Essay: Law essay – offers and counter offers

Based on the incident mentioned in the question, it is required to advise Daniel if Macho was held liable to Daniel for the breach of contract. In this context, or in the event of any dispute, it is important to identify if the necessary elements have arise as legal issues, this is because these elements are required by law in order to establish the existence of a contract, which the elements include proposal, acceptance and so on.
1.0 Macho & Daniel
1.1 Offer
The first thing that occurs when two parties decide to enter into a contract is an offer. Based on S2 (a) CA’50, offer refers to an expression of willingness to make a contract with the intention of become binding as soon as it is accepted. An offer may come in the form of written, oral, or by conduct (textbook, 2014). As stated in S2 (c) CA’50, offeror refers to the person who makes the offer, while offerer refers to the one who is accepting the offer.
In the case of Macho and Daniel, Macho (offeror) offered to sell his business, “Solid Gold Café & Bistro” to Daniel (offerer) by writing a letter to him on the 10th July 2016. Rather than invitation to treat (ITT), it is considered as an offer as it has fulfilled the criteria of an offer. First of all, the price for the sale of Macho’s business was also clearly stated which it would be sold for RM2 million. Besides, Macho has made the offer to a specific person, which in the case was Daniel. Another sign of it is an offer is that the offer was in written form where the offer letter is prepared by Macho and sent to Daniel, and lastly, it clearly stated that Macho’s business, “Solid Gold Café & Bistro” is available for sale.
Hence, it is clear that there is an offer that is made by Macho to Daniel. Both of them have communicated effectively where there is consensus between them. It is in accordance with S4 (1) CA’50, where Daniel is aware of offer that was made by Macho. Similar case is Ayer Hitem Tin Dredging Malaysia Bhd v Y.C. Chin Enterprises Sdn Bhd (1994) 2 MLJ 754, which in the court’s view, there must be consensus between both parties to identify the existence of an agreement.
1.2 Acceptance
Once an offer has been made, the existence of acceptance is needed in order to convert the offer into a promise (textbook, 2014). Based on S7 CA’50, (a) stated that an acceptance only occurs where the acceptance must be unqualified and absolute in relation to the terms that are being offered in the offer, and (b) stated that the acceptance must be in a reasonable and usual manner.
In the case of Macho and Daniel, Daniel was given one week time to make respond to Macho’s offer, Daniel then replied Macho and saying that he would only be able to afford it if the payment is in four installments. No respond from Macho, and on the 6th day, Daniel accepted Macho’s offer by sending a letter with a cheque of RM2 million.
It is then lead to the legal issue which, when Macho offers to sell its business to Daniel, did Daniel actually accept the offer? Does Daniel’s reply is a counter offer or merely a request for information? Was there binding agreement between both parties?
1.2.1 Counter offer
Counter offer is considered as a rejection of the original offer, whereas new terms are being brought to the original offer (Textbook, 2014). When Daniel replied to Macho’s offer stating that he would only be able to afford to purchase if the payment is in four installments. If the payment terms were mentioned in the original offer, for example, RM2 million must be paid in full amount, then Daniel’s replied would be considered as counter offer, because in the original offer stated that full amount must be paid, which means no installment are allowed. So when Daniel mentioned about the installment, he is more likely to bring in a new term into the agreement, hence counter offer. When there is counter offer, there will be roles reversion. Daniel is now the offeror and Macho is the offeree, which their roles are the other way round in the original offer. If it is in this case, Macho has the right to whether accept, reject or negotiate the counter offer, while the original offer that was made by Macho will be voided. Hence, there is no binding agreement between Macho and Daniel, because Macho did not respond to Daniel’s counter offer, and the law states that silence is not a form of acceptance. Furthermore, since the original offer has been voided, so even if later Daniel wishes to accept Macho’s original offer, which is to pay full amount of RM2 million, there is no legally binding contract between them.
One good illustration of counter offer would be the case of Hyde v Wrench (1840) 49 ER 132, the plaintiff introduced a new term to the original offer, i.e the price, which the original offer is destroyed and also defendant did not accept plaintiff’s counter offer. Hence, in court’s view, there was no agreement between both parties.