The Offer Contract Agreement

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Offer Contract Agreement

Peter acquired a Degas painting. On 2nd May, he sent a telex message to Manjit that he was prepared to sell the Degas painting to her for £240,000, but that he “must receive an answer within seven days.” Manjit replied immediately by telex, stating that she was willing and that she would pay for it in monthly instalments of £20,000 each. On 3rd May, Manjit received a telephone message from Peter that he would prefer six monthly payments of £40,000 for the painting. The following day, Manjit sent a letter to Peter which stated, “I agree to pay monthly payments. Please arrange for the delivery of the painting on 10th May.” Unfortunately, her letter reached Peter on 12th May. On 11th May, in response to a magazine advertisement Manjit contacted the seller Victoria over the phone and left a message on her answering machine, stating that she would buy the Van Gogh painting for £201,000. On 15th May, both Peter and Victoria arrived at Manjit’s office, each claiming that she was contractually bound to buy their respective paintings. As Manjit had received a letter from her accountant that morning warning that her business was in some difficulty, she now states the she does not wish to buy either painting. Advise Manjit. In English Law in order to form a contract, the following elements have to be present:

  • A valid offer has been proffered by the first party to the other party or parties.
  • The offer has been accepted unchanged by the second party or parties and this has been communicated to the offeror.
  • There is an intention by all parties to create legal relations, when they enter into the contract and the parties have the capacity to contract.
  • The promises made within the contract are for valuable consideration.
  • The terms of the contract are certain.

An offer is defined as an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed, the “offeree”. The “expression” referred to in the definition can have various forms, such as a letter, newspaper, fax, email, conduct (https://en.wikipedia.org/wiki/Offer_and_acceptance), etc., and the main criterion is that it has to perforce communicate the basis on which the offeror is prepared to contract. The courts will judge the aspect of intention, referred to in the definition, objectively. In Smith v. Hughes it has been emphasized that the important thing is not a party’s real intentions but how a reasonable person would view the situation (https://en.wikipedia.org/wiki/Offer_and_acceptance). This is attributable to the reason that in accordance with common sense neither party would wish to breach their side of the contract if it would make them culpable to damages. Acceptance is a final and unqualified expression of assent to the terms of an offer (https://en.wikipedia.org/wiki/Offer_and_acceptance).

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