The there are no real issues of consideration

The
question posed is whether a contract has been made between the parties.  For there to be an agreement between Electronic Installations plc (EI)
and Office Solutions Ltd (OS), there must be an offer by one party that has
been accepted by the other.

It
is essential to acknowledge the main rules in relation to the formation of a
contract. A contract
is a legally binding agreement and in most cases results from the agreement of
the parties (Adams and Brown sword, 2007). The elements of a contract are offer, acceptance,
consideration and intention, the question posed highlights that there are no
real issues of consideration or intention. Therefore, this essay is solely focused
on offer and acceptance.

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The
majority of contracts are made through the process of offer and acceptance. Treitel
defines an offer as ‘an expression of willingness to contract on specified
terms made with intention that is to become binding as soon as it is accepted
by the person to whom it is addressed’ (Sweet & Maxwell, 2015). The person
who initiates an offer is known as an offeror. A person to whom an offer is
made is recognised as an offeree. If the offeree accepts, expressing his/her
willingness to be bound by the terms proposed a contract will result. An offer
can be either written or spoken, or it can be inferred from the conduct of the
offeror (MacIntyre, n.d.). EI and OS’ negotiations coincides a unilateral
contract potentially being formed, as happened in Carlill v The Carbolic Smoke Ball Co 1893, as only one promise is
made. The person making the offer (Electronic Installations plc) promises that
if the offeree performs an act, then the offeror promises to do something in
return. The offeree (Office Solutions Ltd) makes no promises.

Thus,
in Harvey v Facey 1893 the
defendant was prepared to sell Bumper Hall Pen and a request to telegram his
lowest price. The defendant replied that the lowest price would be £900. It was
held that the defendant had not made an offer and that there was no contract concluded between the
parties. A more recent illustration is provided by Bowerman v Association of British Travel agents 1996.A school had
booked a holiday with a company who were a member of the ABTA .The tour
operator became insolvent and cancelled the skiing holiday, the school was
refunded the money but not the travel insurance. As a result, the school
brought a claim against ABTA to seek reimbursement of the cost of insurance in
which the Court of Appeal agreed that ABTA constituted an offer that the
customer accepted by contracting with an ABTA member.

It
is important to distinguish an offer, which is capable of creating a contract
on its acceptance, and an invitation to treat, which merely invites the other
person to make an offer, and which in turn can be accepted or rejected by the
other party. This question is an example of an offer and not an invitation to
treat, as EI and OS
are negotiating to come to an agreement to move a large quantity of computer
equipment owned by OS currently stored in a warehouse, to its main premises.
This distinction is established upon the person’s intentions; it is important
to determine is whether one of the parties has indicated a willingness to be
bound. Thus, in the case of Pharmaceutical
Society of Great Britain v Boots Cash Chemists 1953 .The Pharmacy and Poisons Act 1933 made it a criminal offence to
sell listed drugs without a pharmacist being present and could say yes or no to
the prospective buyer. If taking goods from the shelf in an early type of
supermarket made a contract, then Boots were breaking the law, as clearly the
pharmacist could not be present at every shelf .They could however be present
at the checkout, where the contract was actually made.

This
essay aims to identify the legal issues and then explore and analyse whether a
contract has been formed and if it has by what means. The two questions may be
linked as the legal issues will often be relevant to the whether a contract has
been made.

 EI and OS were in negotiations over a contract
to move computer equipment owned by OS. In which OS queried for this work to be
carried out over a weekend. On
30th  May EI sent OS an email,
quoting a price of £15,000 to complete the work over a Saturday and Sunday.
This is an offer by EI as it shows an intention to be bound
on specified terms if accepted. 

On
the same day, OS made a request for information as they made an enquiry to EI
asking what the difference in price would be if the work was carried out over a
longer period during weekdays. EI then sent a second email on 31st May quoting
a price of £12,000 to spread the work over four days during the week. Both EI’s
emails provided an order form attached, which declared that if OS wished to
accept any of the quotations that they should print off the email and sign the
attached order form and return it to them by post. Firstly, this indicates that
the particular mode of acceptance required would be through the posting of a letter.
If you ask the offeror for information or clarification about the offer, that
doesn’t extinguish the offer. Therefore, when applying this principle OS are
still free to accept the either of the offers if they want.

Secondly,
for acceptance to be valid now it must be clear and unconditional agreement to
the terms of the offer.  If it introduces
changes or new terms then it becomes a counter-offer which implies rejection of
the offer thus. In the case of Hyde v.
Wrench (1840) the defendant offered to sell a farm to the claimant for
£1,000. The claimant in reply offered £950 which the defendant refused. The
claimant then sought to accept the original offer of £1,000. The defendant
refused to sell to the claimant and the claimant brought an action for specific
performance. There was no contract. Where a counter offer is made this destroys
the original offer so that it is no longer open to the offeree to accept. The
mirror image rule states that the acceptance must precisely and unequivocally
mirror the terms of the offer. It follows that if, in accepting the offer, the
offeree adds a new term or removes or varies an existing term, this will not
constitute valid acceptance and will be regarded as a counter offer (Roach,
n.d.).

A
counter offer has two effects: A new offer is created by the former offeree,
who now becomes the offeror and the original offeror now becomes the offeree,
or the original offer is destroyed, so that the former offeree cannot
subsequently accept it. EI sent a second email on the 31st May
quoting a price of £12,000.This introduces new terms and could therefore count
as a counter offer. As previously, the original quote On 30 May was a price of
£15,000 to complete the work over a Saturday and Sunday. The issue arisen here
is whether if one party makes an offer and the offeree makes a counteroffer,
does the original offer remain open. We can conclude this as no, as a
counteroffer invalidates the original offer. As a result, the new offer in
question is now the only offer to be accepted.

The
request for information is also not a counter-offer. Enquiries as such should
not be considered as a counter offer and this is what was held in the case of Stevenson Jaques & Co. v. McLean (1880).
An iron merchant asked the defendant whether they would accept a payment of
forty over 2 months, or their longest limit before receiving a telegram of
revocation, the iron merchant accepted the defendant’s offer. Ultimately, it
was an inquiry for information. Therefore an offer was capable of being
accepted.

We
can conclude that OS was looking for a better proposition from EI. This can be
seen as an invitation to tender, which is a formal invitation to make an offer
for the supply of goods or services. Thus, in Spencer v Harding 1869 it was held that a circular distributed to
potential customers offering the defendant’s stock for sale was not in fact an
offer, but merely an invitation to buyers in general to make their offers that
could then be accepted or rejected by the defendant. This was despite the defendant
using the word offer in the circular.

On
the morning of 1st June, OS determined that the variation in price
was insufficient to be worth the greater disruption of having the work
completed during the week. As a result, OS printed off the order form attached
to the first email, signed it and posted it to EI. This can be reviewed as
acceptance of an offer. Whenever an acceptance is made by posting a letter, the
postal rule has to be considered. If the rule applies then acceptance is
effective when the letter is posted, not when it is received. The postal rule
has been developed by subsequent cases. In Household
v Grant 1879 it was applied even when the letter of acceptance was
permanently lost in the post. The court of appeal accepted evidence that the
letter of acceptance had been posted. However, the postal rule carries
limitations as in Quenerduaine v Cole 1883 the defendant made an offer by telegram which the offeree sent a
letter to accept. The issue which has arisen is whether it was reasonable to
accept by letter when the offer was made by telegram.

It
is a general rule that in order for acceptance to be effective, it must be
communicated to the offeror. The theory behind this principle is that if
acceptance can be valid without being communicated to the offeror, this would
place the offeror in an extremely difficult position as a general rule, the
communication of acceptance must actually be brought to the offers’ attention.
In Entores v. Miles Far East Corp 1955,
it was held that a contract comes into being when and where acceptance is
received.  An exception to this rule is
where the postal rule applies.  Where it is
reasonable and appropriate to use the post as a means of communication,
acceptance is deemed to be complete at the moment the acceptance is posted,
even if the letter is subsequently delayed, destroyed or lost in the post.
Authority for this is Household Insurance
v. Grant 1879 as Thesiger LJ
used Adams v. Lindsell 1818, arguing
that the post office is the common agent for both parties. Therefore if we are
applying this principle, OS posting their letter of acceptance constitutes a
binding contract.

EI
realised that they had underestimated the costs of doing the work over the
weekend, and that it should have quoted a price of £20,000. On 2nd June
an email was sent to OS stating that their quotation on the 31st May,
in their email of 30th May was no longer available for
acceptance.  In Hyde v Wrench 1840 the defendant offered to sell a farm to the
claimant for £1,000. The claimant in reply offered £950 which the defendant
refused. The claimant then sought to accept the original offer of £1,000. The
defendant refused to sell to the claimant and the claimant brought an action
for specific performance. In this question there is no contract, as once the
counter offer revoked the defendants original offer it destroys the original
offer. Therefore, OS do not have the rights to the first offer, in the same way
as Hyde did not have the rights to buy the land. As the original offer had
ceased to exist and could not be accepted.

This
is seen as a revocation. If an offer is called off by the offeror the offer is then
revoked. Once an offer has been revoked it can no longer be accepted. (Elliott
and Quinn, 2013). A revocations effective when it is received rather than when
it is sent. Therefore
no contract existed between the parties. There was no obligation to keep the
offer open until Friday since the claimant had provided no consideration in
exchange for the promise. The offeror is free to withdraw the offer at any time
before acceptance takes place unless a deposit has been paid. A similar
situation arose in Byrne v. Van Tienhoven
1880 where there was held to be
a binding contract because a letter of revocation was delayed in the post and
the offer had been accepted in the meantime. This is a reminiscent as OS letter
of acceptance was sent on 1st June whereas the revocation was made
on the 2nd June, revocation cannot be effective until it was
received on the 3rd June.

To
conclude if we are applying the postal rule there is a contract. Whenever an acceptance is made by
posting a letter, the postal rule has to be considered. If the rule applies
then acceptance is effective when the letter is posted, not when it is
received. Therefore a contract would be formed. However, if it did not apply,
acceptance would not take place until the letter was received by EI on the 3rd
of June. By this time
it would be too late as the offer was revoked EI on 2nd June. As a
result there would be no contract. This is reminiscent of the Dickson v. Dodds case
1876. The defendant offered to sell his
house to the claimant and promised to keep the offer open until Friday.
However, the defendant accepted an offer from a third party to purchase the
house. Upon hearing the news, the claimant went round to the claimant’s house purporting
to accept the offer. If we are applying this principle to the case of EI and OS,
EI first offer had been effectively revoked. Therefore no contract existed
between the parties, as there was no obligation for EI to keep their first offer
open when they realised that they had underestimated the costs of undertaking
the work, since the claimant had provided no consideration in exchange for the
promise.