Contract and Procurement Management

This study material provides an overview of contract and procurement management. It discusses the rules and principles of contract law and provides answers to specific scenarios and issues. Topics covered include invitation to treat, postal rule, promissory estoppel, and more.

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Contract and Procurement Management

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Answer 1
Issue
The issue is whether a liability can be imposed on Kangaroo Island Council in order to accept
the tender submitted by Boot Projects Australia?
Rule
While forming a contract, parties have to ensure that they correctly differentiate between
an invitation to treat and an offer in order to ensure that they create a legally binding
contractual relationship. An invitation to treat is not considered as a valid offer; instead, it is
only an invitation which eventually leads to an offer (Suff 2013). Establishing the difference
between these two elements is important because an invitation to treat cannot create a
legally binding relationship between parties. Usually, a request made for tender is
considered as an invitation to treat rather than an offer. Sometimes, a party might call a
client to provide a tender based on tendering conditions which provides that the tender will
be selected based on specific criteria, then in such case, if the tender of a party is not
selected, then the party has the right to claim the costs which was incurred for preparation
of the tender (Suff 2013).
In this regards, a relevant judgement was given by the court in the case of Hughes Aircraft v
Airservices Australia (1997) 146 ALR 1. In this case, the Civil Aviation Authority (CAA) signed
a contract with the last two tenderers to set out assessment criteria based on which the
tender would be selected. Later, the company selected the tender based on separate
criteria. The court provided that there was an implied obligation which is imposed on CAA to
conduct the tender as per the agreed criteria. This obligation was breached by CAA based on
which the party whose tender is not selected has the right to claim the costs incurred for
preparing the tender (Thompson 2015, p. 28).
Application
In the given case study, Boot Projects Australia can only enforce Kangaroo Island Council if a
valid contract is formed between the parties. The advertisement posted by Kangaroo Island
Council was an invitation to treat rather than an offer because the company did not

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specifically ask Boot Projects Australia to provide its tender for the project. It was also
mentioned in the advert that along with the give provisions, other factors would also be
taken into consideration by the company while selecting the tender. Therefore, the
advertisement was an invitation to treat which did not form a contract between the parties
due to which Kangaroo Island Council cannot be enforced to accept the tender of Boots
Projects Australia. The provision of Hughes Aircraft v Airservices Australia case cannot apply
in this scenario based on which Boots Projects Australia cannot claim $25,000 for the cost
incurred in preparation of the tender.
Conclusion
In conclusion, Boots Projects Australia cannot hold Kangaroo Island Council liable for not
accepting its tender and it cannot claim back the cost incurred in the preparation of the
tender.

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Answer 2
Issue
The issue presented in this scenario is relating to whether a contract is constructed between
UniSA and Rexell?
Rule
The postal rule is a relevant concept in the contract law which provided that when the
parties of a contract give their acceptance through an acceptance, then the acceptance is
considered as given when the letter is posted by the party in the post box. As per this
principle, even if a letter is delayed when reaching the offeror, the acceptance is considered
as valid when the letter (properly addressed and stamped) is posted in the post box by the
parties (Graw 2012). This rule was established by the court in the judgement of Adams v
Lindsell (1818) 1 B & Ald 681. Although this rule is disadvantageous for the offeror; however,
its purpose is to let the offeree know that his acceptance is valid which immediately creates
an agreement between parties. An exception of the postal rule was recognised by the court
in the case of Household Fire Insurance v Grant [1879] 4 Ex D 216. As per this exception, a
party can avoid the postal rule if it is stated that the acceptance will only be considered as
valid when it reaches the party. Moreover, the postal rule can be avoided by the parties if
they specify a particular mode of receiving acceptance.
Application
In the given scenario, Rexell submitted a tender for $4,075,987 for the project; however, it
was rejected by UniSA and a counteroffer was made for $3,567,567. Rexell rejected this
offer and provided a counter offer of $3,900,000. However, this offer is also rejected by
UniSA, but the company kept its offer open. Rexell later sent a letter of acceptance on
August 24 which reached the company on August 27. UniSA gave the tender to Boots IT
brother on August 26. As per the postal rule discussed in the case of Adams v Lindsell, the
acceptance of Rexell is considered as valid when the company posted the letter of
acceptance on August 24. Despite the fact that the letter was received by UniSA on August
27, a contract was formed between the parties on August 24. Moreover, UniSA cannot rely

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on the defence given in Household Fire Insurance v Grant case because the company did not
specify an alternative mode to receive the acceptance and it also did not provide that the
acceptance will only be considered as valid if it is received by the company.
Conclusion
In conclusion, a legally binding contract is created between Rexell and UniSA based on the
principle of the postal rule and the company has the right to claim the extra costs from
UniSA for hiring and terminating new employees that were hired and fired by the company
for the project.

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Answer 3
Issue
The issue present in this scenario is relating to the legal right of Westside to enforce
Kangaroo Island Council to claim $450,000 and whether this promise can be legally
enforced?
Rule
The doctrine of promissory estoppel is equitable in nature which is also referred as
equitable estoppel which focuses on rectifying the injustice of a situation in which a promise
is made by a party to another who is in a contractual relationship (Gan 2013, p. 47). This
principle prevents a party from going back to the promise which was made without
consideration. There are certain circumstances which must be present to consider this
doctrine as valid which were given in the case of Central London Property Trust v High Trees
House Ltd [1947] KB 130. In this case, the rent of the defendant was reduced by the plaintiff
because it was unable to sublet flats due to World War II. The plaintiff agreed to reduce the
rent; however, after the war was over, the plaintiff claimed full rent along with arrears.
The court prohibited him from going back to his promise and provided that he cannot claim
arrears because of the promise. However, the court provided that the plaintiff can demand
full rent from now on because the promise was made during the war and after the war, the
defendant was able to sublet the flats. The promise made by the parties must have the
intention to create legal relationships, to the knowledge of the promisor, the promise must
be fulfilled. Another element is that the promisee must act on the promise which resulted in
its detriment which means that if the promisor goes back to his promise, then the promisee
must suffer a detriment (Hepburn 2013). Reliance is a key element which must be present to
establish the principle of promissory estoppel. Promissory estoppel applies when the parties
are already in a contractual relationship, and the promise resulted in altering their position
in the contract.

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Application
In the given scenario, Westside Building Services asked to extend the date of the project by
several weeks; however, Kangaroo Island Council agreed to made a payment to the
company additional $450,000 to make sure that they did not exceed the work of the project
above the already agreed upon deadline. Westside Building Services hired extra labour to
meet the contract deadline after which Kangaroo Island Council denied to make the
payment. The principle of promissory estoppel can be applied in this scenario by Westside
Building Services to prevent Kangaroo Island Council from going back on its promise. As
discussed in Central London Property Trust v High Trees House Ltd case, the key elements of
promissory estoppel are present in this scenario. Both the parties are in a contractual
relationship, and a promise was made based on this relationship. This promise resulted in
altering the position of the parties in the contract, and the promise was completed by
Westside Building Services to its disadvantage. It would be inequitable for let Kangaroo
Island Council to go back on its promise; thus, Westside Building Services can claim the
money.
Conclusion
In conclusion, Westside Building Services can rely on the doctrine of promissory estoppel to
claim $450,000 because the promise given by Kangaroo Island Council is legally enforceable.

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References
Adams v Lindsell (1818) 1 B & Ald 681
Central London Property Trust v High Trees House Ltd [1947] KB 130
Gan, O 2013, ‘Promissory Estoppel: A Call for a More Inclusive Contract Law’, J. Gender Race
& Just., vol. 16, p.47.
Graw, S 2012, An introduction to the law of contract, Thomson Reuters, Missesota.
Hepburn, S 2013, Principles of Equity & Trusts (Aus) 2/e, Routledge, Abingdon.
Household Fire Insurance v Grant [1879] 4 Ex D 216
Hughes Aircraft v Airservices Australia (1997) 146 ALR 1
Suff, M 2013, Essential Contract Law, Routledge, Abingdon.
Thompson, C 2015, ‘Avoiding claims of breach of good faith’, Brief, vol. 42, no. 4, p.28.