposition put by one person to another person made with the intention that it shall become legally binding as soon as the other person accepts it. When the offer is accepted a contract is formed between the persons involved. An offer is also, capable of being converted into an agreement by acceptance and must consist of a definite promise to be bound provided that certain specified terms are accepted. Smith v Hughes (1871) introduces the objective test that decides whether an offer has been made.
Smith plc. V Jones Ltd 2012
On 1 October
Jones Ltd made an offer to Smith plc. by post to service their
photocopying machine for £10,000 per year and told
Smith to reply by post
On 4 October
Jones Ltd received an offer from Watson & Co to do the
service for £9,000. 5 October
Jones made a counter offer to Watson by offering to pay
them £8,000 instead of the proposed amount which Watson
accepted. 6 October
Smith plc. received the letter of the offer of 1st October made
by Jones Ltd 6 October Smith plc. received an email of withdrawal of the offer of 1st
October by 10.45 from Jones Ltd but not read until 5pm
same day 6 October Smith PLC accepted the offer at 11 am when they posted the letter back to Jones.
Jones Ltd and Smith PLC formed a contract on the 6th of October at 11 am when the letter of acceptance was posted as the postal rule have to be applies in these case. Jones proposed an offer which smith accepted. Watson & Co v Jones Ltd
1.1b Counter offer
A counter offer is acceptance that proposes to introduce new terms that can be accepted or rejected by the offeror. If the offeror rejects it the previous offer will no longer be available for acceptance but a new offer would be made as in this was the case in Hyde v Wrench (1840) which introduces the precedent that a counteroffer negates the original offer that is, a valid contract must be a simple acceptance of the terms proposed. By making a counteroffer, Jones plc rejects the original offer made by Watson. Under these facts the parties did not form a binding contract. However, Jones and Watson also have a contract even though Jones made a counter offer to them which they accepted. Watson & Co has the right as the offeror to accept or reject the counter offer made to them. What we do not know whether the appropriate person made the acceptance. If so, Jones is bound by two contract which he has to make a choice which one to keep.
1.2 The operation of the postal rule
The postal rule is an exception to the general rule of contract law which states that an acceptance of an offer is not effective unless and until it has been communicated to the offeror (the person who made the offer) the postal rule contradicts that an acceptance takes effect when a letter is posted not when it was received. The rule was established by a series of cases, starting with Adams v Linsell (1818) and was confirmed later and developed more in Dunlop v Higgins (1848) Henthorn v Fraser, Household Insurance v Grant (1879) it clearly specifies that an acceptance is made when the offeree posted their letter of acceptance not when it was received. An exception to this rule would be if the offeree knows or reasonably should have known that the letter of acceptance never reached the offeror. It makes no difference whether the offeror actually receives the letter. This was demonstrated in...
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