Contract Law Analysis: High Five Systems Case Study

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Contents
Solution............................................................................................................................................2
Issues............................................................................................................................................2
Relevant Law...............................................................................................................................2
Contract....................................................................................................................................2
Offer.........................................................................................................................................2
Acceptance...............................................................................................................................2
Revocation of acceptance.........................................................................................................3
Counter – offer or mere inquiry...............................................................................................3
Invitation to treat......................................................................................................................3
Application of law........................................................................................................................3
Conclusion...................................................................................................................................6
Reference List..................................................................................................................................8

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Solution
Issues
With whom does the High Five Systems have a valid contract, Jacob, Iris, Hamid and Ranbir?
Relevant Law
Contract
When an offeror communicates an offer to an offeree and the offeree accepts the offer and such
promises are made by the capable parties with the legal intention and the promises are supported
with consideration, then, a contract is made and the parties are bound by the terms of the
contract. Combination of all the contract elements results in the contract formation and binds the
parties in contractual relationship. (McKendrick and Liu, 2015)
Offer
A statement or proposal which is made by an offeror and which shows his willingness to comply
with the terms of the offer, if the same are approved by an offeree, then, such statement or
proposal is considered to be an offer in law. As per Carlill v Carbolic Smoke Ball Co [1893] an
offeror has the power to make an offer to any person or group but whosoever is made, the offer
must be clear and not ambiguous and is held in Foley v. Classque Coaches Ltd (1934). (Carter,
2013)
When the offeror makes an offer then the offeree should come in the notion of the same to make
it valid and is held in Carlill v Carbolic Smoke Ball Co [1893]. There is a need of
communication of an offer to make it binding and enforceable in law.
If an offer is made through an answering machine, then, as per Brinkibon Ltd v Stahag Stahl und
Stahlwarenhandels-Gesellscaft mbH [1982] the offer is said to be complete only when the offer
comes in the notion of the offeree. It makes no difference that the message is left on the
answering machine. The communication of the offer is deem to be complete only when the same
comes in the awareness of the offeree and not before that. (MacDonald, 2013)
Acceptance
It is an act wherein the offeree gave assent to the offer clauses and which are communicated by
him by the offeror. As per Subdivisions Ltd v Payne [1934] an acceptance is the mirror image of
the offer. It is also necessary that when an acceptance is made then the same must be

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communicated and is held in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd
(1988). If an acceptance s not communicated and silence is kept, then, as per Felthouse v Bindley
(1862) it is not an acceptance in law. (McKendrick and Liu, 2015)
Revocation of acceptance
When an acceptance is made then in order to revoke the same it is necessary that the same can be
done before the acceptance is communicated to the offeror and is held in B y r n e v V a n
T i e n h o v e n (1880).
Counter – offer or mere inquiry
It is submitted that when the offeree did not gave an assent which is the mirror image of the
offer, rather, includes certain new terms to the acceptance, then, it s called a counter offer and is
not considered to an acceptance in law. The counter offer is the new offer and thus cancels the
original offer and is rightly evaluated in H y d e v W r e n c h ( 1840).
But, when queries are sought by the parties or information is asked, then, it s not a counter offer
in law but as per S t e v e n s o n J a c q u e s & C o v M c L e a n (1880) it did not
affect the offer at all. The offeree still has the power to accept the offer after seeking the relevant
information.
Invitation to treat
The act n which there were no offers that are made initially, rather, it is an act wherein offers are
invited. In an invitation, an invitation is sent to the public, individual, group etc in which they are
asked to come forward and make offers. The inviter is then acquired the position of the offeree
and when he accepts the offers so received, then, a valid contract is made between the parties.
An invitation can be made by various modes. In Partridge v Crittenden [1968] an advertisement
was held to be an invitation. In Felthouse v Bindley (1862), an auction was an invitation and in
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952], the
display of goods was considered to be an invitation.
Thus, an invitation is totally distinct from an offer.
Application of law
The law is now applied.

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As per the facts,
In the newspaper, on 25th November, an advertisement was issued by High Five Systems
(Rhonda - Sales person)
According to the advertisement, a Boast sound system of model BS100 is available for sale @
$2000. . It was declared that the price for the system is half the price which s generally paid by
the customers. It was also mentioned that there are only 10 units that are left. Any person who s
interested in the advertisement can made a call or cal personally visits the store.
The advertisement that was issued by High Five Systems is an act of invitation to treat. in
Partridge v Crittenden the advertisement was considered to be an invitation and in the given
case, High Five Systems is the inviter and he must received offers from the people and of High
Five Systems accepts the offer then there is a contract with such offeror.
Now, there are four parties involved and thus it is important to understand all the four
transactions individually to understand with whom a contract is made with High Five Systems.
i. Jacob – Jacob called on the phone number that s provided on the advertisement and
spoke with Rhonda. He simply states that he accepting the offer that is made by High
Five Systems through its advertisement and that he will come tomorrow and pay and
will then take the set tomorrow.
But it is stated that the advertisement that is made by High Five Systems is not an
offer which is accepted by Jacob and is held in Partridge v Crittenden. Rather he
must make an offer to Rhonda and if Rhonda accepts the offer of Jacob then there can
be a contract amid the parties.
Thus, there is no contract that is made amid Jacob and Rhonda as there are no
corresponding offers and acceptance that are made between the parties.
ii. Iris – on 25th November, Iris called High Five Systems and wished to place an order
for the system. However, Iris s not able to communicate with any of the salesperson.
Now, she left a message on the answering machine and specified that if nothing is
hear back from the High Five Systems then she will assume that 2 of the sets are
purchased by her at the price which is mentioned on the advertisement. Now, as per
Carlill v Carbolic Smoke Ball Co no offer is complete unless the same comes in the

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knowledge of the offeree. now, High Five Systems comes in the knowledge of the
offer only on 28th November, Thus, it is only on 28th November that the offer stands
complete against Iris. Now, High Five Systems must accept the offer of Iris to make it
a binding contract. As per Felthouse v Bindley silence is not an acceptance and High
Five Systems must communicate the acceptance to Iris to make a valid contract. But,
no acceptances made by High Five Systems and thus, there is no contract that can be
established amid the parties.
The communication of acceptance s very important to hold any contract binding in
nature and since the same is not present in the given situation, thus, there was no
contract that was established and the parties.
iii. On 26th November, Hamid visited High Five Systems. He inquired whether he can put
the system on layby and then can pay the full amount a month later. Rhonda
responded to Hamid and submitted that she has to check the same from her boss. She
told Hamid that she will call later and inform him the same. However, the boss did
not agree with the same. The same was communicated by Rhonda to Hamid.
It is submitted that till now there was no offer and acceptances that are exchanged
amid the two as there are exchanges of queries and as per S t e v e n s o n
J a c q u e s & C o v M c L e a n seeking information from the parties is
neither an offer nor an acceptance in law.
The advertisement is still valid and if Hamid need to make an offer against the
advertisement the he can do so. The communication of an offer from the side of
Hamid s very important to initiate the contract with High Five Systems.
Now, Hamid did not agree with Rhonda and submitted that he will come the next day
and will make the payment and will collect the set. But, Hamid had no authority to do
so as there was no offer in the first place that was ever made by him to High Five
Systems and which was accepted by High Five Systems. There was only exchange of
information and queries and there were no promises that are made amid them.
The exchange of information was not regarded as the mode of formation of a valid
contract and thus there s no contractual relationship that is stabled amid the parties.
iv. On 27th November morning, Ranbir visited High Five Systems. He placed an order
for all the 10 sets that were mentioned in the advertisement. Thus, as per Carlill v

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Carbolic Smoke Ball Co a valid offer was made by him against the advertisement.
The offer was communicated to Jimmy. Now, if Jimmy accepts the offer of Ranbir,
then, there is a valid contract amid the two.
However, instead of accepting of the offer of Ranbir as it is, Jimmy submitted that he
was not sure whether all the sets were available or not and if the sets would have been
available the he will sent the sets to Ranbir by evening. Now, this statement is not the
mirror image of the offer of Ranbir. It is a counter offer and as per H y d e v
W r e n c h the statement of Jimmy cancels the offer of Ranbir.
Now, the new offer that is now available is the offer that is made by Jimmy to Ranbir.
Now, the delivery company collects all the 10 sets so that the same can be delivered.
Now, before the delivery was made Ranbir called High Five Systems and cancelled
his order. It is submitted that High Five Systems has made counter offer which was
never accepted by Ranbir. Thus, there was no contract that was made amid them and
thus High Five Systems cannot force Ranbir to take the delivery.
Conclusion
There is no contract amid Jacob and Rhonda as Jacob accepted the advertisement and no offer
was given by him against the advertisement which if accepted by Jacob resulted in the formation
of contract.
Further, no contract was made amid Iris and High Five Systems. An offer was made by Iris to
High Five Systems but the offer was never accepted by High Five Systems. Thus, there is no
contract.
There s no contract that was made amid Hamid and High Five Systems as there were no
exchange of promises, rather, only information s sought by Hamid which was duly provided by
Rhonda. Thus, there is no contract.
There was no contract that was made amid Ranbir and High Five Systems as the offer made by
Ranbir was cancelled by High Five Systems by making a counter offer and the counter offer that
was made was never accepted by Ranbir.
So, there is no contract amid the parties and thus High Five Systems has no obligation to comply
with any contractual relationship with any of the parties.

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Reference List
Books/Articles/Journals
Carter, JW. (2013). The Construction of Commercial Contracts. Bloomsbury Publishing.
MacDonald, E. (2013) Dispatching the dispatch rule? The postal rule, e-mail, revocation and
implied terms. 19(2) Web JCLI.
McKendrick, E. and Liu, Q. (2015) Contract Law: Australian Edition. Macmillan International
Higher Education.
Case laws
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-Gesellscaft mbH [1982] 2 AC 34.
B y r n e v V a n T i e n h o v e n (1880) LR 5 CPD 34
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527.
Felthouse v Bindley (1862).
Foley V. Classque Coaches Ltd (1934).
H y d e v W r e n c h ( 1840) 49 ER 132.
Partridge v Crittenden [1968] 2 All ER 421.
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB
795
S t e v e n s o n J a c q u e s & C o v M c L e a n (1880) 5 QBD 346
Subdivisions Ltd v Payne [1934] SASR 214 at 220