What is required under english law to form a legally binding contract?
In order to create a legally binding contract under English law, an agreement between two parties must be found. In essence this agreement is constituted by an offer in clear and uncertain terms coupled with an equally unequivocal acceptance. Within the agreement the terms must be sufficiently clear and certain, there must be an intention to create legal relations evident and there must be consideration.
To establish whether or not a contract exists between Tony, George and Crawford, we must first establish at what stage in the correspondence a valid offer was made between the parties. It may be argued that the first correspondence in the question would not be considered an offer but merely an invitation to treat in line with Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd (1953). Furthermore the facts of this problem may be distinguished from Lefkowitz v. Great Minneapolis Surplus Store (1957) where an advert stating ‘Saturday 9 a.m. sharp: 3 brand new fur coats, worth to $100; first come first served, $1 each’ was held to be an offer. The reason given for deciding that this advert constituted an offer was that it was possible to identify a specific limited person who was able to accept the offer i.e. the first three customers. Although the facts in the problem state a time limit for reply, as was so in Lefkowitz, the facts do not go so far as to identify a specific identifiable party. Had the first letter stated that the contract would be offered to the most competitive bid received before 12 noon on the 30th August it may have been possible to categorise the letter as an offer. On the facts however, the letter is merely speculative and it is clear from the language used e.g. ‘requesting’ and ‘proposals’ that it was not intended to be an offer.
The next issue in the problem question is whether or not Crawford’s letter would constitute a valid offer for the purpose of contract formation. In order to constitute a legally binding offer, the letter must be clear in its language and an intention to be bound must be evident Gibson v. Manchester City Council (1979). It may be submitted that Crawford’s letter represents an offer because it is specific in its wording and contains a price quotation. The facts state that Crawford ‘promised’. This signifies an intention to be bound on their part and fulfils the requisite specificity. Furthermore Crawford’s inclusion of initial designs for the project indicates an intention to be bound as they have already spent time and money on those initial designs.
Thirdly we must examine whether or not Tony and George’s postal acceptance is adequate to form a legally binding contract. An acceptance must be final and must accept all the terms of the offer Butler Machine Tool Co. v. Ex-Cell-o Corporation Ltd (1979). It may be submitted that on the facts Tony and George’s acceptance accepts all the terms of the offer as it states that the job should be carried out for the same price quoted by Crawford. Also the acceptance states that work should begin immediately. It may be argued that this was implied in the terms of the offer as Crawford stipulate to complete the project within 3 months. It may be implied that in order to do this they must start the project immediately.
When an acceptance is posted it may benefit from the postal rule. Adams v. Lindsell (1818) established that if acceptance is posted it is effective as of the time it is posted. However there are limitations on the application of the postal rule and should the facts fall foul to these, the postal rule will not apply making the acceptance effective only at the time of receipt. If the postal rule applies Tony and George’s acceptance will take effect at the time it is posted i.e. at 11:45 on the 30th August 2003. If this is the case a valid contract will be formed at this point in time and Tony and George will indeed have a legally binding agreement with Crawford, which they can rely on.
In order for the postal rule to apply the post must be a reasonable mode of communication of acceptance to the offer Quenerduaine v. Cole (1883). It may be argued on the facts that as Crawford specify that a reply by post is necessary that this is an appropriate means of communicating the acceptance.
If the oferor has given the correct address to reply to, the acceptance must be addressed correctly in order for the postal rule to apply Adams v. Lindsell (1818). On the facts Tony and George wrongly addressed the acceptance letter. Thus it must be concluded that the postal rule does not apply. Therefore Tony and George’s acceptance is only effective on the date that it is received by Crawford. The acceptance will create a contract if it can be found that Crawford’s offer is still open at this time.
If the offer does not stipulate a time as to when the offer will lapse, the offer will lapse after a reasonable time has passed Ramsgate Victoria Hotel Co. Ltd v. Montefiore (1866). On the facts it may be argued that the one-week gap between offer and acceptance is not long enough to constitute a lapse of the offer. Thus it may be submitted that Crawford’s offer is still open at the time of acceptance and there is therefore a valid agreement between Tony, George and Crawford at the date that the acceptance was received.
Consideration must be present in order to make this agreement legally binding. Currie v. Misa (1875) provided the following definition of consideration: ‘A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility, given suffered or undertaken by the other.’ On the facts consideration passes between the parties in the form of Crawford’s profit of £105,000 and responsibility to undertake the project and Tony and George’s benefit of having the promise of the completed work.
In conclusion a valid legally binding contract may be found to exist between Tony, George and Crawford. There is a valid agreement as an offer and acceptance coincide, the terms are clear and certain, there is an intention to create legal relations and there is consideration present.
As this dispute involves a figure of more than £50,000 the case would not be heard in a county court but in the Queen's Bench division of the High Court.
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