Enforceability Of Contractual Promises

Armstrong V Gibson

Discuss about the Enforceability of Contractual Promises.

The law of contract guides people in the management of promises. There is a need to acknowledge that not all promises that people make enforceable in law. For a court to enforce a promise or agreement, it must look for the existence of some elements. If all the elements are present, then the court will rule that the agreement or the promise was a contract. This paper is an examination of five cases where there were promises. It will therefore analyze them using the law of contract to decide whether they were enforceable contracts.

Gibson and Armstrong entered into an agreement concerning a delivery. Armstrong was to deliver the toys to Gibson’s customers. While undertaking the contract, Armstrong insisted on raising the transportation charges because he had underestimated the size of the load. Gibson reluctantly accepted the increase for he didn’t want to fail his customers, yet he never had time to get another transporter. Armstrong completed the delivery, but Gibson refused to pay the extra raised charges.  

A valid contract must carry its contents which are also called the terms or clauses of a contract. Any enforceable agreement will usually consist some terms however simple it could be. So while analyzing this case, this paper shall first look at the existence of the terms. Within a contract, the main terms are usually the price to be paid by one party, and the service or the goods to be provided by the other party. In this case, Gibson was to pay Amstrong for a delivery service. So there was a contract, and the parties were on the same track up to that point.  When it came to executing the contract, one party decided to change the terms on the grounds of a mistake. The law of contract recognizes that mistakes can happen while making a contract. Where only one party makes the mistakes, the mistake is called a unilateral mistake (Miller & Jentz 2011, p. 279)

In consideration of the above explanation, the errors between Armstrong and Gibson fall under unilateral mistakes. In most cases, such cases a prone to modification. Where both parties agree in good faith about the acceptance of amendment, both parties are bound to such modification, and Gibson was supposed to pay Armstrong the extra money. A mirror case that can illustrate this well is Williams v Roffey Bros (1990) 2 WLR 1153. The court held that Roffey was liable to pay the extra payment since William helped him to avoid the penalty from Shepherds Bush Housing Association. So like William, Armstrong should sue Gibson to recover his extra payments.

Jenny V Boutique Cashier

Jenny saw a dress on display in a boutique that caught her attention. She decides to buy the dress, and so she walked to the cashier to pay. When she got to the cashier, she realized that she had no enough money. So she asked the cashier to reserve the dress while she rushes to the ATM for more cash. She quickly left before the cashier responded to her request. When she came back with the money, she found that the cashier had already sold the dress. The question in law here is whether there was a valid contract between the cashier and the Jenny.

While answering this question, this paper shall illustrate to when an invitation to treat becomes a valid contract. The dress on display in a boutique was an invitation to treat which attracted Jenny to make an offer.  In other words, an invitation to treat is an expression telling other people that they are welcome to come and negotiate with you.  So this is to say, Jenny accepted an advertisement of a dress on display and made an offer to the cashier. Therefore, it was up to the cashier to accept or dismiss it. 

For a formation of a contract, the offeree must accept the offer. Plus, the offeree must clearly communicate the acceptance to the offeror. So Jenny’s offer didn’t wait for Cashier to accept the offer. The general rule disregards silence as an acceptance. The best illustration of this reasoning was illustrated in Felthouse v Bindley (1862) EWHC CP J35. The Court of Common Pleas held that there was no contract because Felthouse could not conclude that Bindley accepted the offer by not hearing from him. So Jenny should accept that there was no contract and look for another dress.

This case illustrates whether there was a complete contract and whether the failure to see the acceptance constituted a breach. The background of the case started at 9.00am on Monday 13 August when Joseph, a car dealer, sent a telex to Arthur offering to sell him a rare vintage car for $50,000. Arthur received the telex at 9.15am and telexes the acceptance back at 2.00pm. However, Joseph didn’t check whether he had received the acceptance from Arthur. So at 2.30pm, he received an offer for Charles, and he accepted. At 4.00pm Arthur then learned that Joseph sold the car to James. He also learned that the same car would cost him an additional $2,000. So he sent Joseph another text demanding the car at 5:00 pm. The message only made Joseph realize that Arthur had accepted the offer before Charles bid.

Arthur V Joseph

As illustrated above, an offer becomes a contract when the offeree accepts it. Also, a valid acceptance must be shown by the offeree, and the acceptance should be clear. In the case of Arthur and Joseph, the acceptance was communicated through a telex. Acceptance works in two ways. When both parties are at a close distance or they are there at the same place, and same time when the offeror is offering the offer, they conclude the contract when the offeree communicates the acceptance at the same location and same time.

Considerably, distant contracts that rely on post or messengers become abiding when the offeree put the acceptance in the process of transmission. However, the offeree becomes bound to the contract after the offeror receives the reply. That is because it might take days or get intercepted by a third party. But when dealing with phone or telex where there was a direct communication, the completion of the contract happens when the offeror receives the reply message. This case was explained in details in Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas (1966) AIR 543 and in Brinkibon Ltd v Stahag Stahl GmbH (1983) 2 AC 34. In this case, Arthur was bound by the contract when Joseph received the acceptance reply at 2:00 pm when the message arrived at Joseph’s office. Also, Joseph became bound to the contract when he received the message whether he read it or not. So Arthur can sue Joseph for to recover the damages that he would undergo if he buys the car at an extra price. 

In this case, the cause of dispute involves Jone entering into a contract to decorate and furnish Peter’s apartment. Peter agreed to pay him $1,000, on completion. Jones commenced work, but Peter cancelled the contract while Jones was halfway performing as required by the contract. More than that, Peter refused to pay Jones for the amount of work he had performed.  In law, when the owner cancels the contract during performance without justifiable cause, the contractor may suffer damages due to the breach. To some extent, the contractor can suffer severe losses particularly when the breach prevents him from continuing with the work.

In such a scenario, the Jones has a full entitlement for a remedy that will put him to the place where he would have ended had Peter performed his obligation. In particular, this typically means that Jones can sue for the recovery of lost profits and to some extent the cost incurred while performing his duties. Additionally, this rule also extends to those contracts where there was a wrongful termination of a contract between general contractor and subcontractor. The best case that illustrates this cause was decided by the Supreme Court of Alabama in section 8-29-6 Tolar Const., LLC v. Kean Elec. Co., (2006) 944 So. 2d 138.

Jones V Peter

In the case similar to Jones where the contractor starts working, but the owner commits a material breach, the contractor should treat the breach as termination of a contract. So in a situation where the breach was a major one (Peter disposing of the central element of the contract), Jones can suspend his duties and sue Peter to recover the damages. The damages that Jones can pursue are like ‘out – of – pocket’ expenses and the recovery of the contract price. He can also recover any other expense he may have incurred M & R Contractors & Builders, Inc. v. Michael, (1958) 138 A.2d 350

Sally needed an aeroplane for flying people between London and Rome. She found an advertisement for the sale of a light aircraft in a trade paper. Two weeks before completing the contract Judith the seller advised Sally that the aircraft has a fuel capacity of flying between the two cities without a need to refuel. Sally purchased it for $500,000. During a test flight to Rome, the aircraft ran out of fuel before she reaches the destination. Further investigation revealed that the aircraft could only work for short trips. As a result, Sally had to abandon here business suffering some loss in setting up her business rather than her expected profit. She also found that the aircraft was worth $100,000 less

In such a scenario, the question in law is whether the term, “… the fuel capacity of the aircraft will enable her to fly between the two cities without the need to refuel…” was a mere puff or was a representation. In law, a puff is a statement which one party makes to induce the other in entering into an agreement and has no legal implication.

In general, representations are a statement that one party says to induce the other to a contract, but a reasonable person will take them seriously. In this case, this paper will use two factors that the court uses to determine whether the statement was a puff or a representation. One of the rules is ‘relative expertise.’ Where one party is more knowledgeable than the other, the statement would be a term Dick Bentley v Harold Smith Motors (1965) 1 WLR 623. The second one is the importance to rely on the statement. A statement will mainly be a term if the representee specifies to the representor the value of the statement Bannerman v White (1861) 10 CBNS 844. In testing the rules, Judith has more knowledge of the aircraft than Sally (Relative expertise). Also, it was so important for Sally to have an aircraft that can fly longer without a need to refuel, so Sally could dwell on this statement. Considering the situation, the statement statement made by Judith was a term in the contract that she breached. With that, Sally can sue for the damages and loss of profit.

Conclusion

When parties say that they have a contract, it simply means that they have voluntarily accepted liabilities from each other. The contract formation starts with an offer, and then the offer is accepted unconditionally. The acceptance must be communicated, and from there, both parties are bound to the obligations. Failure to perform an obligation will constitute to a bleach and hence the other party has the right to sue for damages.

References 

Bannerman v White (1861) 10 CBNS 844

Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas (1966) AIR 543 

Brinkibon Ltd v Stahag Stahl GmbH (1983) 2 AC 34

Dick Bentley v Harold Smith Motors (1965) 1 WLR 623 

Felthouse v Bindley (1862) EWHC CP J35

M & R Contractors & Builders, Inc. v. Michael, (1958) 138 A.2d 350

Tolar Const., LLC v. Kean Elec. Co., (2006) 944 So. 2d 138

Williams v Roffey Bros [1990] 2 WLR 1153.

Miller, R and Jentz, G. (2011) Business law today, 1st ed. Mason, Ohio: South-Western, p. 279.