Sale of Goods Contracts, A case study of Sandra Peter and others

Question 1

In response to Peter’s proposal of 6000 pounds, Sandra suggested a £5,500. Essentially, Sandra was responding to an invitation to treat from Peter by giving an offer which Peter could either accept or reject. Since there are many customers who could respond to the price of £6,000 by accepting it, this proposal will be treated as an invitation to treat. In the case of Patridge v Crittenden, the court held that an advertisement of a bird amounted to an invitation to customers to make offers that could be accepted by the seller. In the same vein, Peter made an invitation to which Sandra made an offer.

Trietel defines an offer as ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed’. In line with this definition a valid offer must among other factors be clear, communicated to the offeror and must create legal relations. It can be made to a specific person or to the general public as was the case in Carlill v Carbolic Smoke Ball where an offer made to the whole world was held to be valid and could be accepted by any party who came forward.

In Bear Stearns Bank plc v Forum Global Equity Ltd, the court found that when price is indicated by a party to contract it imputes certainty and therefore an intention to be bound. The defendant’s argument was that the agreement resulting from the oral negotiations was too uncertain to be considered as a contract and there was never an intention to create legal relations. However, this argument was rejected by the court and found for the claimant.

Applying the above case to the present scenario, it is clear that her offer to Peter was a valid offer. This can be gleaned from the fact that it exhibits the intention to create legal relations between the parties. Again, the offer expressly stated the price of the motorbike she intended to pay if the offer was accepted.

Applying the above case to the present scenario, it is clear that her offer to Peter was a valid offer. This can be gleaned from the fact that it exhibits the intention to create legal relations between the parties. Again, the offer expressly stated the price of the motorbike she intended to pay if the offer was accepted.

In the case of Hyde v Wrench rejected an offer made to him regarding a particular land he wished to sell by giving a counter offer. Afterwards, the claimant sought to accept the original offer. It was held that the counter offer by the defendant had destroyed the offer and could no longer be available for acceptance.

Therefore, the offer made by Peter to the extent of £5750 pounds amounts to a counter offer. As a counter offer, it extinguished the original offer and cannot be accepted by Sandra. Just like any offer, it was communicated to Sandra and in express terms. According to the above case law, it is a valid counter offer.

After the counter offer from Peter, Sandra took time to find the additional 250 and later accepted the counter offer after 4 days. The question in this scenario is whether Sandra’s letter sent on 18 December constitutes a valid acceptance as required under contract law.

A binding contract is the result of a valid acceptance. For acceptance to be valid it must comply with three rules set by case laws on the subject. First acceptance must be communicated to the person giving an offer. As a general rule, the offeror must be in receipt of the acceptance for it to be considered as effective. In Entores v Miles Far East it was held that acceptance was effective only when it was communicated to the offeree. Further, the courts have found that silence cannot be treated as an acceptance of an offer. In this case the court found that there was no valid contract since he had assumed that the nephew had accepted his offer by the virtue that he did not communicate further.

There are instances when acceptance will be construed by the actions of the parties. It thus possible that acceptance is not communicated but the conduct of parties points to acceptance. In Brogden v Metropolitan Railway, it was found that acceptance had taken place by virtue of the continued performance of the contract by the parties in absence of any protest as to the terms. Where an acceptance is in form a letter posted, communication will be deemed to take place the moment the letter is posted. This rule was confirmed in the case of Adam v Lindsel and it applies where the parties agree that it is medium of communication between them.

Applying the above cases to Sandra’s letter, it will be deemed to have been communicated to Peter the moment she placed the letter in the postal box. Because Peter did not expressly exclude the postal rule as was done by the defendant in Holwell Securities v Hughes, the postal rule will apply. As a result, acceptance took place on 18 December upon posting of the letter. Peter is thus bound by the contract since there was an offer and acceptance with intention to create legal relations.

Overall, there is a binding contract between Peter and Sandra. A valid counter offer was made by Peter and an equally valid acceptance made by Sandra. The result is an agreement between the parties laced with consideration and intention to be bound.

Question 2

Consideration is an important element of a valid contract. It implies that each party in a contract must each receive a benefit and suffer a detriment in return for a promise. As a general rule under common law consideration cannot be dispensed with. However, in equity the courts have found that promises not supported by consideration can still amount to a valid contract under the doctrine of promissory estoppel. As a result a wife who seeks to enforce a promise for maintenance by the husband after a divorce will fail for lack of consideration and is nothing but a mere promise. The court found in Combe v Combe that the doctrine

In Combe v Combe, a wife sought to enforce a promise of maintenance the husband had made to her during their marriage. Subsequently, the marriage fell apart and the wife sought the intervention of the court in the matter. At first instance, she was successful and the husband’s promise was enforced on the basis of promissory estoppel. However, on appeal the decision of the trial court was reversed and Lord Denning stated thus:

“where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him”.

Therefore, if a promise is made by one party to the other with intention to create legal relations and that party relies on it, the party who made it cannot go back on that promise. In Central London Property Trust Ltd v High Trees House Ltd, part payment of rent during World War II was enforced by the claimant. Significantly, Lord Denning commented in his obiter that had the claimant sought to claim full payment during the war they would have been stopped from doing that by virtue of a promise they had given and was acted on by the defendant.

It follows that the defendant in the above case could, hypothetically, have used the doctrine of promissory estoppel as defence if the claimant had sued for full payment of rent during the war. This buttresses the point that the doctrine is only to be used as shield against an action by a party who goes back on a promise made and relied upon. While the doctrine of promissory stoppel affords a leeway around the conundrum of consideration, it cannot be said to do away with the requirement of consideration in contracts. It merely provides an equitable remedy for a party will suffer injustice if consideration were to be strictly applied yet they relied on a promise for part payment of debt.

Similarly, Arden LJ in Collier v P&MJ Wright (Holdings) Ltd imported the principle in High Trees and applied it to the case herein. In her judgment, the Lady Justice found that the doctrine of promissory estoppel was such that it could destroy a creditor’s right to claim for whole payment of debt in similar conditions as High Trees. This case builds on the principle in Foakes v Beer that part payment of debt even without consideration is binding. Consequently, Mr Collier in the Collier case, was aided by promissory estoppel to the extent that an agreement to pay a third of the debt based on assurance by Wright Ltd precluded the company from claiming full payment of the debt.

Accordingly, the High Trees case was distinguished from Combe v Combe on the basis the former involved a cause of action not within the promise in question. Essentially the court did not find any consideration for the promise by the husband to cater for the maintenance expenses of the ex-wife. In the end the court ruled that promissory estoppel is only available as defence but not as a cause of action. This then explains the implication that it can only be used as a shield and not as a sword.

In as much as promissory estoppel bypasses consideration, it must not be inequitable to permit the promisor to renege on his promise. In D & C Builders v Rees it was found that Mrs Rees could not benefit from estoppel as there was never a conclusive agreement to accept less payment. The claimants in this case were therefore successful. This case demonstrate that the courts are keen to find out the intention of the parties even as they apply the doctrine of promissory estoppel.

As a defence, promissory estoppel is an aid to a party that acts on a promise by the other party. In Tool Metal Manufacturing v Tungsten, the House of Lords held in favour a Tungsten who had relied on a waiver on royalty payments to be made to TMM arising from patent breaches. TMM had agreed to accept less payment by Mr Tungsten as a result of harsh economic terms caused by the war. The doctrine of estoppel applied to this case to the extent that it estopped the company from claiming full payments. It therefore acted as a shield to defendant in this case.

Despite the above position on the application of the doctrine of promissory estoppel, it appears that there have been attempts to use the same as a sword under the auspices of proprietary estoppel. Lord Denning MR in Crabb v Arun District Council ruled that in special circumstances it may not be necessary for parties to provide consideration and they may pursue a cause of action contrary to the principle in promissory estoppel. However, this construction of promissory estoppel has not changed the use of promissory estoppel only as a shield and not a sword.

Bibliography

Table of Cases

Adam v Lindsel (1818) 106 ER 250

Bear Stearns Bank Plc v Forum Global Equity Ltd [2007] EWHC 1576

Brogden v Metropolitan Railway (1877) 2 App Cas 666

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

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329

Combe v Combe [1951] 2 KB 215 Court of Appeal

Crabb v Arun District Council [1975] EWCA Civ 7

D & C Builders v Rees [1966] 2 WLR 28

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

Foakes v Beer [1884] UKHL 1

Holwell Securities v Hughes [1974] 1 WLR 155

Hyde v Wrench (1840) 49 ER 132 Chancery Division

Partridge v Crittenden [1968] 2 All ER 421

Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761

Books

Treitel GH, The law of contract. (Sweet & Maxwell 2003)9