Contract Law Case Study

This case study discusses the key elements of a valid contract and explores the issues related to the formation and breach of contract. It examines the concepts of offer, acceptance, counter offer, and the postal rule of acceptance in the context of contract law. Based on the facts of the case, it concludes that no valid contract was formed between the parties involved.

CONTRACT LAW
CASE STUDY

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“Based on Question-2 Related to Contract Law Theme”
Introduction
A contract is valid legalized document or an agreement that is enforceable by law and is
defined in a legalised manner upon the parties who are said to be in the contract. In such a
contract the promise is made between two or more parties. In a contract one party initiates the
consideration amount and the other party carries out the work stated (Mindy Chen-Wishart,
2016). To form a legal contract it has some basic key elements to be fulfilled by the parties
that include offer and acceptance, consideration, capacity to contract, intention of parties to
enter into legal relations, certainty and consent.
The oral form of contract is the one in which it is discussed and initiated orally while on the
other hand in the written form which is done by writing or signing on a paper so both forms
of contracts are considered valid in nature. Also, out of any such contract the rights and
obligations of the parties are determined (Philip Clarke, 2016).
Issues
The key issues of this case study are based on the facts mentioned:-
1. Whether a contract has been formed between Troy and Helen?
2. In case the contract has been formed whether the same was breached?
Rule
In any kind of formation of a legal contract an offer is to be made. According to the
Australian contract law it is stated that an offer is a mode of communication that amounts to a
promise to do something or not to do, if that offer is given to the person either does it or
refuses to do the same or returns it in a form of promise (Andrews, 2011). In this, it also
stated that an offer must show that the promise would be fulfilled, when it is duly accepted by
the other party to the contract (Croese, 2015).
The initial requirement to form a contract is when one party gives an offer to the opposite
party, which has fixed terms and obligations mentioned to make it a valid contract. In this
case law Carlill v. Carbolic Smoke Ball Company (1893) 1QB 256, however, when it comes
to such terms in the adverts which can be acted upon for giving the acceptance further, then
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same is considered as a unilateral offer. This case is a main example of an offer which can be
made to any individual, group or even to the public at large (Latimer, 2012).
Secondly, the rule of counter offer is a reaction given to an initial offer. In this condition the
original offer gets rejected and replaces with another one. It gives the original offerer three
options: accept it, reject it and make another offer with negotiations between the two parties
(McKendrick, 2018). The offer once made and which has also been accepted by the other
party, in such condition if prevails any kind of changes in the original offer the
communication is not accepted and instead it is termed as counter offer (Poole, 2016).
In the case of Hyde v. Wrench (1840) 3 Beav 334 it was determined that when an original
offer become invalid then it cannot be accepted latter on and the original offer is completely
ended or no more found.
Thirdly, acceptance is a clear statement which is either in oral, written or by the conduct. It is
initiated by the offeree who is agreeing to the offer. When the person to whom the proposal
has been made gives his ascent the offer is said to be accepted (Davis J. , 2012). So, it can be
said that silence cannot be considered as acceptance in the case of Felthouse v. Bindley
(1862) EWHC CPJ35. In this case law an acceptance to any offer in mere silence will not be
amount to any kind of acceptance and no such obligation can be imposed by the other party.
An acceptance for an offer must be clearly stated; as silence cannot be treated as acceptance
for an offer (Stone, 2017).
Lastly, in the postal rule of acceptance, the offer is said to be accepted at the very moment it
is posted by the acting party. It is the postal office which is considered as the implied agent to
the accepting party. The date of receipts is irrelevant in such case where the postal rules of
acceptance are applied. In the case of Adams v. Lindsell (1818) 106 ER 250, the court held
that postal rules of acceptance was applied by the court of law and further it was held that the
contract was enforceable (Carter J. W., 2018).
Application
In the given situation of the case the facts emphasize firstly on an offer that was made by
Troy on 1st April 2018 to sell his canary yellow Toyota Corolla car to Helen for an offered
price of $6,000 as there was an absence of unilateral offer because the amount mentioned is
paid by the other party, then it would be deemed as performance of the term of the contract
and hence, acceptance in this case like Carlill v. Carbon Smoke Ball company. The offer and
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proposal made in this case was clear and is stating the consent of Troy to move with the
mindset of selling his car and waiting for the assent or the revert of Helen. However, this
conversation was forwarded when Helen after inspecting the car said that the car seemed
good of its age and she could only afford it if the payment would be done in instalments of
six months which turned out to become a counter offer a where the acceptance was necessary
because the original offer ended with this new counter offer. Based on the case of Hyde v.
Wrench when the original offer expires and get ended due to no such response by each of the
parties and as Troy did not respond to Helen’s statement which directly states that she could
not afford the car unless she could pay by instalments so, the lack of acceptance is reason for
non-formation of a contract. It was a negotiating sort of acceptance with Troy where it is
deemed as a counter offer which was not covered in the original or subsequent
communication .So, no such valid contract was formed between them.
It further ended with silence from both the sides after the last discussions about the
inspection and price. Here, based on this aligned aforementioned statutory law case of
Felthouse v. Bindley, this would not be applicable as state of mere silence can never be
considered as acceptance. This is because the acceptance would only be considered when troy
gives assent to such offer so it is directly applied to the case of Troy and Helen.
Another important concept is the postal rule of acceptance .It is the day on 16th April when
Helen had posted a letter saying “she accepts the offer and will buy the car for $6,000” but
the letter of acceptance was not received until 17th April and the same car was sold to third
party named Alex. So, here the post and letter were used as a mode of giving acceptance by
Helen along with the communication which was sent by her on the 16th April and was
received on 20th of April which got delayed as it was incorrectly addressed. So, it will be
considered as a new offer since the original offer ended up with the counter offer on 1st April
now it will require the due acceptance of Troy because the communication was sent through
letter. It stated based on a similar case facts of Hyde v. Wrench stated that when an original
offer expires due to counter offer came into existence, the acceptance in this case will be
invalid. Due to absence of acknowledgement by the other party, a contract cannot be formed
in between the two. In such condition Troy can willingly sell his car to any other third person.
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Conclusion
Therefore, no such contract was created between the two parties i.e. Troy and Helen. As
when there was an offer from troy to sell his car but Helen turned up with negotiating
statement with him which would be considered as a counter offer which directly implies that
the original offer had expired that time itself and as troy did not respond neither gave any
proper acceptance upon it. Both the parties kept silent with no acceptance, no discussion
therefore, considering this situation he can further sell his car to any third party which
resulted into an invalid contract. So, when there is no contract no breach of contract will
arise.
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Reference List:
Chen-Wishart, M., Loke, A., and Ong, B. (2016) Studies in the Contract Laws of Asia:
Remedies for Breach of Contract. Oxford: Oxford University Press.
Clarke, P., and Clarke, J (2016) Contract Law: Commentaries, Cases and Perspectives. 3rd
ed. South Melbourne: Oxford University Press.
Harris, J. and Croese, C. (2015) Contract Law in Context. Sydney, NSW: CCH Australia
Limited.
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia
Limited.
Poole, J. (2016) Textbook on Contract Law. 13th ed. Oxford: Oxford University Press.
Stone, R., and Devenney, J. (2017) The Modern Law of Contract. 12th ed. Oxon: Routledge.
Neil Andrews (2011) Textbook on Contract Law: Cambridge University Press.
Jim Davis, ( 2012). Contract: General Principles : the Laws of Australia. Thomson Reuters.
Ewan Mckendrick (2014). Contract Law: Text, Cases, and Materials (8th Ed.). Oxford:
Oxford University Press.
J. W. Carter (2018).Contract Law in Australia (7thEd.) LexisNexi.
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