As perhaps could not be better put than that

As a legally binding agreement made between two or more individuals or parties, contract plays an extraordinarily important role in our everyday life, from buying a cup of coffee to selling a preowned car etc. The law encourages people to make contracts because it believes that contracts can make everyone better off. Unless one party is manifestly taken advantage of, the law tends to not intervene; this is because the freedom of contract believes that an adult shall have his or her own right to make a legally binding mutual agreement with one or more other persons, without governmental interference. It is a concept evolved of people being regarded as self-sufficient, able to control their own destiny, following changing attitudes taken place during the Industrial Revolution and theories of Natural Law. The essence of freedom of contract perhaps could not be better put than that of Sir George Jessel MR’s remark in the case Printing and Numerical Registering Co v Sampson,1 :’men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice’.  

 

Seen as an expression of willingness to enter into a contract, offer is one of the four prerequisites in formation of a contract, alongside acceptance, consideration and intention to create legal relations. It must be distinguished from an invitation to treat, where one party merely invites offer(s) from others which they are always free to accept or reject (Fisher v Bell)2. Advertisements are generally considered by courts to be invitations to treat rather than offers; according to the legal principle applied in Partridge v Crittenden3, the advertisement stating ‘Bramblefinch cocks, bramblefinch hens 25s each’ was merely an expression of willingness to receive offers in order to have further negotiations. In this case, however, by placing an advertisement in the local newspaper with clear instructions and specific personal details, Olivia made a unilateral offer (Carlill v Carbolic Smoke Ball Company Ltd4  In her advertisement, Olivia made the promise to sell one ticket each to the first three people who contacted her in return for their actions of paying £50 cash each, there were no ambiguous or uncertain parts on wording (Loftus v Roberts)5. Since Olivia seriously meant to offer to sell the tickets and Bernard wanted to buy one from her after seeing the advertisement, both of them had the intentions to create a legally binding relation, unlike what happened in Weeks v Tybald.6 Bernard seemed to have accepted Olivia’s offer by posting a letter with a £50 cheque. Acceptance by post is an exception to the general rule that acceptance must come to the offeror’s attention before it becomes valid. Since acceptance by post in Bernard’s case is a normal and reasonable means of acceptance (Henthorn v Fraser),7 and was not explicitly excluded by Olivia in the advertisement, also did not lead to any manifest inconvenience (Holwell Securities v Hughes),8 the postal rule applies. Bernard accepted Olivia’s unilateral offer the moment he posted the letter (Adams v Lindsell).9 Nevertheless, this acceptance may not be legally valid, due to the fact that Bernard, as an offeree, failed to comply with all Olivia’s (offeror) requirements. Olivia stated in the newspaper advertisement clearly that she wanted to be paid in cash. According to the Oxford English Dictionary, cash is defined as ‘money in coins or notes, as distinct from cheques, money orders, or credit’.10 While some dictionaries may also provide a secondary definition: ‘money or its equivalent’ (including certain types of cheque), there are generally no reasonable grounds for a person to interpret the word by adopting its narrower definition(s), if its chief meaning is not manifestly ambiguous or confusing. Hence, in Bernard’s case, what he sent with the letter (cheque) is not what Olivia asked for. Despite the facts that Bernard was the first person who accepted Olivia’s unilateral offer and his acceptance by post seemed to be valid as the postal rule applies in his case, he de facto formed no legally binding contract with Olivia. Bernard’s acceptance by using a cheque did not mirror all the terms stated, that he did not complete his performance but had only done part of what Olivia (offeror) wanted. Since there was never a contract being formed, there was never a breach of contract too. Thus, Bernard might not have any rights under contract law, he could not sue Olivia nor could he be entitled to any damages.

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Ching phoned Olivia’s landline number on Saturday morning, prior to the tickets being sold to Dirk. It was an instantaneous communication method, which is treated the same as face-to- face communications: acceptance takes place when it is received. Unlike non-instantaneous communication methods, acceptance by telephone is usually less problematic (Brinkibon v Stahag Stahl).11 Nonetheless, Olivia was not at home, so her son, Stephen, answered Ching’s phone call. By telling Stephen that s/he would bring the money for the ticket to Olivia’s house on Monday afternoon, Ching showed the intention to create legal relations with Olivia. However, the problem was raised when Stephen forgot to deliver Ching’s message to his mother. In general, an acceptance has no effect until it was communicated by the offeree to the offeror (Entores v Miles Far East Corporation).12 Though Ching tried his/her best to let Olivia know that he/she would like to accept Olivia’s offer, there was no effective communication as Stephen failed to pass Ching’s massage to his mother, which amounted to silence. Ching in fact never communicated his/her intention to accept Olivia’s offer, and since silence could not constitute acceptance, he/she never had a contract with Olivia (Felthouse v Brindley),13 and thus there was never a breach of contract. Therefore, it was absolutely fine for Olivia later to sell those three tickets to Dirk as he made a higher counter offer which she was free to accept or reject (Hyde v Wrench).14 Unfortunately, Ching would not have any rights under contract law.

 

Olivia’s act (giving two tickets to Angela for free) and the promise made by Angela (to make payment afterwards) did not amount to a legally binding contractual agreement due to the facts that both of them did not have intentions to create legal relations in the first place and there was no consideration; none of the other two crucial elements in formation of a contract (offer and acceptance) existed when Olivia gave Angela the tickets, which happened before Olivia placing the advertisement. The modern definition of consideration in contact law should be based on an exchange of promises came from Sir Frederick Pollock – ‘An act of forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought; and the promise thus given for value is enforceable.’15 However, in Olivia’s case, she voluntarily gave Angela two tickets, thought they would cheer her up, as her neighbour recently had some bad news. Neither did Olivia nor Angela have the intention to create a legal relation. The tickets were meant only as a gift and Angela offered Olivia nothing back in return, thus there was no consideration and never had a contract been formed. In order to form a contract, consideration must be sufficient, if not adequate (Thomas v Thomas).16 Although in fact Olivia could take the two tickets back whenever she wanted to, and sell them too, she did not do that because of moral reasons. Later, Angela promised to make payment to Olivia for the tickets because she enjoyed the performance. But since Angela did not ask for a future act from Olivia (e.g. ‘If you…, I’ll pay you ££’), there was no consideration this time, as well as no contract. Like what Olivia did previously, Angela’s promise to make payment is only bound by moral reasons, she could choose to give Olivia £100 or not. Therefore, even if Angela never pays her the promised money, Olivia could not sue her neighbour Angela for a breach of contract as they were never legally bound throughout the whole time.

1 (1875) 19 Eq 462.

2 1961 1 QB 394.

3 1968 I WLR 1204.

4 1893 1 QB 256.

5 (1902) 18 TLR 532.

 

 

6 (1605) Noy 11.

7 1892 2 Ch 27.

8 1974 1 WLR 155.

9 1818 1 B & Ald 681.

10 The Oxford English Dictionary.

11 1983 2 AC 34.

12 1955 2 QB 327.

13 1863 142 ER 1037.

14 1840 49 ER 132.

15 Pollock Frederick, The Law of Torts: Treatise on the Principles of Obligations Arising from Civil Wrongs in the Common Law (Banks & Brothers 1892).

 

16 1842 2 QB 851.