Contract Law

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Business and Company Law Coursework Assignment Problem

Agreements have four essential formalities that must be fulfilled in order to create a binding contract, these being offer, acceptance, consideration (it would appear that all the deals have consideration as bargaining has taken place in each of them) and intention. In the case of Wajid and his mobile phone, each of these factors must be investigated in order to come to an accurate conclusion of whether or not he does have a binding contract with any of the companies in question.

First, in the case of Telecom, it is necessary to consider whether there has in fact been a binding contractual agreement, looking at offer and acceptance. An offer is the expression of the intention to be potentially bound on certain circumstances made by the offeror (the person who makes the offer), Telecom. This appears to be the case with the Telecom statement that, ' unless we hear from you otherwise, we will renew your contract automatically on your renewal date.' In saying this Telecom are putting forward their terms with which they intend to be bound in contract without further negotiations with the offeree (the person to whom the offer is made). However, the question is raised here as to whether this is an offer or merely an invitation to treat? By using the phrase, 'unless we hear from you otherwise,' it is implied that Wajid is obligated to contact Telecom if he chooses to reject the stated terms, and therefore negotiations are being invited whereby Wajid can accept or reject as he pleases, this being the theory of an invitation to treat. (Fisher �v- Bell 161 )

In a case that implies invitation to treat, the customer has the opportunity to accept or reject as he pleases, thus, until the offeree has communicated the acceptance through his conduct there can be no binding agreement. (Carlill �v- Carbolic Smokeball Company 18 ). Without communication, whether it be oral or written the offeror cannot possibly know whether the terms of contract have been accepted, the result being that it is not binding. In the case of Wajid, no form of communicated acceptance has taken place meaning that the contract with Telecom has not been accepted is therefore is not a binding contract. Telecom have attempted to initiate discussion of terms with the statement, 'unless we hear from you otherwise,' but this invitation to treat cannot be accepted as Wajid has been invited to make Telecom an offer which he can accept or reject as he chooses rather than, as already stated, Telecom making any offer to Wajid. Telecom are also imposing a positive obligation to make Wajid refuse the contract terms and this is unfair towards the offeree

The argument against this could be that Wajid and Telecom and involved in a course of dealing i.e. Wajid makes payments to Telecom each month meaning that acceptance can be assumed through the previous contract and there need be no obligation for acceptance again as the two are already bound. The judge of the case would determine as to whether the two parties do have a significant course of dealing. By judging this a course of dealings, on the other hand, would imply silence as acceptance on the part of the offeree and this is very unlikely in a bilateral contract (a promise in return for a promise) such as with the case of Wajid since acceptance is being presumed and not communicated (Felthouse �v- Bindley 186 ). However, if it is judged that there is no course of dealing then it would suggest there has been no communicated acceptance between offeror and offeree.

Second comes the case of Savaphone Ltd. When Savaphone, the offeror, quote Wajid a price for his contract they have put an offer to him but Wajid's response of, ' I'd be a fool not to sign up with you,' does not imply acceptance as he is simply stating a fact rather than literally accepting the offer i.e. as no point does Wajid say that he is going to accept Savaphone's contract offer. Also, Wajid's telephone conversation could be seen as an invitation to treat. The salesperson lays down the terms for Wajid in the quote but invites him to accept or reject as he pleases. A quote cannot be used as an offer. There is no firm offer of a contract until Wajid receives the documentation on 4th October.

The documentation sent out by the offeror is a direct expression of intention to be bound by certain circumstances i.e. contract terms. Once Wajid has signed and posted the documentation, he is bound to those terms under the postal rule or postal acceptance. This rule is an exception to the general rule that acceptance must be communicated in order to be effective. When a posted acceptance, such as this documentation, it is effective as and when it is posted ( Adams �v- Lindsell 1818 ). A letter is considered to be posted when correctly stamped and posted to an official letter box or Post Office. Therefore, as soon as Wajid has posted the documentation he has accepted the proposed offer from Savaphone Ltd. Although the case study does not actually say that the documentation contained an offer towards Wajid it is likely that it did due to the fact that the offeree only had to sign the paperwork and no counter-offers are mentioned e.g. he would be asked to sign to show his acceptance of the contractual terms. Wajid is showing an obvious intention to enter into a binding contract with Savaphone Ltd.

There is also no case with Savaphone for the revocation of postal acceptance. This is to say that at any time until acceptance the offeror can withdraw his offer. Once Wajid had posted the documentation, he was bound to the set terms of contract even though he telephoned Savaphone Ltd on the same day. Although this may be unfair towards the offeree ( Household Fire Insurance Co �v- Grant ) the contract is still binding as and when the letter is posted. Therefore although Wajid isn't bound to Telecom plc at this point he is bound to Savaphone Ltd.

Finally, there is the debate as to whether Wajid has entered into a binding contract with Webphone.com. The statement that,

' If you would like to take advantage of our offer, click on "OK" and we'll send out the relevant documentation'

Unlike Savaphone Ltd, where Wajid was only quoted prices implying invitation to treat, the above statement along with the conduct of Wajid manifest his acceptance to the contractual terms. By clicking "OK" Wajid is communicating his acceptance of the offer and has indicated his willingness to 'take advantage (Taylor �v- Allon 166 ).' It is not necessary to have documentation in this case as it was with Savaphone Ltd as the acceptance has already been evident in his conduct. It could be argued that this is purely an invitation to treat. The reason that Wajid clicks 'Ok' is through intrigue rather than actual acceptance of any offer. He is merely suggesting that he is interested in the suggested offer and wants to see the relevant documentation to ensure that he want to go through with it, as suggested in the Webphone statement. Wajid makes the offer to Webphone. It is more likely that, in the court, it will be judged that Wajid has accepted the offer. He has acted in a manner that can be conceived as acceptance and although there has be no official receipt of documentation, this is not necessary for an offer to be made.

The next point of reference is the fact that Webphone have claimed their quote was too low due to a computer error. As has already been discussed, Wajid is already in a binding contract with Webphone at the price they had earlier quoted. Webphone had already offered Wajid this price so were bound to him with that deal. However, if the computer error meant that there was no evidence of acceptance e.g. no evidence that Wajid has clicked 'Ok' then there may be a case for the contract not being bound. It is hard to make the case for this allegation as there is no substantial evidence that Webphone did not receive Wajid's acceptance.

To conclude, it seems that Wajid has at least one, if not two binding contracts. The postal rule provides acceptance for the contract with Savaphone and as discussed, there is no case for revocation of postal acceptance. The contract with Webphone is debatable although the conduct of Wajid throughout the dealings suggest that he is bound to a contract with the company. Common sense is likely to prevail in those circumstances and it is probable that it would be judged that Wajid does intend to enter a binding contract. There is no case for a binding contract between Wajid and Telecom plc, with there being no communication of acceptance.

References

Law for Accountancy Students Seventh Edition, Card & James, 00

Modern Equity Sixteenth Edition, Martin, 001

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