Analyzing the Contract of Sale

Introduction

This paper will bring into analytical scrutiny, the concept of contract of sale. In the case of Happy Hotels Ltd and Exquisite Cuisine Ltd, where, being a big hotel that owns and operates many restaurants, as well as hotels throughout the UK, Happy Hotels Ltd can use various goods supplied by Exquisite Cuisine Ltd. On a particular day, Exquisite Cuisine Ltd emailed Happy Hotels Ltd that if they were interested, they could offer them ‘pasta steamers’ at £175 each, which in the following month, Happy Hotels Ltd gave a positive response, and noted that they needed 30 of the ‘pasta steamers.’ On the day that Exquisite Cuisine Ltd was set to deliver the supplies, they received a phone call from Happy Hotels, notifying them that they no longer needed the pasta steamers. Based on this case in question, there could be a contract of sale between Happy Hotels Ltd. and Exquisite Cuisine Ltd, which this paper purposes to find out. A contract of sale occurs in an where a buyer comes to an agreement with the seller to purchase goods, based on a specific value, in exchange for a given amount of money (agreed by both parties) (Peel & Treitel, 2007). Legally, for a contract to be regarded as valid, there must be an offer, acceptance, considerations, formality (it has to be conducted in a formal way), as well as the parties’ capacity to engage themselves in the contract. This paper primarily purposes to establish the legal positions of Happy Hotels Ltd. and Exquisite Cuisine Ltd, based on the provisions of law of contract. Firstly, it will identify the problem issue(s), then the application of the legal rules, and finally provide a definitive conclusion.

Identification of the problem issue(s)

According to Peel & Treitel (2007), he defines an offer as an expression of the willingness to contract, based on given terms, which are made with an intention that they shall be binding in an instance where the individual to whom they have been addressed accepts them. Based on this definition, it is notable that a valid offer must amongst other factors, be clear and should be communicated to the offeror whilst creating legal relations. An offer presented to a specific individual or to the public as presented in the case of Carlill v Carbolic Smoke Ball, where there was a unilateral offer that was made to the entire world and was held valid, as it could be accepted by any individual who came forward. However, in this case, an email was specifically sent to Happy Hotels Ltd. In response to the proposal that Exquisite Cuisine Ltd made, Happy Hotels Ltd accepted the offer by emailing back, by virtue of asking to be supplied with ‘pasta steamers,’ which was initially presented as an invitation to treat, in which case, Happy Hotels Ltd had to choice to either reject accept. Exquisite Cuisine Ltd made an invitation for Happy Hotels Ltd, which was similar to an offer. However, Happy Hotels Ltd went ahead and accepted, and later had a change of mind, thus implying that in one way or another, they inconvenienced Exquisite Cuisine Ltd, for the time taken to prepare the good for delivery, another organization could have accepted the offer. This poses as the primary damage, owing to the fact that Exquisite Cuisine Ltd might have rejected a request from another organization to the supply the same ‘pasta steamers,’ which were now being rejected by Happy Hotels Ltd.

Moreover, it is worth taking note of the fact that a binding contract results from a valid acceptance. In order for an acceptance to be regarded a valid, it should be noted that it must comply with three rules, which are set by significant case laws, based on the subject. Firstly, acceptance must have to be communicated to the individual giving an offer. On a general rule, the offeror must receive the acceptance for it to be regarded as effective. For instance, in the case of Entores v Miles Far East, the court held that acceptance was considered effective only in an instance where it was communicated to the individual given the offer. Furthermore, courts have also held that silence cannot in any way be regarded as acceptance of a given offer, as either way, it may mean that the offer is rejected or accepted or even none of the aforementioned could apply. This is as presented in the case of Felthouse v Bindley, where the court held that there existed no valid contract, owing to the fact that he assumed that his nephew acceted the offer he presented to him because he failed to communicate. However, in this case, it is evident that Happy Hotels Ltd communicated in acceptance, thus, the contract was binding of the two parties, yet Happy Hotels Ltd failed to fulfil their part of the deal.

Application of the legal rules

In the case of Bear Stearns Bank plc v Forum Global Equity Ltd, it is evident that the court held that when a price has been indicated by a party, then certainty is imputed and as such, intention can easily be determined. However, the defendant argues that the set agreement resulted from oral negotiations, which were uncertain for them to be regarded as a contract, and moreover, there was no intention of creating legal relations. The court rejected this argument. In applying this case to the scenario at hand, it is evident that the offer made by Exquisite Cuisine Ltd to Happy Hotels Ltd was a valid offer, based on the fact that it exhibited the intention of creating legal relations between the two parties through email. Moreover, the offer stated the prices of the ‘pasta steamers’ which ought to be paid in an instance when Happy Hotels Ltd accepted the offer.

There are various circumstances in which acceptance is construed, based on the actions of the parties, for instance in a situation where acceptance has not been communicated, yet the conduct of the parties point to acceptance of the offer. For instance, in the case of Brogden v Metropolitan Railway, the court found out that there was acceptance, owing to the fact that there was continued performance of the parties towards the contract in absence of any form of protest to the terms of the contract. In cases where acceptance is in the form of a letter/email that has been posted, the communication is considered to have taken place. This rule was significantly confirmed in the case that involved Adam v Lindse. It applies in a situation where the involved parties agree that a given channel of communication is suitable for both of them. In the application of the above cases to the emailing between Happy Hotels Ltd. and Exquisite Cuisine Ltd, it is evident that the two parties deemed it as the most appropriate form of communication, thus implying that the contract was valid. This is owing to the fact that neither of the parties failed to exclude the rules as done in the case of Holwell Securities v Hughes, where, a letter was used as a channel of communication and acceptance took place upon the posting of the said letter. In this case, it is worth noting that Happy Hotels Ltd is bound by the said contract, owing to the fact that there was an offer, as well as acceptance, with the intention of creating legal relations.

Conclusion

Overall, it is significant to take note of the fact that there is a contract that binds Happy Hotels Ltd. and Exquisite Cuisine Ltd. This is owing to the fact that Exquisite Cuisine Ltd made a valid offer and it was accepted by Happy Hotels Ltd, thus resulting into an agreement between the two parties, with considerations, as well as intention to be bound.

References

Books

Peel, E., & Treitel, G. H. (2007). The law of contract (pp. 1-2). London: Sweet & Maxwell.

Cases

Felthouse v Bindley [1862] EWHC CP J35 Court of Common Pleas

Bear Stearns Bank plc v Forum Global Equity Ltd EWHC 1576

Adam v Lindsel (1818) 106 ER 250

Brogden v Metropolitan Railway (1877) 2 App Cas 666

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Entores v Miles Far East Corp [1955] 2 QB 327

Holwell Securities v Hughes [1974] 1 WLR 155