Analysis of Contract Formation, Acceptance, and Legal Principles

This assignment delves into various aspects of contract law, analyzing several scenarios to determine the formation, validity, and enforceability of contracts. The analysis begins by examining the essential elements of contract formation, including offer and acceptance, and how modifications to an off...Read More

LAW

TABLE OF CONTENTS
1. ISSUES........................................................................................................................................1
2. LAW............................................................................................................................................1
3. APPLICATION...........................................................................................................................2
4. CONCLUSION............................................................................................................................3
REFERENCES................................................................................................................................4

1. ISSUES
In accordance to the factual scenarios and the applicable legal framework, following
issues shall have been deciphered to analyze the facts:
 Considering that the offer was responded with an acceptance with modified terms,
whether a valid contractual relation was formed between Bob and Mike?
 Considering the fact that revocation of acceptance was made pursuant to making an
effective acceptance, whether the contract could be considered terminated?
 Considering that Bob agreed to give a computer in return of certain favours made by
Steve could bind Bob under an enforceable relation.
 Considering the fact that Bob signed the contract by mistake, can still make him liable to
perform.
2. LAW
An enforceable contract can be formed only if all the essential elements of contract are
present in the process of formation. For instance an effective offer shall be responded with an
unconditional acceptance. In Hyde v. Wrench (1840) it was opined by the court that in the event
an offer is responded with modification in the terms, then it shall be considered as a counter offer
(O'Sullivan & Hilliard, 2016). In addition, it was also held that communication of a counter offer
has an effect of ceasing the existence of the original offer.
The law governing offer and acceptance differs in the case communication between the
parties have taken place through the medium of letters. Hence, in such a case Postal Rule is said
to be applicable, in accordance to which an acceptance shall be bound against the offeror as soon
as it is put into transmission (Hogg, 2011). However, it becomes bound against the offeree only
when such a letter is received by the offeror. In the case of Byrne & Co. v. Leon Van Tienhoven
& Co. (1880) it was opined by the court that though an effective acceptance made through post
makes the parties bound to perform the contract, revocation of acceptance may also be
considered valid if made in a reasonable manner (Szczerbowski, 2015).
In order to formulate a valid contract, it is essential for the parties to have an intention to
form a legal as well as binding relation. In the case of Balfour v. Balfour (1818) it was ruled by
the court that in the cases of social and domestic relation the presumption of existence of such
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intention shall not be raised. On the other hand, in the case of commercial relations it shall be
presumed by court that the parties intended to form a legal and enforceable relation.
In accordance to law if a person has verified a document or contract by a signature, it
shall have a binding effect on the concerned party. However, this general rule is subject to
certain exceptions such as the plea of mistake (Furmston & Tolhurst, 2010). Thus, in the case of
Carlisle and Cumberland Banking Co. v. Bragg, CA (1911) it was held that if a person signs a
contract considering it to be another document, shall be eligible to raise the plea, in the name of
non est factum if he has not acted in a negligent manner.
3. APPLICATION
In the light of the case of Hyde v. Wrench, it can be stated that the contract
between Mike and Bob would not be valid as the essential elements required for the formation of
a valid contract are not present in their agreement (Andrews, 2015). As per law, if there is any
change or modification in the original offer, then, the original offer gets canceled and counter
offer comes into existence. Therefore, the communication made by Mike regarding price
changed the terms of offer and hence, was a counter offer. In this context, original contract
ceased to exist between them as the communication made by Bob on 5th January to accept the
offer made on 1st January would not be considered valid.
As per the case of Byrne & Co. v. Leon Van Tienhoven & Co. (1880), the postal rule
states that whenever the acceptance is given by post, it would become effective as soon as the
letter is posted. Therefore, the communication made by Tom on 12th January would be effective
acceptance and thus, there is a contractual relationship between the parties (Poole, 2016). Bob is
bound by the offer as soon as acceptance was posted and Tom would be bound by offer when the
letter is received by Bob. In this context, the common law provides that the contract can be
rescinded within reasonable time period if the parties have not acted by relying on such
agreement. In the given case, Bob revoked the contract before the hard drives were delivered to
him, as it was within the reasonable period of time, so the contract can be rescinded.
It was held in the case of Balfour v. Balfour (1818), that in case of social agreements
there is a presumption that the parties do not intend to create legal relations (Connell, 2016).
Therefore, the contract between Bob and Steve to give computer in exchange of favour is a
social agreement and thus, it is not enforceable by law.
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As per Carlisle and Cumberland Banking Co. v. Bragg, CA (1911), if document has
signature of a party, then, it shall have binding effect on the party. But according to the principle
of non est factum, Bob can plea in the court of law that he signed the document by mistake
considering it to be some other contract (Benson, 2011). The plea raised by the principle of non
est factum can be accepted as Bob acted in bonafidely.
4. CONCLUSION
In a nutshell, it can be articulated that for the formation of valid contract, it is
must that agreement contains all the essential elements of contract. The contract between Bob
and Mike cannot be enforced due to absence of essential elements. Moreover, the party to the
contract can revoke the contract within a reasonable time if other party has not acted by relying
upon such agreement. Also, social agreements cannot be enforced in the court of law as there are
of gratuitous nature and not intend to create contractual relationship. As per non est factum
principle, the court will accept the plea if a person has signed a document by mistake.
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REFERENCES
Books and Journals
Andrews, N. (2015). Contract law. Cambridge University Press.
Benson, P. (2011). The Idea of Consideration. University of Toronto Law Journal. 61 (2). pp.
241-278.
Connell, S. (2016). Not My Doctrine: Finding a Contract Law Explanation for Non Est Factum.
Victoria U. Wellington L. Rev. 47. p. 245.
Furmston, M., & Tolhurst, G. J. (2010). Contract formation: Law and practice. Oxford
University Press, USA.
Hogg, M. (2011). Promises and Contract Law: comparative perspectives. Cambridge University
Press.
O'Sullivan, J., & Hilliard, J. (2016). The law of contract. Oxford University Press.
Poole, J. (2016). Textbook on contract law. Oxford University Press.
Szczerbowski, J. J. (2015). Formation of Contract. In European Perspectives on the Common
European Sales Law (pp. 37-44). Springer International Publishing.
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