Business Law Case Study: Evaluating Offer, Acceptance, and Contract

This case study examines a scenario involving Bob and Mollie to determine whether a valid contract was formed between them. It begins by defining a contract and outlining its essential elements: offer, acceptance, legal intention, consideration, and capacity. The analysis then delves into the termination of an offer, covering revocation, rejection, time constraints, failure of condition, and death of the offeror. Applying these legal principles to the facts, the study assesses Mollie's offer to sell a demonstration TV to Bob, highlighting Bob's failure to accept the offer's conditions, particularly the booking money requirement. Ultimately, the case study concludes that no valid contract was formed because Bob did not fulfill the essential condition of paying the booking amount, leading to the offer's termination. Desklib provides access to this and many other solved assignments to aid students in their studies.

Running head: BUSINESS LAW ASSIGNMENT
Business Law Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Issue.................................................................................................................................................2
Rule..................................................................................................................................................2
Application......................................................................................................................................5
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Issue
Whether a contract was formed between Bob and Mollie
Rule
A contract is defined as a statutory agreement between two or more persons that is
enforceable in the court of law. The significance of contract lies in the fact that it comprises
exchange of promises, which have legal enforceability (McKendrick 2014). In order to render a
contract as valid, a contract must include its essential elements.
Essential elements of a contract
 Offer- an offer is a promise made by one person known as the offeror to another person
known as the offeree to do something or refrain from doing something in exchange of a
return promise. An offer can be made to an individual person to a group of person as was
held in Smith v Hughes [1871] LR 6 QB 597. An offer can be made to the world at large
which amounts to an invitation to offer as was ruled in Carlill v Carbolic Smoke Ball Co
[1893] 1 QB 256; [1892] EWCA Civ 1.
 Acceptance- the offeree must accept the offer made by the offeror and such acceptance
must be communicated to the offeror to form the contract as was observed in Crown v
Clarke [1927] 40 CLR 227. The acceptance must be made in accordance to the terms and
conditions stipulated in the offer. Legal intention- The parties to the contract must have the legal intention to be bound by
the terms of the contract after the contract is formed. The contract shall be rendered as
valid only if the contracting parties establish that a legal relationship exists between them

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as was ruled in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2
NSWLR 309.
 Consideration- it refers to the price that is asked by the promissory in exchange of the
promise and forms an essential requisite of a valid contract to make it legally binding
upon the contracting parties. Under the common law, it is mandatory for the promisee to
provide a consideration that is , payment in some form in exchange for the promise
received as was held in Coulls v Bagots Executor & Trustee Co Ltd [1967] 119 CLR
460.
 Capacity- The contracting parties must have legal a capacity to enter into a contract as
lack of capacity to form a contract may result in non-enforceability of the contracts.
Persons considered to have lack of capacity include parties with mental disorder,
intoxicated, bankrupts, minors etc. The requisite of legal capacity to render a contract to
be valid was upheld in the case of Gibons v Right [1954] 91 CLR 423.
Termination of offer
In contract law, an offer is said to e terminated in the following number of ways:
a) Revocation- an offer may be terminated any time before the acceptance of the offer even
if the offeror has promised to keep the offer open provided a consideration is paid in
exchange of such promise. Revocation must be communicated either directly or indirectly
(Poole 2016).
b) Rejection- When an offer is rejected by the offeree, it cannot be accepted any longer and
rejection may amount to a counter-offer or a refusal as was observed in Hyde v Wrench
[1840] Beav 334.

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c) Time- if the offer sets out a specific time within which an offer should be accepted, the
acceptance of such offer after the expiry of such stipulated time shall be considered as
ineffective. If the offer does not stipulate any specific time, the acceptance must be made
within a reasonable time otherwise such offer shall expire (Stone and Devenney 2017).
d) Failure of condition- if either the contracting parties fail to satisfy any particular
condition set out in the offer, the offer shall lapse. However, such condition must be set
out in the offer to be effective. The essential terms of an offer are also known as
‘conditions’ are perceived as fundamental terms. The essentiality of such terms depends
on the fact whether such term is so essential that any violation shall amount to
termination of the contract. This was upheld in the case of Tramways Advertising Pty Ltd
v Luna Park (NSW) Ltd [1938] 38SR NSW 632 at p.641-2.
e) Death- the death of an offer shall amount to the expiry of an offer and the offeree must be
aware of the death of such offeror.
An offer is said to be open, if the offer does not stipulate any particular time within which the
offer should be accepted, the offer should lapse after a reasonable time ((Stone and Devenney
2017). The reasonable time depends on the subject of the potential contract and is often subjected
to the discretion of the judge as was held in Carr v JA Berriman [1953] HCA 31 [1953] 89 CLR
327.
However, as per a general rule of the contract, even if the offeror states that the offer shall
remain open for a stipulated time, the law does not bar the offeror from revoking such offer prior
to its acceptance.

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Application
On the facts here, Bob accepted the offer that was advertised regarding purchase of Sony
Bravia OLED Televisions and gave his card to the sales manager, Mollie, of the Toshiba
showroom as an acceptance to the offer. However, Mollie did not accept the card stating they
were sold out.
Mollie offered Bob to purchase the demonstration model TV, which would cost $2000
instead of the real offer $3500. As was observed in Smith v Hughes case, an offer was made by
Mollie to Bob regarding the purchase of the TV, which was the demonstration model for the
price of $2000. This further signifies that the offer was made along with a consideration, which
was to be made by Bob.
However, in order to render a contract as a valid contract and to be enforceable, it is
essential that an offer should be made followed by a valid acceptance of such offer as was held in
Crown v Clarke case. In the given scenario, a valid offer was made by Mollie to Bob but Bob
was confused and required time to think about the offer.
Mollie promised that she would keep the offer open until Friday provided Bob is ready to
make a payment of $10 as the booking money. However, Bob refused this arrangement and
stated that he would inform within Friday afternoon, which was next day. Here, it can be stated
that though Bob did not accept the offer made by Mollies immediately but Mollie stipulated in
her offer an essential condition that she will only keep the offer open if Bob provides as booking
money of $10, which would be adjusted while the original transaction is made. The offer also
included the stipulated tome within which the acceptance must be communicated to her.

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Nevertheless, Bob refused to fulfill the condition set out in the offer, which required him
to pay a booking amount for the television. This amounts to a non-fulfillment of an essential
condition of the offer made by Mollie.
Further, Mollie sold the TV to Mark on Friday when he offered $2500 for the
demonstration model TV at the store. Generally, the offeror may revoke the offer any time
before its acceptance even if the offeror has promised to keep the offer open for any particular
time. However, this does not amount to a breach of a contract on the following grounds.
Firstly, Mollie offered $2000 to Bob for selling the demonstration TV model, which Bob
did not accept. Secondly, Mollie stated that her offer to sell the TV at the offered price of $2000
shall remain open until next day (Friday) only provided Bob pays $10 as booking money
immediately which shall be adjusted while he purchases the television on Friday.
Now, as was held in Crown v Clarke, a valid acceptance must be made to a valid offer to
form a contract. However, Bob did not make any acceptance while the offer of purchasing the
demonstration TV for $2000 was made to him by Mollie. Further, Bob also refused to fulfill the
condition that Mollie mentioned in her offer regarding the payment of the booking amount.
As a rule, an offer can be terminated on the ground of failure of condition of the offer
(Stone and Devenney 2017). The condition of an offer is considered as essential provided breach
of such condition shall necessarily result in termination of the contract as was held in Tramways
Advertising v Luna Park case. In the given scenario, Bob did not pay the booking amount,
which formed an essential condition as Mollie stated only if the booking amount is paid, she
would hold the offer for till Friday.

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Therefore, the failure to satisfy the essential condition of the offer, which was so
important that it would have determined the legal intention of both the parties to form the
contract, resulted in termination of the offer that Mollie made to Bob.
Conclusion
There was no valid contract formed between Mollie and Bob.

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References
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309.
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; [1892] EWCA Civ 1.
Carr v JA Berriman [1953] HCA 31 [1953] 89 CLR 327.
Coulls v Bagots Executor & Trustee Co Ltd [1967] 119 CLR 460.
Crown v Clarke [1927] 40 CLR 227
Gibons v Right [1954] 91 CLR 423.
Hyde v Wrench [1840] Beav 334.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Poole, J., 2016. Textbook on contract law. Oxford University Press.
Smith v Hughes [1871] LR 6 QB 597
Stone, R. and Devenney, J., 2017. The modern law of contract. Routledge.
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [1938] 38SR NSW 632 at p.641-2.