Contract Law: Validity of Offer and Acceptance

Running head: CONTRACT LAW
Contract Law
Name of the Student
Name of the University
Author Note

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CONTRACT LAW
Question 1
Issue
Ann offered to sell her car to Jack for a particular amount. She subsequently rescinded
the contract the day after. The offer was time bound and the revocation was received by Jack
after mailing a subsequent acceptance after various communications made between them. The
revocation of the offer however was received by Jack after his acceptance for the same was
mailed. The issue to be determined here is if Ann and Jack in fact had a valid contract between
them and if so the obligations of both the parties in the transaction.
Rule
Common law is a body of laws that are not codified but are developed through judicial
interpretations delivered by judicial precedents in England. This basically means that these are
laws developed by judgments of courts in the United Kingdom. The Australian commonwealth
incorporates common law principles into legal and judicial framework and thus these precedents
delivered by courts of the United Kingdom have a binding effect on the judicial interpretation of
disputes in Australia. This applies for contractual obligations as well and contract law in
Australia is not bound by statues but by common law principles. As per common law for a
contract to be valid and legally enforceable it must have the following elements (Hughes,
Champion and Murdoch 2015):
 Offer and acceptance.
 An Intention to create legally binding relationships.
 Consideration for both parties.
 The respective party’s capacity to enter into the contract.

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CONTRACT LAW
 Legality of the terms of the contract.
If all these elements are present in a particular agreement between two or more
individuals then the same would be legally binding. In case of legally binding contracts the
courts would hear the same in case of any breach or any form of dispute arising from it
(McKendrick 2014). If any of these elements are not present the same would not have any legal
value and cannot be brought to court in case of any breach or any dispute arising out of the same
between the parties.
In the determination of the rights of the parties to a contract and their subsequent
obligations the first step would be to establish the existence of a lawfully valid contract. The
primary consideration in case such a fact needs to be established is the evidence of legally valid
offers and acceptance. Offer and acceptance are key principles decided by various judicial
precedents and the existence of their legality would have to be brought out in light of the
circumstantial evidence. Offer, which is legally valid, has two parties, and “offeror” (the person
making the offer) and an “Offeree” (the person to whom the offer is made) (Maine and Scala
2017). The first precedent to be speak of such an instance is the judgment delivered in the
historical case Carlill v Carbolic Smoke Ball co [1893] 1 QB. The ultimate principle laid down
in Carlill v Carbolic Smoke Ball co [1893] 1 QB is that for an offer to be legally valid the same
would have to be made by someone who has the intention to create legally binding relationships
(Milsom 2014). This means that the offeror must have an intention to create lawfully enforceable
relationships with the offeree. It was laid down in this case that an offer is different from an
invitation to treat or an invitation to offer, which is merely a precursory step which solicits an
offer. Accepting an invitation to treat means that a subsequent offer would be made, on the other
hand accepting a valid offer creates legal relationships between the two parties and thus creates a

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CONTRACT LAW
contract between these parties. This proposition has also been considered in a landmark
judgment Partridge v Crittenden (1968) 2 All ER (Hunter 2017). The court stated in Partridge
v Crittenden (1968) 2 All ER that the acceptance of an invitation to treat does not form legally
enforceable relationships (Hughes, Champion and Murdoch 2015).
Once a valid offer has been established in a particular scenario then the court must infer if
the same had a legally valid acceptance which accompanied the offer. A valid acceptance is one
that made devoid of any variation to the terms of the original offer and/or of any form of
clarification regarding the offer. Another important aspect to consider when inferring acceptance
is if the same was made within the time stipulated in the contract. In case of time bound contracts
the same need to be accepted within the stipulated time as efflux of time devoid of acceptance
would lead to a revocation of the original offer as laid down in the judgment delivered in
Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 (Llewellyn 2016). Thus apart from
the time factor the only important consideration is acceptance of the offer without any variation
to the original terms and devoid of any clarifications regarding the same (Hughes, Champion and
Murdoch 2015). In case of an acceptance which has a variation to the original terms of the
contract or any query or clarification regarding the same it would amount to a counter-offer. A
counter-offer is not a valid acceptance of the offer, in fact it is a subsequent offer which must
now be accepted by the original offeror. A counter-offer also amounts to revocation of the
original offer as laid down in the landmark judgment in Hyde v Wrench (1840) 49 ER 132
(Hughes, Champion and Murdoch 2015).
Application
Under the given set of facts and circumstances the issue is to determine if there was a
lawfully valid contract between Ann and Jack. In order to establish the same it must be inferred