MBS 518 - Analyzing Contract Law: Offer, Acceptance, and Termination

This case study provides a detailed analysis of contract law principles, specifically focusing on offer, acceptance, and termination. It examines two scenarios: the first involving John Doe and Tom Jones, analyzing whether a contract was formed for the sale of barley, considering counter-offers and the postal rule; the second scenario involves Gorpal and Alistair, determining if Gorpal can terminate a contract for a car purchase due to a breach of condition and what damages are available to him. The analysis applies relevant common law principles and case precedents like Hyde v Wrench and Dickinson v Dodds to determine the legal obligations and remedies available to the parties involved. This document is available on Desklib, a platform offering a wide range of study resources for students.

Running head: CONTRACT LAW
CONTRACT LAW
Name of Student-
Name of University-
Author note

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Answer 1(a)
Issue:
Was there a formation of contract between John Doe and Tom Jones under the common
law?
Relevant Rule:
According to the contract law, there are certain essentials of a contract, which must be
present while forming a valid contract (Kötz 2017). According to the common law, there are five
main essentials of a valid contract are as follows:
 Offer and acceptance
 Legal relationship
 Lawful consideration
 Competency to contract
 Free and mutual consent
The first and the most essential aspects are offer and acceptance. There must be a lawful
offer from one party and a valid acceptance by the other party (Smits 2017). This is the basic and
the first requirement in order to form a valid contract.
In this context, It is another rule of contract law that after the offeror makes an offer to
the offeree and when the offeree provides a counter offer, the original offer gets destroyed and
the original offeror becomes the offeree and the offeree becomes the offeror. In the case of Hyde
v Wrench (1840) 49 ER 132, Wrench had offered Hyde to sell an estate for 1000 pounds, to
which, Hyde made a counter offer that whether the estate could be bought for 950 pounds (Poole

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Shaw-Mellors and Devenney 2017). Hence, in this case, it was held that the original contract of
sale by Wrench was destroyed and the counter offer made by Wrench was a new offer, where
Wrench became the offeree and Hyde became the offeror.
Another rule of contract law is that an offer can be revoked at any time before its
acceptance. However, such revocation must be brought to the notice of the offeree, otherwise it
has no effect. In DICKINSON V. DODDS [1876] 2 CHD 463, Dodds offered Dickinson to sale
a house for $800 and stated in his offer later that the deal was open till 12 June, 9 am. On the 11 th
of June, Dodds sold it to another person and Dickinson got to know of it from another person and
had sent a formal letter of acceptance to the offer to Dodds before the end of the stipulated time
of the offer. It was held that no acceptance was made and offeree was aware of Dodds being no
longer minded to sell the house to him beforehand and therefore the offer was withdrawn validly
(Jones 2017).
Application:
In the given case, John Doe made an offer to sell 1000 tons of Barley to Tom Jones for
$1000 per ton, which he would deliver in 60 days and payment was to be made in cash. To this
offer, tom Jones made a counter offer that he would like to pay the amount in four installments.
Therefore, according the common law of contract, due to the counter offer of Tom Jones
(offeree), the original offer of John Doe (offeror) got destroyed and the counter offer gave rise to
a new offer, where Tom Jones became the offeror and John Doe became the offeree and this rule
shall apply here in accordance with the decision in the case of Hyde v Wrench .
The offer made by John Doe was open till 22nd and the counter offer by Tom Jones was
made on 17th August. After receiving the letter on 18th August, John Doe immediately replied to

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tom Jones that he will not sale the barley if the payment is not made in cash and therefore,
rejected the offer or revoked it, which was received by Tom Jones on 20th August. But before
receiving this letter he had already sent another letter, accepting John’s first offer, before
receiving which, John had already sold the barley to another. Therefore, as the counter offer
constituted a new offer and John had rejected it, about which Tom had knowledge, it can be said
that there was no acceptance of such offer by John and according to the common law and from
the decision in DICKINSON V. DODDS, there was no formation of a contract and the offer was
validly withdrawn by John.
Conclusion
Therefore, in the given case, there was no formation of contract as the original offer was
destroyed by the counter offer and there was no acceptance of the counter offer by John Doe.
Answer 1(b)
Issue:
Is John Doe legally obliged to wait until the 22nd August to sell the 1000 tonnes of
barley in his letter of the 15th August?
Relevant rule:
In contract law, there are exceptions to the general rule of offer and acceptance that
acceptance is done, when directly communicated to the offeror. These are called the postal rules
of contract law. When offer and acceptance is to done by post, it may create certain delays and
gaps in communication between the parties (Hearn 2017). The postal rules were established for
such purpose in the cases of Adams v Lindsell [1818] 1 B and Henthorn v Fraser [1892]. It was

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held that when offer is made by post by an offeror, the acceptance or rejection is said to be done
by the offeree, as soon as such acceptance or rejection is posted by the offeree as a reply to such
offer (Todd 2017).
Moreover, it is also a rule under the common law that an offer can be rejected at anytime
by the offeree and such revocation must be in the knowledge of the offeror.
Application:
In the given case, the postal rules, as have been applied in the cases of Adams v Lindsell
[1818] 1 B and Henthorn v Fraser [1892], the postal rules of contract law will apply as the offer
and counter offer were made by post. Although the stipulated time of acceptance of the offer was
22nd August, Tom Jones did not accept the offer and made a counter offer, which destroyed the
original offer and as John Doe, immediately revoked such counter offer as soon as he received
the counter offer. Therefore, according to the postal rules of contract, the moment John had
posted the rejection of the offer, the offer was revoked, without any regards to Tom’s last letter
for acceptance of the first offer, made by John. As John had rejected the offer at the time when
he posted it, he could sell the barley without waiting till the end of the stipulated time of his first
offer i.e. till 22nd August, which was destroyed by the counter offer.
Conclusion
Therefore, based on the postal rules of contract, John has no legal obligation to wait till
22nd August for selling the barley as per his offer made on 15th August.

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Answer 2(a)
Issue:
On what basis Gorpal can terminate the contract with Alistair?
Relevant rule:
According to the common law, the contents of a contract are the terms of such contract,
which state the obligations of each party to a contract. It is very much necessary to determine
whether a statement or representation is a term of contract or not (O’Leary 2017). Terms of a
contract can be classified into:
 Conditions- These are the major terms and are at the heart of the contract. In case of
breach of such terms, the aggrieved party can either terminate the contract and or sue for
damages
 Warranties- These are less important or minor terms of contract and in case of breach, the
aggrieved party cannot terminate the contract but can sue for damages.
 Intermediate terms- These terms fall between the condition and warranty and are divided
according to the relative seriousness of the consequences of the breach. Remedies for
breach of terms depend on how the court views the seriousness of the consequences of
the breach i.e. whether it is a breach of condition or warranty.
On the other hand, terms of a contract can be expressed or implied. Expressed terms of
contract are those which are clearly and expressly mentioned in the contract and implied terms of
contract are those which are not expressly mentioned but are implied by courts, statutes or

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customs (Austen-Baker 2017). The expressed terms are divided under the broad categories of
condition and warranty. It is very essential determine if a party has entered into a contract due to
a particular term.
Application:
In the given case, Gorpal wanted to buy a Mercedez Benz cruiser for starting a business
as a taxi driver, for which, he approached his friend Alistair, a MercBenz car dealer. Alistair
offered the car to Gorpal for $50,000 and said that he had a shipment of the required vehicles,
which he expected to arrive by the end of the week. Due to such statement made by Alistair,
Gorpal entered into the contract with him and hence it can be treated as an expressed condition
for entering into the contract. But, Alistair failed to provide the car within the stipulated time and
Gorpal bought the same car from another dealer due to such delay. As the time of delivery, as
mentioned by Alistair was an expressed condition for Gorpal to enter into the contract, there was
a breach of such expressed condition and according to the common law, when there is a breach
of a condition, the aggrieved party can sue for damages and or terminate the contract.
Conclusion
Therefore, Gorpal can terminate the contract on the ground that there was a breach of an
expressed condition of contract by Alistair.
Answer 2(b)
Issue:
What damages, if any, are available to Gorpal?

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Relevant rule:
According to the common law, there are five basic remedies for a breach of expressed
contract terms: rescission, restitution, reformation, money damages and specific performance. An
award for money damage includes an amount of money, which is given as compensation for the
financial losses occurred, which is caused due to the breach of a contract (Dobbs and Caprice
2017). In case of breach of expressed terms, parties are entitled to the total amount of gain or
profit that would have resulted, but for the breach. The extent of the damages to be recovered is
governed by the type of breach. Moreover, as stated earlier in case of a breach of an expressed
condition of a contract, the aggrieved party can claim damages and or sue for damages (Carter
Wayne and Gregory 2017).
Application:
In the given case, Gorpal entered into the contract with Alistair due to the statement made
by Alistair of delivering the car within a week. This was an expressed condition based on which
Gorpal entered the contract because he wanted to start a taxi business as early as possible.
Alistair failed to deliver the car with in the stipulated time, due to which Gorpal bought the same
car from another dealer, which took another 6 weeks. According to the common law, Gorpal can
either cancel the contract or and sue Alaister for damages. As due to Alistairs’s breach, Gorpal
was delayed in starting his business, he has the option to repudiate the contract and or sue for
monetary damages for the financial loss that he had suffered throughout the stipulated time of
one week and the further six weeks, due to the delay of the car delivery by Alistair.
Conclusion

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Therefore, apart from repudiating the contract, monetary damages are available to Gorpal
for the financial losses suffered by him due to Alistair’s breach of condition.

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References:
Austen-Baker, Richard. Implied terms in English contract law. Edward Elgar Publishing, 2017.
Carter, J. W., Wayne Courtney, and Gregory Tolhurst. "AN ASSIMILATED APPROACH TO
DISCHARGE FOR BREACH OF CONTRACT BY DELAY." The Cambridge Law Journal 76,
no. 1 (2017): 63-86.
Dobbs, Dan, and Caprice Roberts. Law of remedies: damages, equity, restitution. West
Academic, 2017.
Hearn, John. "Protecting Consumers Using Postal and E-Commerce Delivery Services in
Competitive European Markets." In The Changing Postal and Delivery Sector, pp. 127-137.
Springer, Cham, 2017.
Jones, Lucy. Introduction to business law. Oxford University Press, 2017.
Kötz, Hein. European contract law. Oxford University Press, 2017.
O’Leary, Leanne. "Introduction." In Employment and Labour Relations Law in the Premier
League, NBA and International Rugby Union, pp. 1-18. TMC Asser Press, The Hague, 2017.
Poole, Jill, Adam Shaw-Mellors, and James Devenney. Contract law concentrate: law revision
and study guide. Oxford University Press, 2017.
Smits, Jan M., ed. Contract law: a comparative introduction. Edward Elgar Publishing, 2017.
Todd, Paul. E-commerce Law. Taylor & Francis, 2017.