Law in Business

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On 15th October 2010 East Midlands Airways (EMA) advertise a second-hand Airbus 321 for sale in an aviation industry trade journal for £12.5m. Later that same day, Colvin, the Chief Executive Officer of Houston Aviation Ltd, phones EMA’s Managing Director Patricia. Colvin says that his firm would very much like to view the Airbus 321 but that he is off on a 5 day business trip to Dallas, Texas and will not be able to view the aircraft until he returns. Patricia says that if another buyer comes forward she will have to sell the Airbus 321 to that buyer. Colvin then says he will pay £100,000 if EMA promises not to sell the Airbus 321 to another buyer for the next 5 days. Patricia agrees to this.

Analyse whether any contract has been made between the parties and if so, what are its terms? Refer to the facts briefly and discuss the relevant case law that supports the conclusions you arrive at in your answer. Also advise on any practical implications for the parties.

In legal terms a contract is defined as ‘Any legally binding agreement voluntarily entered into by two or more parties that places an obligation on each party to do or not do something for one or more of the other parties and that gives each party the right to demand the performance of whatever is promised to them by the other parties.’[1] In this essay I am going to look at whether a contract has been made by the two parties, I will then look at the elements of this contract, what this contract means, whether it has been breached and the results of this. I will use relevant case law to support my findings.

The first thing to consider is that the advert placed in the industry based journal is an invitation to treat. They have advertised a price in the journal of £12.5m however this is not an offer so they are not obliged to sell at this price. An invitation to treat is an invitation to negotiate, or an invitation to make a deal. [2] We can be sure that this is an invitation to treat and not an offer if we look at the case of Partridge v Crittenden (1968). In this case the defendant was advertising in a magazine for sale of a bramblefinch for 25 shillings. Under the Protection of Birds Act 1954 it was illegal to offer for sale a bramblefinch. A customer then posted a cheque asking for the bramblefinch. The defendant was held not guilty as the advertisement was an invitation to treat not an offer.

After the invitation to treat Colvin contacted Patricia and made an offer to her that he would give East Midlands Airways £100,000 if they agreed not to sell the Airbus 321 in the next five days. Patricia agreed to the terms of this offer and therefore a contract was made They both agreed to the terms of the contract voluntarily. There are two types of contract unilateral and bilateral. Almost all contracts are bilateral because both sides make a contractual promise to the other.[3] In this situation the contract is bilateral this is because Colvin has made an offer of £100,000 and Patricia has accepted it, therefore there are two parties involved.

A contract will only come into existence if the offer which is accepted contains all of the terms of the contract. A court must be able to obtain with certainty exactly what was agreed.[4] They take an objective view asking whether the reasonable person would have thought that the agreement was sufficiently certain. In Sudbrook Trading Estate Ltd v Eggleton (1983) a lease gave a tenant an option to buy land at a price above £12,000 as agreed by two valuers. The tenant wanted to buy the land however the landlord refused to appoint a valuer as it said he must in the contract. This was held as the contract was certain and the landlord should have appointed a valuer. In this situation Colvin offered to give EMA £100,000 in return for them not selling the plane for five days. The five days is a set period of time, however there is no set period of time for the paying of the £100,000. This could be considered evidence...
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