Understanding The Essentials Of A Contract: Offer, Acceptance, Invitation To Treat, And Counter Offer

Definition of a Contract

Contract: – A single promise or a set of promises, that is legally enforceable for and in against of both the parties is/are known as “Contract” (Barnett, 2010).

Meaning of a contract can also be understood as that “An agreement that has all the components which are necessary for a valid contract, termed as a contract.” By reviewing the previously mentioned definition and meaning of a contract, this can be stated that some essentials are mentioned in contract laws, which are necessary to convert an agreement into a contract. These elements are given hereunder:

• Offer: – An offer must be there in a contract. This offer can be in writing as well as in verbal mode. This is necessary to mention that only existence of an offer is not enough in a contract, but such offer must be informed to the offeree.

• Acceptance: – As soon as an offeror presents an offer to the offeree, the offeree requires to accept such an offer. Acceptance must not contain a new condition and must express the assent without any modification in terms and conditions of the offer. Similar to offer, communication of acceptance is also essential (Miller and Cross, 2013).

• Consideration: – After offer and acceptance, consideration is another important element of a contract. Without a consideration, an agreement cannot be developed into a contract. According to the case of Thomas v Thomas (1842) 2 QB 851; 114 ER 330 that consideration needs to be sufficient and the same is not required to be adequate.

• Intention to create legal relation: – In a valid contract, the intention of the parties must be to create legal relation and to bind each other legally. Further as per the decision of the case of Tweddle v Atkinson [1861] EWHC J57, 1 B&S 393, a consideration in a contract must move from promisee I.e. offeree.

Question 2

 Issues

• In the provided case, Safe Bank Ltd (“SB”) did not acknowledge the original offer made by All Gifts Pte Ltd (“AG”) at the first stage and from there on a few correspondences held between the parties. Further, the latest offer remained open; as SB was required to accept it but did not do the same. At the point when SB has gone into contract with a third party, AG became agreed on the asked terms by SB. Presently the issue is to check whether there is a legitimate contract between SB and AG or not?

• Here, Perfect Gifts Pte Ltd (“PG”), another gift company, provide an offer to the SB to sell 1000 key coin box in consideration of $10 per piece. PG also stipulated that if SB is ready to buy the mentioned coin box, then the same (SB) be required to provide the consent by giving a cheque worth $500 as token money. Although SB agreed with the terms and conditions of the offer made by PG yet due to some reason, SB became late to provide the cheque to PG. Now the issue is to check the possibility of cancellation of the contract between PG and SB.

Rules

In the area of contract law, in addition, to offer, some other terms are also there. These terms are an invitation to treat pre-contractual statements and counter offer. A person must not misunderstand an offer with these terms. An invitation to treat is not an offer but simply an open offer or the invitation of offers. In reply to an invitation to treat, other people are required to submit their offer. It was held in the case of Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 that in some cases, where a counter offer has been made, an act of other party can be treated as an acceptance. In such cases, another party does not need to give an offer in reply to an invitation to treat.

Further, a situation where an offeree does not accept the offer made by offeror but instead put some additional information to the offer, then such a situation is called “Counter offer.” This is necessary to mention that a counter offer cancels all the previous offers of the parties. In the case of counter offer, parties are required to accept the latest offer made by another party. A counter offer needs not to be present by an offeror always.

Similar to the offer, an acceptance is also a significant aspect of a contract. As mentioned earlier, while giving an acceptance, the offeree must not introduce any new conditions. Acceptance needs to be informed to the offeror in order to develop an agreement. An offeree can give his/her consent in written or verbal mode. In conjunction to this, Section 11 and 12 of Electronic Transactions Act 2010, consist that both offer and acceptance can be performed via electronic mode and the same will have legal impacts.

In the area of contract, study of postal rules is also important. When parties of the case chooses postal method to give their offers and acceptance then, postal rules are applicable in such cases. It has held in the case of Adams v Lindsell (1818) 106 ER 250 that in a case where postal rules are applicable, acceptance will be termed as complete as soon as offeree would put the acceptance letter to the process of the post.

Applicability

• In this case, information that showing on AG’s portal was an invitation to treat. In reply to this invitation, SB has made an offer proposing that we want 1000 pieces of key coin chain at rate of $12 per unit. It was the first offer of this case that was required to be accepted by AG but instead accepts this offer; AG has made a counter offer on 05th March 2018. This counter offer canceled the original offer made by SB and now SB was supposed to accept the counter offer, But SB did not do so. Further, on 06th March, AG itself becomes agree to accept the terms mentioned by SB in the very first offer. As SB did not accept any offer made by AG, no contract was there in between AG and SB.

• In reply to the query raised by SB, PG has made an offer mentioning, that price of key coin box is $10 per piece, if you want to get such 1000 pieces then you are required to send a cheque of $500 as an advance amount. Here, PG had to send the subjective cheque to PG in order to accept the offer. But due to some reason, the same could send this cheque on 07th March 2018 i.e. two days after the offer, and thereafter PG has received the same around 15 days after the date of the offer. As according to the case of Adams v Lindsell, in this case, acceptance will be consider as complete on 07th March 2018. It was the date when PG has dropped the cheque into the mailbox. Therefore, there was a valid contract between PG and SB.

Conclusion

• AG did not provide consent to the offer made by SB but made a counter offer. Further, offer provided by AG remained opened and SB did not give any acceptance to the same, therefore no contract was there between SB and AG.
• Postal rules will be applicable to the case, and according to the same offer given by PG will be termed as accepted as soon as SB dropped the cheque into postbox i.e. on 07^th March 2018. Hence, a valid contract was there between SB and PG and SB cannot terminate the order placed with SB.

References

Adams v Lindsell (1818) 106 ER 250

Barnett, R. E. (2010) The Oxford Introductions to U.S. Law: Contracts. UK: Oxford University Press

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Electronic Transactions Act 2010

Miller, R.L.  and Cross, F.B. (2013) Cengage Advantage Books: Essentials of the Legal Environment. Canada: Cengage Learning

Thomas v Thomas (1842) 2 QB 851; 114 ER 330

Tweddle v Atkinson [1861] EWHC J57, 1 B&S 393