Offer & Acceptance

Q1 (I know the remedy is insufficient but i’m really tired and haven’t gone through the topics)

Alan owns an antiquarian bookshop. Dave sells and fits electronic security equipment. At the local cricket club, to which they both belong, Alan told Dave that he wanted him to fit his shop with closed circuit television and the best available electronic locks for the main and side entrances to the shop. Dave told Alan that he would send him an estimate, based on materials and labour costs for the closed circuit television system and the labour costs only for the locks. Dave told Alan that, in returning the estimate, he should specify the type of lock he desired. Dave also told him that he would include the relevant price lists. When Alan received Dave’s estimate, he accepted it by post and in so doing specified a ‘Superlock’ system for the entrances. Unfortunately, Alan posted his letter to Dave’s old business address (from which he had moved six months earlier) and the letter was not forwarded. Dave, who was eager to undertake the work, arrived at Alan’s shop a week later. He installed the closed circuit television system and fitted a ‘Magnalock’ on each of the entrances since he thought that this was the best lock on the market despite the fact that it was more expensive than the ‘Superlock’. When Dave presented his bill a week later Alan refused to pay.
Advise Dave.
 

The English law on formation of contract generally requires an offer and “matching” acceptance. This is particular the case when a contract is made by correspondence. The offer must set up all the terms of the contract; the acceptance must be final and unqualified expression of assent to the terms of the offer – mirror image rule. In some cases, it’s hard to draw a clear line between an offer and an invitation to treat which is an expression to enter into contract in the future.

In this problem, the first issue is to ascertain whether there was an offer? If so, was the offer communicated (Taylor v. Laird [1856])? Alan contacted Dave for his specific products and services which his action demonstrated that he wanted to enter into contract with Dave in the future (invitation to treat). Dave replied to him by post with a list of detailed estimate which included material and labour cost. Would Dave’s action considered a mere statement of price or an offer? In the case of Gibson v. Manchester City Council [1979], where the court held that the contract had not been concluded as the price negotiation of the house between both parties can not be treated as an offer. This is also supported by the case Harvey v. Facey [1893]. However, Lord Denning in Gibson’s case held that the contact has been concluded as the both parties had an agreement on all the material points regardless the precise formalities have not gone through. In addition, the case of Storer v. Manchester City Council [1974] held the contract had been concluded where the negotiation was advanced beyond the stage reached in Gibson. On balance, based the fact that Alan requested Dave’s services in the first place and Dave had sent the detailed information by post which included estimation of material, choices of lock and labour cost, it’s unlikely to be treated as a mere statement of price, therefore it could reasonably believe the estimate was an offer which was communicated.

 

Alan received the estimate and replied with his specific item (Superlock) by post, he however mistakenly wrote the wrong address and therefore, the letter has never been delivered to Dave. Would it be reasonable to reply by post? And can we still apply the postal acceptance rule when the address was incorrectly stated? The general rule requires the acceptance must be communicated (Entores v. Miles Far East Corporation [1955]) except by post (Adam v. Lindsell [1818]). Since Dave sent the estimate by post in which he did not expressly stipulate other means of communication, so it is reasonable to reply to Alan by the same mean (Henthorn v. Fraser [1892]). This was held that even the letter was lost and never received by offeror, the postal rule could still be applied supported by the case in England in Household Fire Insurance v. Grant [1879]. This “rule” was somehow controversial; Lord Shand in Mason v Benhar Coal [1882] took the view that  no contract came into existence when the acceptance was posted but never reached to offeror. Furthermore, the reason of why the letter can not reach to Dave was due to the incorrect address stated, the postal acceptance rule may not be applied in this circumstance demonstrated by the case Korbetis v.. Transgrain Shipping BV [2005]. Finally, the court is likely to consider the acceptance has been communicated and it could be further supported by the case Holwell Securities v. Huges [1874] as this case in which the postal rule does not create “manifest inconvenience and absurdity”. On the other hand, since Dave and Alan were in the same local cricker club, from which can reasonably assume that both of their shops are not far away, meaning other instantaneous communication means (telephone or email) were available while Alan chose the less speedy one – letter. Dave can challenge Alan by applying the case Henthorn v. Fraser [1892]. However, this argument is relatively irrelevant as Dave did provide his services to Alan a week later.

 

The contract seemed to be concluded. However Dave provided his services and products to Alan without his matching acceptance in which some of the terms/conditions were different. What is the difference between “Superlock” and “Magnalock”? And what is the remedy in this case? First, based on Alan’s request, he needed the “best available electronic locks” for his entrances; what does the “best” mean in term of security, price, brand, style, accessibility or other? It would be too vague to justify the meaning as the same word could be interpreted differently. In the case of Raffles v. Wichelhaus [1864], the claimant expected the cotton will arrive on the ship “Peerless” from Bombay in December; the defendant expected to deliver the cotton in October as there were two ships named “Peerless” from Bombay; both of the parties were mistakenly understood the name “Peerless”. The court said this is a mutual mistake which could lead the contract void. Moreover, assuming “Superlock” was indeed the best at that time; Dave could challenge Alan as his request was the best “available” electronic locks … but the acceptance letter was never received due the incorrect address sent, implying that the week delay (Ramsgate Victoria Hotel Co. Ltd v. Montefiore [1866]) may possibly lead the “Superlock” out of the inventory and the best substitute at that time was “Megnalock”, Dave was only following Alan’s terms. In conclusion, Alan has to bear the responsibility of his mistake that leads to this situation. Dave will probably claim the remaining money back.

 

C

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