LW2903 Business and Law – Answer Guide

The legal issue is whether there is a contract between Karen and Julia.

A contract is defined as a legally binding agreement between two or more parties. Formation
of a valid contract requires an offer that is accepted before it is revoked. In addition to an
offer and acceptance - consideration and intention to create legal relations must also be
present to form a legally binding contract. [Introduction Issue + Definition = I+D]

From the facts, it is clear that the letter Karen sent on Wednesday 4 January 2023 constitutes
an offer. It is a definite proposal to sell “the stuff” at $40,000 to Julia. This can be compared
with the case of Partridge v Crittenden (1968). The case was concerned with an
advertisement in the periodical “Cage and Aviary Birds” under general heading “Classified
Advertisements” which contained, amongst other things, the words “Quality British
Bramblefinch cocks, Bramblefinch hens 25 s. each”. The case appears to be similar to our
question, but the distinction here is that Karen and Julia knew each other beforehand, and
the letter serves as direct communication between Karen to Julia. Similar to the case of
Carlill v Carbolic Smoke Ball Co [1892] where an advertisement constitutes a definite
promise, equally the letter sent by Karen would be regarded as a definite promise to sell her
belongings (38 items) at her flat for the price of $40,000. A reasonable person under these
circumstances would conclude that Karen communicated a willingness to be bound by these
terms. [Offer = O]

On Monday 9 January 2023, Julia’s reply by letter was a counteroffer and the effect would be
to destroy the original offer, as in the case of Hyde v Wrench (1984). She made it clear that
she is interested, and she proposed to buy the remaining 36 items for $30,000. Karen received
the letter on Tuesday 10 January 2023. She attempted to accept the offer by calling Julia.
However, there was no direct communication between them, and Karen left a voicemail.
[Counteroffer = CO]
The next issue is when communication takes place. Unfortunately, there is no clear authority
regarding telephone voicemail communication. In Entores Ltd v Miles Far East Corporation
(1955), it was said that acceptance occurs when and where the message of acceptance is
received. Whilst it is not a perfect analogy, arguably a message left on the answering machine
is communicated when it is received. In The Brimnes (1975) the Court of Appeal held that a
message by telex must have been regarded as having been received in the normal course of
business hours. But the case concerned the termination of a contract, not its formation, and
moreover it was in the context of business dealings. So even when the position is unclear
here, Karen also sent a letter on the same day. [Communication of Acceptance = A]
[Instantaneous Communication = IC]
Karen validly accepted Julia’s offer by replying to Karen’s letter on Monday 4 July 2022. To
be valid, acceptance must come before the offer has been revoked. It also requires an
expression of willingness to be bound by the terms stipulated by the offeror and it must be
effectively communicated. To be binding, an acceptance of the offer, as a general rule, must
be actually brought to the offeror’s knowledge. Where the offeror indicates that acceptance
of the offer must be made by a particular method only, the acceptance must be made by that
method. Otherwise, the offeree is entitled to validly communicate his acceptance in an
equally or more efficacious or faster method. In Tinn v Hoffman (1873), the offeree
requested “reply by return of post”. The court held that “that does not mean exclusively a
reply by letter or return of post, but one may reply by telegram or by verbal message or by
another means not later than a letter written by return of post”. So the emphasis is on the
 speed of communicating the acceptance rather than on the means. Here, it is reasonable to
reply by post since Julia did not stipulate to exclude acceptance by post. Karen’s acceptance,
according to the “postal rule”, is deemed to be complete when the properly stamped and
addressed letter of acceptance is posted, not when it is delivered to the offeror’s address, or
received by Julia. This is true even though the letter of acceptance is delayed or lost. This
rule was laid down in the case of Adams v Lindsell (1818). The court held there was a
binding contract the moment the letter of acceptance was posted. The rationale of the postal
rule is to promote certainty and expediency in commercial transactions.1** [Postal Rule = P]

Thus, the only question left is whether Julia can still revoke the offer on Wednesday 11
January 2023. Based on the facts, Julia changed her mind and informed Karen to forget the
deal, but as mentioned above, acceptance is effective when the letter is posted. The judge in
Adam v Lindsell stated “if the defendants were not bound by their offer when accepted by
the plaintiffs till the answer was received, then the plaintiffs ought not to be bound till after
they had received the notification that the defendants had received their answer and assented
to it. And so it might go on ad infinitum”. The facts indicated Karen received the letter later
that week, this has little relevance because arguably the contract was formed on Tuesday 10
January 2023 when Karen posted the letter to Julia. [Revocation = R]

The agreement here was also supported by consideration on both sides. In the case of Currie
v Misa (1875), Lush J said “a valuable consideration must constitute either a benefit
accruing to one party, or a burden suffered or undertaken by the other”. Julia promised to
pay Karen $30,000 by agreement to buy her stuff and Karen promised to sell “the stuff from
her flat in exchange for Julia’s promise to pay $30000. A contract was formed between
them because there’s an intention to create legal relations which would then turn the
agreement into a legally binding contract. The court would consider this objectively. The
fact that one party claims that it thinks that the agreement will not have any legal effect is
irrelevant. [Consideration + Intention]

A contract was formed in this case and Karen can recover damages from Julia if she wishes
to do so. According to Lord Diplock in the case of Photo Production Ltd v Securicor
Transport Ltd [1980], where a party breaches, the party has a secondary obligation to pay
monetary damages to the nonbreaching party and Karen is entitled to damages that will put
her into the position she would have been in had the promise been performed. [Conclusion]

1
The postal rule was developed by the case of Adam v Lindsell is concerned with the sale of wool by the
defendant to the plaintiff. The offer letter sent by the defendant on 2 September was wrongly addressed and so the
plaintiff did not receive the letter till 5 September. The letter of acceptance was received by the defendant on 9
September, which was 2 days later than expected. The wool was already sold on 8 September to another buyer.
The court held the offer had been accepted as soon as the letter was posted. The contract between the plaintiff and
defendant was formed before the sale on 8 September.

The rationale of this rule is to do with the intention of the parties (meeting of the minds), that when the letter of
acceptance is posted (Henthorn v Fraser) the relevant intention comes into existence. That is the reason why some
scholars, including Lord Wilberforce in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-Gesellschaft mbHf
stressed that issues like delay, incorrect address or technical problems may arise - but it all boils down to the
intention of the parties. The reality is, when the plaintiff posts a letter of acceptance, neither the plaintiff nor the
defendant will know that the letter was wrongly addressed. The example given in the textbook is when the letter
was wrongly addressed, and it was returned to the sender - that's why the author of the book said there is no
contract here. During the lecture, I mentioned the best way to protect the offeror is to exclude acceptance by post
OR for the offeree to post the letter of acceptance by registered post, so the receipt can serve as evidence to show
the letter was sent and it was correctly addressed. That way, the possible risks mentioned above can be
eliminated.