1. Is Mojo Beverage entitled to pay $100,000 to Ben?
2. Whether there was any valid contract between Livestock Brothers and Dorper Sheep Sellers,If the acceptance were made through fax, would it amount to an acceptance of the offer?
3. Is Stuart liable to pay the full amount of $1000 rental and the deficit amount to Westphalia Marts Pty Ltd?
An agreement entered into by two or more parties that is enforceable by law is termed as a contract. The parties entering into the agreement must have legal intentions to bind the agreement (Bhat, 2015). The prerequisite of a valid contract is that it consists of an agreement, an offer and the acceptance of such offer. An offer is the willingness of an offeror to form a contract and acceptance takes place when the offeree accepts the offer proposed. An offer is distinguished from an invitation to treat. Advertisements are usually construed as invitations to treat. However, if they are made to the entire world to accept it, it becomes a unilateral contract and is treated as an offer (Butler et al., 2013).
A unilateral contract is formed when either of the parties make an express promise to pay in exchange for an act to be performed by the other party (Cheong, 2014). If the offeree performs according to the offeror’s promise, the offeror becomes legally bound to fulfill his obligations. In the case Carlill v Carbolic Smoke Ball Company (1893), the court held that although the offer was made to the world, Mrs Carlill accepted the offer by fulfilling the terms of the contract. Hence, it amounted to a valid contract and the plaintiff was entitled to the reward. In a unilateral contract, there cannot be acceptance unless the offeree has the knowledge of the offer (Mir, 2015). The party whose performance is sought is not legally bound to perform his obligations but if he performs, the offeror becomes legally bound to comply with the contract (Smits, 2014).
In the mentioned case, Mojo Beverage made an advertisement for reward that an amount of $100,000 shall be paid whoever catches the tagged Trout. It amounted to a unilateral contract as it was made to all the people of Lake Tranquil. Here, Mojo Beverage is the offeror and Ben the offeree. Ben heard that the price money was erroneous and the correct amount was $1000, few minutes before catching the trout. Ben was aware of the error in the price before catching Lord Harry. Even after that, he proceeded to perform his obligation. In a unilateral contract, when the offeree performs the act, acceptance takes place. Ben performed despite being aware of the change in the offer, which means he had accepted the offer.
It is a well-established rule that the offeree must communicate the acceptance of an offer to the offeror (Zhang, 2015). A contract would not come into existence unless the offeror receives the acceptance as stated in the case of Entores Ltd v Miles Far East Corporation (1995). Once an offer is accepted the contract becomes binding between the two parties. An offer may be revoked by the offeror at any time unless the offeree has accepted the same. However, the offeror must communicate the revocation of the offer to the offeree (Adriaanse, 2016).
The offeree must accept the offer without modifying or changing the original offer. If the offer is modified in any manner, it would be treated as a counter-offer and then the original offer cannot be accepted further as stated in the landmark case of Hyde v Wrench [1840] (McKendrick, 2014). However, a simple request for obtaining information regarding the terms of the offer, it shall not be treated as a counter-offer and the original contract remains intact as observed in Stevenson V. McLean [1880].
Where an offer specifies a stipulated period of time within which it has to be accepted, the offer must be accepted within the stipulated time; otherwise, the offer shall terminate after the expiry of such stipulated period (Jones, 2016). In case, the stipulated period is not expressed, the offer shall be deemed valid for a reasonable period as observed in Ramsgate Victoria Hotel v MonteFiore [1866] LR 1 EX 109. The reasonable time depends upon the circumstances, that prevails at the time the offer is made and acceptance of the same has been made. If the process of acceptance is specified by the offeror, the acceptance of such offer must be communicated by the specified method. If the acceptance is made by telex, telephone and Fax, it is completed when the offeror receives such acceptance. The moment the offeror receives the acceptance the contract is concluded. The offeree must ensure that the acceptance communicated has been received by the offeror to make the contract legally binding.
However, the offerer expressly specified the stipulated period within which the offeree was required to communicate the acceptance of the offer to the offeror. The offeree accepted the offer after the expiry of the stipulated period. As observed in the Ramsgate Victoria’s case, if the offeree fails to accept an offer within the stipulated period, the offer automatically terminates after the expiry of the stipulated period.
It is a well-established law that part-payment of a debt is not considered as a good consideration for discharging the full debt. This rule has been established in the landmark case of Penny V Cole [1602]. This rule is referred to as the Pinnel’s Case. A person owes a certain amount of money to another person, he promises to pay half the amount in full satisfaction, and the other person accepts the same (Kane, 2014). The person accepting the payment cannot be barred from claiming the balance amount later since there is consideration made by the person paying the half amount to make the promise made by the other person, enforceable (Poole, 2016). There is an exception to this rule where consideration may be provided if the creditor agrees and accepts half-payment on prior date rather than the due date or if half-payment is made in a different place and not the original venue (O’Sullivan & Hilliard, 2016).
In the mentioned case, Stuart agreed the lessor, Westphalia Marts Pty Ltd, that he would pay $700 per week instead of $1000 due to a downfall in his business. Westphalia Marts agreed and allowed him to pay the reduced rent amount. Westphalia Marts claims the entire $1000 rental amount per week along with the deficit amount of $300. Here, Stuart made part payment of the rental amount to the lessor, Westphalia Marts Pty Ltd. The lessor although accepted the half payment but it cannot be prevented from claiming the rental amount as stated in the Pinnel’s case.
Conclusion
In a unilateral contract, the offeror is legally bound to fulfill the promise made. The offeree is not legally bound to perform his obligations. If the act is performed then the offer is considered as accepted and he becomes entitled to the reward promised. If Ben has performed the act in exchange of the corrected price amount that is, $1000, that was offered by Mojo Beverage then Mojo Beverage being the offeror, would become legally bound to fulfill the promise made. Hence, as stated in the Carbolic Smoke Ball Company’s case, Ben would be entitled to receive the reward amount of $1,000 for performing his obligations.
A valid contract does not exist between the Livestock Brokers and the Dorper Sheep Seller as the livestock Brokers failed to communicate the acceptance of the offer within the stipulated time and the offer terminated after the expiry of the time-period.In case the acceptance was made by fax, within time the acceptance was not valid, as it was not communicated to the offeror.
Stuart is entitled to pay the rental amount along with the deficit amount, as half-payment of a debt is not regarded as a good consideration to discharge the full debt.
References
Adriaanse, M. J. (2016). Construction contract law. Palgrave Macmillan.
Bhat, A. S. (2015). 008_Contract Law.
Butler, D., Christensen, S., Willmott, L., & Dixon, B. (2013). Contract Law Case Book.
Cheong, T. (2014). A Promising Idea: Reconceptualizing the Formation of Unilateral Contracts. Oxford U. Undergraduate LJ, 1.
Jones, E. (2016). Texts, Cases and Materials on Contract Law, by Richard Stone and James Devenney. The Law Teacher, 1-3.
Kane, J. (2014). The Rule in Pennel’s Case: The Case for Repeal, a Mistaken Preponderance and Finding Consideration in Debt Renegotiations. Dublin ULJ, 37, 79.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Mir, F. A. (2015). 020_Mercantile Law.
O’Sullivan, J., & Hilliard, J. (2016). The law of contract. Oxford University Press.
Poole, J. (2016). Textbook on contract law. Oxford University Press.
Smits, J. M. (2014). Contract law: a comparative introduction. Edward Elgar Publishing.
Zhang, E. (2015). Australian Business Law. A Case Study.
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