Elements of a valid enforceable contract

Issue

The issue is to determine whether Ann has an enforceable contract with Jack or not.

Law

The main elements for the enactment of a valid enforceable contract between the two parties are highlighted below (Carter, 2012).

• Valid offer by the offeror
• Valid acceptance by the offeree
• Presence of consideration
• Capacity of the parties to enter into legal relationship
• Intention of the parties to create contractual relationship

A contract would be formed only when the offeror has communicated offer to the offeree and offeree has sent the acceptance towards the offer without any condition. In contract law, it is imperative to note that the offer will become valid only when the offeree has received the offer send by the offeror. However, this aspect is not applicable in case of acceptance because the mode of communication used by the offeree is a critical aspect that must be taken into consideration before deciding whether the acceptance is enforceable or not (Latimer, 2016). It is because the silence of the offeree or mere mental level acceptance without sending the acceptance to the offeror would not be considered as valid acceptance. The judgement highlighted in Felthouse v Bindley [1862] EWHC J35 is the evidence of this fact that mere silence of the offeree would not lead to the acceptance towards a given offer (Lindgren, 2015).

Two main modes of communication for acceptance are common in contract law.

Electronic mode of acceptance

When the offeree has sent the acceptance towards the offer through electronic mode or instantaneous means of communication such as mail, fax, and so forth, then in such cases the acceptance would be termed as enforceable only when the offeror has opened the respective mail or fax. It means if the offeror has not opened the mail or fax, then the acceptance would not be enforceable even if the mail or fax has been received by the offeror in his/her mail box (Taylor and Taylor, 2015).

Postal Mode of Acceptance

In this mode of communicating the acceptance, the offeree uses post office as an agent for the offer. It means when the offeree has sent the acceptance towards the offer to the offeror through post, then in such cases the acceptance would be lawful and enforceable even though the acceptance letter has not been physically delivered to the offeror as evident from the judgement of Adams v Lindsell(1818) 106 ER 250. Also, if the offeror has revoked the offer and the offeree has sent his acceptance through post then the contract would be enacted between them (Paterson, Robertson and Duke, 2015). The verdict of Stevenson, Jacques & Co v McLean (1880) QBD 346 is the relevant case law, in which the acceptance letter sent by post would become enforceable on offeror even though the offeror has sent the revocation letter to the offeree (Andrews, 2014). The critical aspect to note is the timing of acceptance which becomes enforceable at the precise moment that the letter leaves the offeree since no changes cannot be made once the letter is posted. As a result, in cases where letter communicating revoking of offer is received before the offeror receives acceptance letter, the contract is deemed to have taken place. The key factor is that the acceptance letter ought to be posted before receiving the letter communicating revoking of offer (Lindgren, 2015).

Two modes of communication for acceptance

Also in contract law, any acceptance with additional conditions would not be considered as valid acceptance. Conditional acceptance of the offeree towards the offer would be termed as counter offer to the offeror. In this case, the original offer of the offeror gets terminated and also, the offeree cannot send his/her acceptance towards the original offer as witnesses from Hyde v Wrench (1840) 3 Bea 334 case (Edlin, 2014). For example:

• Let us assume that A has sent an offer to B to sell his car for $2,000.
• B has sent his acceptance to A that he is ready to purchase the car for $1500.
• Sending a conditional acceptance by B would be termed as a counter offer to A.  
• Here, the offer of selling car for $2000 would become terminated and is not more available for acceptance.
• B cannot send his acceptance for the original offer of buying car for $2000.

However, the scenario would be different when the offeree has asked for additional information from offeror and in such case this “request for information” would not be termed as counter offer. Therefore, the original offer would still be open for acceptance for the offeree. The judgement announced in Stevenson v McLean (1880) 5 QBD 346 case is the testimony of the fact where the offer was available for acceptance because the offeree has requested for some enquiry from the offeror about the offer and potential means of payment (Carter, 2012).

Application

Offeror:  Ann and Offeree: Jack

In present scenario, on March 1, Ann has posted an offer letter to Jack regarding the sale of her car for a consideration of $12,000. She has clearly mentioned that she would be ready to sell her car to him if he will send his acceptance towards the offer till March 7. However, early morning next day, she sent another letter to Jack stating that car is not available for sale as she had a change of mind regarding sale of car. It is apparent that on March 3, Jack received first letter from Ann that contains the offer to sell the car. At this moment only, the offer of Ann becomes valid. Further, on March 3, Jack posted a letter to Ann that comprised details regarding payments being given in monthly instalments instead of the complete amount all at once. It indicates that Jack has not sent any conditional acceptance for the original offer since he has not altered the original amount of $ 12,000 asked by Ann. Rather the letter is mere enquiry and hence, the letter would be categorised as request for information and not a counter offer.

As the letter of acceptance was mere request on information therefore, the original offer of Ann is still available for the acceptance for him. Later on, on March 4, Jack received a cheque from his uncle and therefore, he accepted the original offer from Ann and posted the acceptance letter to Ann. The moment when Jack has put the letter into the mail box, the acceptance becomes enforceable and a valid contract was executed between Ann and Jack. Moreover, Jack has received the letter of Ann that contains the information regarding the revocation of the offer. However, the offer revocation information received by offeree Jack was after he already sent the acceptance towards the offer and hence, Ann cannot revoke the offer because it has already been accepted by Jack. On March 5, Ann received the acceptance letter of Jack but this is immaterial as the contract came into existence at the time the letter was posted. Hence, if Ann fails to fulfil the contractual obligation, then Jack has the right to sue Ann for not performing the contractual obligations and thus responsible for breach of contract.

Validity of an exclusion clause in contract law

Conclusion

It can be concluded from the above discussion that Ann and Jack have an enforceable contract because Ann’s offer had already been accepted by Jack before the revocation of the offer on the part of Ann. Therefore, Ann has to sell her car to Jack for a consideration of $ 12,000.

The key issue is to offer legal advice to Batty with regards to legal rights in the backdrop of the given facts. Additionally, he needs to be given advice on whether he can sue Qualal Motors for the damage caused to his car and injury suffered because of the negligence of the company.  For this, the validity of the exclusion clause needs to be ascertained.

Two legal concepts merit discussion, one being the applicability of the exclusion clause and the other being the tort law.

Exclusion clause refers to the contractual term which is present for providing immunity (complete or partial) to a given contractual party from potential liability that can arise when certain events transpire (Carter, 2012). The exclusion clause would be legally valid only if the following pre-conditions are met.

• Before the contract enactment, it is imperative that the exclusion clause should be communicated so that consent on the clause may be granted by the other party

For ensuring the enforceability of the exclusion clause, it is essential that the contracting party inserting the clause should undertake all possible and reasonable attempts to communicate the exclusion clause to the other party so that informed consent of the same is obtained. If such an effort is not made, then the exclusion clause would not be held as legally enforceable (Lindgren 2015).  This understanding can be supported by the Thornton v Shoe Lane Parking [1971] 1 All ER 686 case.

As per the relevant case details, a car was parked in a commercial parking space which claimed that the car owners are parking their cars at their own risk. The plaintiff (Mr. Thornton) gets injured while parking his car and therefore claims compensation from the parking operator. However, the parking owner highlights the exclusion clause which the issued ticket contained. As per this clause, there was no liability on the company with regards to any damage to the car or driver. When the matter landed in court, the honourable court highlighted the fact that the ticket issuance took place post the parking of the car through the use of an automatic dispenser.  As a result, the contract enactment was completed before the issuance of ticket since the plaintiff had already parked the car before getting a ticket. Thus, the exclusion clause was considered as legally void since prior to contract, the plaintiff was not informed about the same (Paterson, Robertson and Duke, 2015).

Precedents set by relevant case law

Another similar case that needs to be highlighted is Olley v Marlborough Court [1949] 1KB 532. In this case also, the information regarding the presence of exclusion clause was given to the plaintiff only after enactment of contract and therefore the court considered the same as void and non-enforceable. Thus, it is apparent that in the event that exclusion clause is not evident, the party inserting the clause must bring the same to the notice of the potential plaintiff before contract enactment (Davenport and Parker, 2014).

• Legality needs to be ensured

The enforceability of the exclusion clause is also contingent on whether it aims to have adverse consumer impact or not. Any such clause which does have an adverse impact and aims to shield the deceptive action of the defendant would not be considered as enforceable (Gibson and Fraser, 2014).

• Further in context of exclusion clauses aimed at protecting the defendant from negligence, the validity would be assumed only when consent is obtained before contract enactment and the other party understands that the clause has been inserted so as to claim immunity against liability arising from negligent conduct (Paterson, Robertson and Duke, 2015).

Tort Law

In order to establish tort of negligence, it is essential that the following three conditions ought to be satisfied.

• Presence of duty to care

It is imperative that the defendant owes a duty to care to the plaintiff. In order to check the same, it needs to be ascertained whether the underlying plaintiff is a neighbour or not. A neighbour may be defined as any entity which could potentially be adversely impacted by the choice of engaging or refraining from an action by the action doer. This test has been highlighted in the landmark Donoghue v. Stevenson [1932] AC 562 at 580 case.  Hence, since the actions of the defendant can potentially harm the neighbour, hence care needs to be extended. Also, it is imperative to note that duty to care is applicable only for foreseeable damages i.e. damages which are likely to happen (Gibson and Fraser, 2014).

• Breach of duty to care

The aforesaid duty needs to be discharged by the defendant. For this, the defendant needs to extend the same level of care which any reasonable person would be expected under the given scenario. Thus, depending on the nature of potential damage and the underlying risk, the level of care would vary. If the action doer fails to provide reasonable level of care to the identified neighbours, then there would be a breach of duty to care which might lead to damages being suffered (Edlin, 2014).

• Damages

For tort of negligence to be established, it is imperative that the plaintiff should suffer damages and more importantly to establish a causal link between the breach of duty to care and damages suffered. One accepted way to develop the same is to highlight that the damage could have been prevented or less in severe, if the duty to care had not been breached. Also, it is noteworthy that the damages covered under tort of negligence are not restricted to only physical or financial loss but are much wider in scope. Further, if the plaintiff would suffer damages, irrespective of duty to care being breached or not, in such cases, the action doer would not be liable (Davenport and Parker, 2014).

Conditions for establishing the tort of negligence

Application

As per the given scenario, Batty’s car broke down while he was going to office and thus he called his local garage i.e. Qualal Motors. The garage sent a mechanic named Eddie to the site who tried to fix the car but reached the conclusion that it needed to be taken to the garage and hence a towing machine was called.  The towing gear had a worn clip which opened thus letting the car to fall. In the process, the suspension of the car got severely damaged and also Batty suffered injury on his toes. However, when Batty demands compensation for the same, the company highlighted the exclusion clause at the back of the towing vehicle in its defence.

It is apparent that in the given scenario, there has been no attempt by Eddie to inform Batty about the exclusion clause. Also, the exclusion clause was written at the back of the towing machine which possibly Batty could only read when the machine was here. But when the decision to tow was undertaken, then Batty had no information about any exclusion clause. Further, the given exclusion clause seeks to provide immunity to the garage and the employees from all liabilities including those arising from negligent conduct. In such cases, it is imperative that informed consent of customer be obtained before-hand which was not done and hence the exclusion clause does not provide defence against any negligence related claims.

The towing machine is owned by Qualal Motors and run by the employees and it is apparent that any negligence with regards to the same can lead to damages to the vehicle and potentially the people nearby. As a result, there is a duty to care which the company owes towards the vehicle owner and other nearby people. Clearly, the company has failed to discharge their duty to care which is apparent because of the presence of worn out clip which potentially can cause damage. It would be reasonable to expect that the towing gear would be periodically inspected so that all the components are equipped for the job. Betty’s car and himself have suffered damages (financial and physical) owing to this breach of duty by the garage. If the towing gear did not have any issues, then the damage could have been avoided. Hence, the tort of negligence is indeed established against Qualal Motors.

Conclusion

Based on the above discussion, it is apparent that Qualal Motors has been negligent and owing to the negligence damages have been suffered by Betty and his car. Also, the exclusion clause would not be held valid owing to Betty not being aware of the same before calling the towing machine. Hence, compensation for the damages suffered can be demanded by Betty from Qualal Motors. 

References

Andrews, N. (2014) Contract Law 3rd ed. Cambridge: Cambridge University Press.

Carter, J. (2012) Contract Act in Australia. 3rd ed. Sydney: LexisNexis Publications.

Davenport, S. and Parker, D. (2014) Business and Law in Australia 2nd ed. Sydney:LexisNexis Publications.

Edlin, D. (2014) Common law theory 4th ed. Cambridge: University Press Cambridge.

Gibson, A. and Fraser, D. (2014) Business Law. 8th ed. Sydney: Pearson Publications.

Latimer, P. (2016) Australian Business Law CC. 5th ed. Sydney: LexisNexis Study Guide.

Lindgren, K.E. (2015) Vermeesch and Lindgren’s Business Law of Australia 12th ed. Sydney: LexisNexis Publications.

Paterson, J. Robertson, A. and Duke, A. (2015) Principles of Contract Law 5th ed. Sydney: Thomson Reuters.   

Pendleton, W. and Vickery, N. (2015) Australian business law:  principles and applications 5th ed. Sydney: Pearson Publications.

Taylor, R. and Taylor, D. (2015) Contract Law. 5th ed. London: Oxford University Press.