Introduction

“The client has a small business, selling and repairing IT devices.” In the two situations where a reconditioned tablet and an iPhone 14 are being sold, the customers assume that they are in a contract with the client and are entitled to the goods and services. The principles of contract law and the offer and acceptance are the core issues to address in both events. This essay will analyse the two scenarios by applying relevant case laws to advise the client regarding the existence of a contract with both the parties. Further, this essay will discuss elements of the ‘offer and acceptance’, as a reference to examine the client’s situation.

David Kelly, Ruth Hayward, and Ruby Hammer (2011)

Defined a contract as a ‘legally binding agreement where the agreement is enforceable by law and complies with legal requirements.’ An agreement refers to the mutual understanding between the parties where an offer has been made and accepted by the other party to form an agreement. To be a valid contract, an agreement can be written or oral, where the offeror and offeree agree on terms to come into a contract. Certain elements differentiate between an agreement and a binding contract; these include an offer, acceptance, intending to create legal relations, and compliance with the legal requirements (David, Ruth, and Ruby, 2011, p. 234).

Scenario 1:

The first scenario is the disagreement between the price shown and the price at the till. On the display, the price clearly stated it was £100, but the client learned that the tablet was priced at £200 at the till. The display of goods, here the reconditioned tablet is the invitation to treat, and anyone interested can start to make an offer and the client decides to accept or reject the offer.  Unlike offer and acceptance invitation to treat is the starting point to negotiate the terms between the offeror and offeree. To become a contract, it must be accepted by both parties and with a binding obligation (Ewan, 2010, p. 76).

The case law Fisher v Bell (1961) illustrates the actual difference between an Invitation to treat and an offer.  In the above case, the defendant was accused under a criminal offence of offering the flick knife for sale which was displayed as “Ejector Knife-4s” under the Restrictions of Offensive Weapons Act 1959. It was disregarded by the court and explained that any item that has been displayed is an invitation to treat rather than the offer itself and does not constitute a contract.

Similarly, the Pharmaceutical Society of Great Britain v Boots Chemists (Southern) Ltd (1953) supports the statement that the customer is not in contract with the client. In this case, the court concludes that a contract is formed when the cashier accepts the customer’s offer to purchase goods, specifically medicines, at the given price obeying the rules and regulations.

The case law clarifies that the customer who was inclined to buy the refurbished tablet at the display with the £100 sticker was an invitation to treat but not the offer by the client. Further, the client upon realising that the incorrect price, has the right to reject the offer.

Additionally, the disagreement in the price of the goods makes it a void contract which was demonstrated in the case of Hartog v. Colin & Shields (1939). The court’s decision was in favour of the seller stating that a contract is voidable, or in simple terms no legal agreement is formed when there is a clear mistake in the price. In this instance, it was confined to the price of the hare skins, which was intended to be 10 shillings per skin but accidentally written as 10 pence per skin. The court also mentioned that the buyer couldn’t take advantage despite knowing the mistake and no contract is formed at a mistaken price and requires a mutual assent to be a contract.

In relevance to the case law, the customer’s insistence on buying the product at an errored price makes the contract voidable. The mistake in price made by the seller was unilateral and the seller has the right to correct it. Moreover, the customer is not entitled to the good as the client refused to sell the tablet at an errored price, hence no contract is created between them.

In a nutshell, the owner is not bound to sell the tablet at £100 as per the principle of offer and acceptance. The price tag at the display was an invitation to treat as highlighted in Fisher v Bell (1961), and the customer’s offer was rejected by the owner resulting in no formation of the contract. Additionally, in Hartog v. Colin & Shields (1939), the contract was considered voidable due to a pricing error. As the price is £100, the client has the right to refuse, and no contract is formed at the mistaken price.

Scenario 2:

The second scenario involves an assumption of existence and a breach of contract between the shop owner and the trader. The seller proposed to sell a reconditioned iPhone 14 on 21^st July for £500 and insisted on ‘notice in writing required by 28^th July’. The letter of acceptance was sent by post on 22^nd July, which wasn’t received by the owner until 30^th July, meaning he received it after the deadline.

As per the postal rule which was introduced in Adam v Lindsell (1818), it is considered that the offer has been accepted as soon the letter is posted properly by the offeree. (Ewan, M 2010). In this case, the claimant (Adam) was sent an offer to buy wool from the defendant (Lindsell) on 2^nd September and was requested to send acceptance by return post. Adam received the letter on 5^th September due to an error. Despite accepting the offer on the very day, the letter was received much later by Lindsell, assuming Adam didn’t accept the offer, he sold the wool to a third party. The court held in favour of the claimant determining that the contract was formed when the claimant posted the acceptance rather than when the letter was received.

Drawing relevance from this case, the trader posted the acceptance on 22^nd July, within the time frame, however it was received after two days (30^th July). Assuming that the rule is relevant, the contract would be valid as it proves the offer was accepted when the letter was sent on 22^nd July. It would lead breach of contract as the owner sold the iPhone to his sister on 29^th July for £400. On the contrary, the owner conditioned it with a specific deadline ‘notice in writing required by 28^th July’ where in this case the postal rule doesn’t apply, as he received it after the deadline.

The case law Holwell Securities v Hughes (1974) explains the limitations of the postal rule when the acceptance is not received within the deadline. In this case law, the defendant (Holwell) was sent a letter to buy certain property by the plaintiff (Hughes). The defendant agrees to sell the property with a clause stating ‘notice in writing required’ within six months. The acceptance letter sent by the plaintiff was never received by the defendant within the stipulated time frame. The court concluded in favour of the defendant, stating that the acceptance must be received by the date and therefore no contract was created.

This case law is relevant to this scenario. Although the trader’s acceptance was posted on 22^nd July it didn’t reach the client until 30^th July. Since the client didn’t receive the acceptance within the deadline no contract exists between the trader and the client as illustrated in Holwell Securities v Hughes (1974).

Revisiting the scenario, the client sold the iPhone to his sister for £400 assuming that offer was rejected. The trader accused the client of breach of contract after discovering the good was sold and claimed he was entitled to goods as he accepted the offer. Alternatively, as mentioned above no legal agreement was established between them. At this point, since no binding contract was formed the trader has no ownership of the goods. Having received no communication from the trader the client was free to sell the good to the other party.

In summary, the postal rule and the case law provide an understanding of the formation of contracts. Concerning the Postal rule and the case law, the client is not bound by a contract and was free to sell the goods to his sister without breaching of contract.

Conclusion
In reference to the principles of offer and acceptance and the reported cases, the client is legally justified. In case one the client has the right to refuse to sell the tablet at a mistaken price as the display of good was an invitation to treat. In case two, the client is unlikely to breach the contract as the acceptance was not received in the time frame.

References

Books

• Kelly, D, Hayward, R, & Hammer, R 2011, Business Law, Taylor & Francis Group, Milton. Available from: ProQuest Ebook Central. [11 November 2024].
• Ewan, M 2010, Business Law fifth edition e-book, Pearson Education UK, Available from: ProQuest Ebook Central. [16 November 2024].

 Cases

• Fisher v Bell [1961] 1 QB 394
• Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 (Court of Appeal)
• Hartog v. Colin & Shields (1939) 3 All ER 566
• Holwell Securities v Hughes [1974] 1 WLR 155