Difference between Invitation to Treat and Offer in Enterprise Law

This document discusses the difference between invitation to treat and offer in the context of enterprise law. It explains the legal rights of sellers and buyers in refusing or accepting a sale. The document also provides case law examples and applications of these concepts.

ENTERPRISE LAW
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Question 1
Issue
The critical legal issue is to consider the difference between invitation to treat and offer so as
to outline if Carla has the legal right to refuse sale of book to Brendan.
Rule
A key question is whether display of goods in a shop with the price tag would constitute as
offer or invitation to treat. The relevant case law corresponding to this situation is
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953]
EWCA Civ 6 as it deals with display of medicines in the store. It was highlighted that this
display would be implied as only an invitation to treat (Taylor & Taylor, 2015).This means
that the seller is willing to negotiate the sale of goods with an interested buyer. Under the
given scenario, when an interested buyer approaches the seller with a proposal, it would be an
offer and not an acceptance (Edlin, 2015). This is because acceptance could be only given to
a matching offer which previously exists. Considering the given interpretation, the seller can
potentially give acceptance, deny the same or float a counteroffer ((Paterson, Robertson &
Duke, 2015).
Application
The case facts provide information that Carla is the sales representative at a book store where
books are displayed with their prices. The display of books would be treated as an invitation
to treat and not an offer for sale in accordance with the relevant rule discussion above.
Brendon is the interested buyer who intends to buy a book and has found a copy of the book.
He offered Carla the price for the book as highlighted at the specimen for display at window.
It is evident that the interested buyer Brendon has communicated an offer for the sale of book
at a specified consideration. Carla being the seller has the legal right to tender acceptance to
the offer or deny the same.
Conclusion
It is noteworthy that the display of book would be considered as invitation to treat and not
offer. Thereby, the communication by Brendon regarding intention to purchase the book is
not acceptance but offer which can be legally turned down by seller Carla without any legal
implications.
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Question 2
Part A
Issue
Taking into consideration the postal media of communication, the key issue is to highlight if
a valid agreement has been enacted between Greg and Edward.
Rule
A key component of offer and acceptance is the mode of communication that is used. This is
less relevance for the offer component considering that irrespective of the media used for
communicating the offer, it would become valid only when the same has been received by the
offeree. But mode of communication has relevance for acceptance as it impacts the timing.
This is of particular significance when the postal media is used for expressing acceptance
(Andrews, 2014). A case worth highlighting in this regards is Henthorn v Fraser [1892] 2 Ch
27. As per this case, the acceptance when communicated through post would come to force
at the very moment when the offeree posts the acceptance letter since the content of the letter
cannot be changed afterwards. This would imply that contract formation also is completed at
the very instant the letter is posted. Thus, any revocation of either acceptance or offer after
the contract formation would have no impact on the contract enforceability. Failure to fulfil
the contractual obligations after posting the acceptance letter would lead to breach of contract
(Carter, 2016).
Application
An offer has been sent using post as the communication medium from Edward to Greg on
February 4. However, this offer would not be valid till the time, the offer letter reaches Greg
which happens on February 7. Greg is willing to accept the offer given by Edward and
thereby communicates his acceptance for the offer through postal medium. The concerned
acceptance letter is posted on the same date (i.e. February 7) and hence a valid agreement is
enacted between Edward and Greg. After couple of days, Greg has sent a email stating his
desire to revoke the acceptance. This would not be valid even though the acceptance letter
has not reached Edward since acceptance is deemed to be valid from the moment of
acceptance letter being posted.
Conclusion
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It is evident from the above discussion that Greg and Edward have enacted a valid agreement
which cannot be negated by the revoking of acceptance by sending the email to Edward.
Part B
Issue
With regards to amended contract for part payment of debt, it needs to be highlighted if
Edward would be able to recover unpaid amount of $ 50 at a later stage or not. This would
essentially depend on the legal enforceability of the amended contract.
Rule
One of the key requirements for a legally binding contract is consideration being present for
the contracting parties. This is not only limited for initial contracts but also is a key
requirement for any modifications to the original contact. Infact, if any material changes in
the original contract are made where either of the parties lack any consideration to agree to
the change, then the contract for change would be declared as void irrespective of the
subjective intentions of the contracting parties (Gibson & Fraser, 2014).
A key aspect to consider is if part payment can serve as valid consideration for modification
in the contract. This aspect formed the basis of Foakes v Beer [1884] UKHL 1 case where it
was held that valid consideration does not comprise of part payment of existing debt. This is
because in this process, the creditor always ends up on the losing side owing to haircut in
payment (Davenport & Parker, 2014). However, recent cases such as Musumeci v Winadell
Pty Ltd (1994) 34 NSWLR 723 have brought in a more practical approach to this issue. This
is especially valid in view of scenario where remedy for breach of contract may not result in
sizable recovery and thereby practical benefits from accepting part payment may actually
serve as valid consideration (Andrews, 2014).
Application
In accordance with the facts provided, it is known that Edward has provided goods worth $
450 on credit. As per the terms of the agreement between them, this amount had to be paid by
Peter on or before February 28. In the meanwhile, Edward learns that Peter ability to pay may
be impaired owing to deterioration in his financial situation. Concerned by the default on the
existing debt, an offer to settle the debt with an instantaneous payment of $ 400 is made by
Edward which is accepted by Peter. Clearly, a legally binding amendment to the original
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contract has been enacted as consideration is mutually present. In case of waiting till 28th, it
might be possible that recovery of money might be significantly lesser even by availing legal
means. Hence, by taking a haircut of $ 50, the practical benefit obtained by Edward is
significantly larger.
Conclusion
The contract amendment is binding on both the parties as valid consideration exists for
Edward. As a result, the debt has been discharged and no claim for unpaid $ 50 can be made
by Edward.
Part C
Issue
In the wake of given information that Edward and Peter are cousins, it needs to be
highlighted if the agreement for sale of goods would be legally enforceable or not.
Rule
In the context of contract formation, a key element is intention on the part of contracting
parties to forge legal relations. While this is inevitably present in case of commercial
agreements, the same cannot be assumed about social or domestic agreements. In case of
social or domestic agreements, it is possible that there is lack of intention on either of the
parties to enforce their contractual rights using legal means. As a result, these contracts would
be considered void (Davenport & Parker, 2014). The decision in the Jones v Padavatton
[1968] EWCA Civ 4 case highlights that additional proof is necessary in case of social
agreements that legal relations intention was present. The conduct of the contracting parties
with regards to drafting of formal written agreement and verbal commitment to drag the
matter to court in case of non-enforcement hints towards intention to initiate legal relations
being present (Taylor & Taylor, 2015).
Application
For the scenario presented, it is known that Edward and Peter are family relatives. Hence, the
underlying agreement involving sale of goods would be categorised under domestic
agreement. To check the enforceability of this agreement, a key element is that intention to
forge legal relations should be present on the end of both Edward and Peter. The information
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provided does not indicate any such information since no written contract seems to be have
been enacted and no verbal representation has been made regarding legal enforcement of
rights.
Conclusion
Taking into regards the failure to ascertain the presence of intention to forge legal relations, it
may be appropriate to conclude that the agreement for sale of goods in this case would be
void.
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References
Andrews, N 2014, Contract Law, 3rd edn, Cambridge University Press, Cambrisge
Carter, J 2016, Contract Act in Australia, 3rd edn,LexisNexis Publications, Sydney
Davenport, S & Parker, D 2014, Business and Law in Australia,2nd edn, LexisNexis
Publications, Sydney
Edlin, D 2015, Common law theory, 4th edn, University Press Cambridge, Cambridge
Gibson, A & Fraser, D 2014, Business Law, 8th edn, Pearson Publications, Sydney
Paterson, J Robertson, A & Duke, A 2015, Principles of Contract Law, 5th edn, Thomson
Reuters, Sydney
Taylor, R & Taylor, D 2015, Contract Law, 5th edn, Oxford University Press, Oxford
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