Contract is an agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. No contract can come into being unless the following features exist: an actual offer, an acceptance, consideration (this means that each party will contribute something of a material value to the bargain) and an intention to create legal relations. The agreement can be formal, informal, written, or just plain understood.
(a) For a contract to exist the offer must be made and then accepted. An offer may be defined as a statement of the terms put forward as the basis of the bargain which carries with it a promise, express or implied, to adhere to the terms. A legally binding offer will include clearly stated terms, intention to do business and the communication of that intention. The offer must be clearly stated, because it may be held to be too vague to compromise a valid offer. This happened in Guthing v Lynn in 1831 where the buyer of the horse promised to pay the seller an extra £5 “if the horse is lucky for me”, this was held to be too vague to be enforceable. Apart from that a legally binding offer should be distinguished from an invitation to treat. Invitation to treat means an “invitation to offer” and can be described as an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed. A display of goods in a shop window, with or without a price tag is a merely an invitation to treat. Customers are making offers to sellers and sellers then decide if they want to accept. (Fisher v Bell, 1961). Anton is making an offer to Bernard and it was communicated successfully as Bernard replied back by post. The offeree, by acceptance, agrees to be bound by all the terms of the offer. Such acceptance must fulfill three main rules: first of all, it must be the ‘mirror image’ of an offer, and secondly it must be firm, because conditional acceptance is not binding. The last rule is that the acceptance should be communicated to the offeror. The offeree must be agreeing to all the terms of the offer and not trying to introduce new terms, otherwise this response will be held to be a counter-offer, not an acceptance. Counter-offer is an attempt to vary the terms of the existing offer to more favourable terms. Such reply is not considered to be an acceptance. Instead, the reply is treated as a "counter offer", which the original offeror is free to accept or reject. In Hyde v Wrench defendant offered to sell his farm for £1000, and firstly claimant said that he would pay only £950, but afterwards accepted to pay the original price. He heard nothing from the defendant later. It was held that there was no contract between parties and Wrench was free to sell the farms to somebody else. It is very important to distinguish the counter-offer from a mere request of information. In Stevenson v Mclean an offer to sell iron at a certain price was not destroyed when the offeree enquired whether payments might be in instalments, It was held that it was not a counter-offer, merely an enquiry as to whether terms might be varied, and the original offer was not destroyed. In order to analyse whether the contract existed in this scenario it is necessary to understand whether Bernard’s question about hire-purchase terms was an enquiry or a new offer. In the case of Scamell v Ouston (1941) the House of Lords found that vague statements by the both parties as to a hire purchase arrangements for the sale did not amount to a binding contract. In this case Viscount Maugham stated: “in order to constitute a valid contract, the parties must so express themselves that their meanings can be determined with a reasonable degree of certainty”. Bernard’s question about hire-purchase arrangements was not expressed adequately and moreover he said that he will need finance, therefore, it can be argued that he is...
Bibliography: 3. Sarah Riches, Vida Allen, 2009, Keenan and Riches Business Law, 9th edition, Pearson.
4. Stefan Fafinski, Emily Finch, 2009. Law Express: Contract Law, 2nd edition, Pearson.
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