Legal Issues in Contract Formation and Revocation Analysis Report

This report provides a comprehensive analysis of several legal issues arising from contract law. It begins by identifying key legal questions, such as the presence of all elements required for a valid contract, the validity of revocation of acceptance, the existence of a gratuitous contract, and the impact of lack of intention. The report then delves into the relevant laws, including the requirements for a valid offer and acceptance, the postal rule, and the need for consideration. It also examines the concept of non est factum and the importance of intention to create legal relations. The application section analyzes specific scenarios, such as the negotiations between Bob and Tom, the agreement between Bob and Steve, and the document signed by Bob and Capital Motors, applying the legal principles to determine the outcome. The conclusion summarizes the findings, stating that no valid contract existed between Bob and Mike due to the lack of essential elements. Revocation of acceptance by Bob was timely. The agreement between Bob and Steve was deemed social, and Bob was not bound by the document signed by mistake under the plea of non est factum. The report includes a detailed list of references, including cases and legal texts.

LAW

Table of Contents
1. LEGAL ISSUES..........................................................................................................................1
2. LAW............................................................................................................................................1
3. APPLICATION...........................................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

1. LEGAL ISSUES
After pursuing the given circumstances and facts of the case, the following legal issues
have been framed:
 Whether all the elements of contract were present to formulate a valid contract between
Bob and Mike?
 Whether revocation of acceptance communicated on 14th January by Bob, can be
considered binding against Tom?
 Whether Bob was bound under a gratuitous contract to give Steve a computer?
 Whether a valid contract could come into existence for lack of intention?
2. LAW
In order to form a valid contract it is imperative for the concerned parties to make a clear
offer and respond to it with an unconditional acceptance. However, in the event the offeree
accepts the offer with alteration or additions in terms of the contract, then a counter offer is said
to have communicated (Anson et. al., 2010, p. 133). The court in Hyde v. Wrench (1840) 49 ER
132 has explained that a counter offer destroys the original offer made by the other party, and
from that point onwards it is no available for the offeree to make an acceptance to the original
offer.
Negotiations or communication for formation of a contract undertaken through the mode
of letters is governed by the Postal Rule as contained in the Contract Law. This rule was
established in the case Adams v. Lindsell (1818) 106 ER 250, where it was opined that
acceptance by the offeree makes the offeror bound from the moment it is put into transmission.
However, it becomes bound against the offeree only when it is received by the offeror. Hence,
revocation of acceptance shall be communicated to the offeror in a reasonable time period before
he has acted to perform the contract (McKendrick, 2014, pp. 109-112).
Under Common Law it is essential that a contract shall be supported by a valid
consideration for making the concerned parties bound by the terms (Anson et. al., 2010, p. 91).
Moreover, it is also essential that the parties shall have an intention to formulate legal relations.
In the case of Jones v. Padavatton (1969) 1 WLR 328 it was held by the court that the
presumption of existence of an intention to formulate a legal relation in social agreements shall
not be raised.
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In accordance to the law followed in the case of L'Estrange v. Graucob (1934) 2 KB 394
signature of a person on the contract has an effect of binding the respective person under the
terms of contract. However, the court in Foster v. Mackinnon (1869) LR 4 CP 704 held that in
such cases the plea of non est factum is available to the parties which essentially means 'it is not
my deed'. Hence, if a person has signed a contract, believing it to be another document or
contract, the court may consider the plea and repudiate the contract (Allen & Overy, 2016, p.
10). Further, in order to establish this it is essential to prove that the concerned party was not
careless in signing the contract.
3. APPLICATION
By applying the rule laid down in Hyde v. Wrench it can be stated that the negotiations
between Bob and Tom could not transform into a valid contract for absence of essential elements
of contract. Furthermore, the communication of Bob on 2nd January amounted to a counter offer
as it modified the terms of offer and hence, in accordance to the established rule, the original
offer made on 1st January was destroyed at by making a counter offer. Therefore, the acceptance
communicated on 5th January by Bob is response to the offer of 1st January cannot be considered
valid as at this time the offer ceased to exist.
In accordance to the Postal rule and laws established in Adams v. Lindsell, that the
acceptance communicated by Tom on 12th January developed a valid contractual relation
between the parties. In accordance to the rule the offeror Bob was bound by the contract from
the moment the Tom posted the letter and the acceptance made Tom bound by it when the
acceptance letter was received by Bob. However, Common Law entitles the parties to revoke
their offer and acceptance within a reasonable period of time, which infers that if the other party
shall not have acted relying on the said acceptance or offer. In instant case also, the letter of
revocation was received by Bob on 15th January prior to making the delivery of the hard drives.
Thus, it can be stated that the acceptance was revoked within a reasonable period of time.
As stated above, it has been established through Jones v. Padavatton that in social
agreements the presumption of contractual relationships cannot be raised. Therefore, the
statement of Bob to give a computer to Steve, in return of certain favours, is an agreement social
in nature and hence, cannot be enforced in court of law (Turner, 2013, p. 70).
In accordance to the principle followed in Foster v. Mackinnon and the plea of non est
factum, it can be stated that Bob signed the document believing it to be some other contract and
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hence, the plea under non est factum can be accepted in the court of law. Moreover, it is
important to state that Bob has placed the form sent by Mary, aside on the desk to keep it
separate from other documents. Thus, he did not act in a careless manner while handling the
documents. It got mixed with other documents for no mistake of Bob and hence plea under non
est factum is maintainable in the court.
CONCLUSION
On the basis of laid down laws and application on the facts that a valid contract could not
come into existence between Bob and Mike for lack of essential elements of contract. In the case
of Tom and Bob, the revocation of acceptance by Bob was within a reasonable time and hence, is
capable to terminate the contract. Thus, Bob is not liable to make payment of $10,000. In the
case of Steve and Bob, the favours done by Steve were gratuitous in nature and the statement o
give a computer by Bob was social in nature, and hence, a contractual relationship does not come
into existence. Lastly, in the case of Bob and Capital Motors, the document was signed by
mistake and under the plea of non est factum, Bob shall not be bound to perform the contract.
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REFERENCES
Books and Journals
Anson, W.R. and et. al., 2010. Anson's law of contract. Oxford University Press.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Turner, C., 2013. Unlocking contract law. Routledge.
Online
Allen & Overy, Basic Principles of English Contract Law, 2016. Available through:
<http://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-
glance.pdf>. [Accessed on 27th March 2017].
Cases
Adams v. Lindsell (1818) 106 ER 250
Foster v. Mackinnon (1869) LR 4 CP 704
Hyde v. Wrench (1840) 49 ER 132
Jones v. Padavatton (1969) 1 WLR 328
L'Estrange v. Graucob (1934) 2 KB 394
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