Business Law: Validity of Contracts and Consumer Guarantees

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note

1BUSINESS LAW
Question 1 Part A
Issue:
Had a valid contract been formed between the Magda and Avinash?
Rule
A contract can be defined as an agreement which is legally binding upon the parties to the
contract. However, for a contract to be legally binding upon the parties it must have the essential
elements of a valid contract. They are:
 Offer
 Acceptance
 Consideration
 Intention of the parties to be legally bound by the terms of the contract
 Capacity to contract
As opined by McKendrick (2014), it can be stated that any of the parties, who wishes to enforce
the contract, must prove that the contract contained all the essential elements at the time it was
entered into by the parties. If any of the aforementioned elements is missing, the contract would
be void or voidable by the parties. It is worth mentioning that offer and acceptance are two
preliminary essentials of a valid contract. Offer and Acceptance can be considered to be a
meeting of the minds of people.
It is to be mentioned that for the purpose of entering a valid contract an offer has to be made by
an offeror. An offer can be described as the promise made by the offeror to the offeree to pay a
consideration for the fulfillment of the terms of the offer. As held in the case Carlill v Carbolic

2BUSINESS LAW
Smoke Ball co [1893] 1 QB, an offer must be distinguished from an invitation to treat. In the
case Smith v Hughes it was held that offeror must have intended to be bound by the offer. In the
case Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401, it had been held that
once an offer has been accepted a valid contract can be formed, however acceptance of an
invitation does not give rise to a contract.
It can be mentioned in relation to the decision of the case Hyde v Wrench (1840) 49 ER 132, that
any change in the terms of the offer while accepting will not constitute valid acceptance but a
mere counter offer. In the case Entorres v Miles Far East [1955] 2 QB 327, it had been held by
the court that for an acceptance to be considered valid, the news of the acceptance has to be
communicated to the offeror.
Mere enquiries do not constitute valid offers as held in the case of Scammell & Nephew v.
Ouston [1941] AC 251. Further it can be stated in accordance with the decision of the
Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 case that an offer must be
accepted before it gets expired.
Application
In this given scenario the events of the days as provided in the case study can be analyzed to
assess whether a valid contract had been form between Avinash and Magda.
Sunday 19th February
Avinash emailed Magda giving her an offer to buy the portrait at a price of $1600. In the case
Smith v Hughes the court held that an offer will be only be considered to be valid, if the offeror
intended to bind the other party and the if the offer is complete in its terms. Therefore, by the

3BUSINESS LAW
application of the decision of the Smith v Hughes case, it can be stated that Avinash made valid
offer.
Magda replied to the Avinash’s offer stating that she could not give the Potrait for less than
$1800. Thus, according to the decision of the case Hyde v Wrench case, it can be stated that
Magda’s reply to Avinash’s offer did not constitute valid acceptance but a mere counter offer.
She did not accept the offer on the original terms of the offer. This means the offer made by
Avinash was terminated.
Avinash after receiving Magda’s reply indicated that he was ready to buy the portrait for 1800
dollars however, he added a condition that he needed to consult with his wife and that he could
not give a confirmation prior to 21st Feb. Thus, it can be inferred that Avinash did not accept the
counter offer of Magda on the original terms of the offer.
Subsequently, Magda sent Avinash a formal offer stating that she was willing to sell the portrait
to 1800 dollars. It was mentioned in the offer that, the offer must be accepted 11:59pm on 21st
February. This can be considered to be a valid offer as per the decision of the Smith v Hughes
case.
March 20th February
After receiving Magda’s formal offer on 19th February, Avinash replied to Magda stating that he
required a certificate of Authenticity with the portrait. Thus, it becomes evident that the formal
offer which had been given by Magda on 19th February becomes terminated as Avinash changed
the terms of the offer as per the decision of the Hyde v Wrench case.