Introduction
A contract is defined as a legally binding agreement between two or more parties. Further, a contract can either be written or oral. Each party to a contract assumes obligations resulting from the particulars of a contract which ought to be fulfilled. The basic elements of a valid contract include, an offer, an acceptance, consideration the intention to create legal relations and the capacity to contract. Therefore, a binding contract must possess the elements listed above. Where a party fails to honor the obligations of the contract, he/she is said to have breached the contract. Some of the consequences of breach of contract include, rescission of the contract, damages or the party in breach is ordered to perform his contractual obligations.
The issue
From the given fact pattern, the issue in this case is whether Bob breached the contract between himself, Alan and by extension with Becky when he failed to honor his agreement of selling the stamp at $ 8,000.
Rule
The offer
Alan a collector of stamps made an offer to Bob to requesting Bob to sell the stamp to him at $ 500. Bob responded he would think about it. The court in Carlill v Carbolic Smoke Ball co defined what an offer is. Generally, an offer is an expression of the willingness to enter into a contract. An offer is made by one willing party known as the offeror to another party known as the offeree. If the offeree accepts an offer then it is referred to as an acceptance. A counter offer essentially means that the first offer was rejected or replaced with the new offer. A counteroffer helps the parties negotiate and arrive at better contracts where each of the parties is contented with the terms of the contract. However, a counteroffer can be differentiated from a request for information because the latter is simply a request to the offeror to make some slight adjustments to the original offer. It therefore plays a neutral role as it neither supports nor rejects the original offer. A conditional offer on the other hand, is defined as an offer that has a preexisting condition attached to it. If the offeree accepts the conditional offer, it means therefore that he has also accepted the conditions that come along with the offer. In Food Corporation of India and Another v Ram Kesh Yadav and Another court held that an offeree has the option of accepting, rejecting or making a counteroffer to the original offer. However, the offeree cannot accept a part of the offer where an offer is conditional.
Acceptance
Acceptance occurs when an offeree accepts an offer made to him or her by the offeror. The acceptance must be a response either agreeing to take up the offer as it is or rejecting the offer as well. Where an offeree rejects the offer but sends it to the offeror with some new terms, then the offeree will be said to be making a counteroffer. The courts in Hyde v Wrench established that a counteroffer destroys the original offer. Once an offer is accepted it becomes a promise. It is a promise to fulfill the terms in the offer for consideration.
Consideration
Similarly, consideration refers to the value given for the exchange of the promise in a contract. Consideration is offered by the offeree to the offeror. Consideration may take various forms. It might possess monetary value or not. Past consideration executed consideration and executory consideration are forms of considerations. Once consideration has been offered, the promise can be rendered enforceable. The court in Thomas v Thomas established that consideration must be something that possesses value. It should be something that is valuable to a reasonable man. Therefore, consideration that does not possess value before the eyes of the law is not sufficient consideration.
Breach
In contract law, breach of contract can be defined as the failure to honor the terms of the contract. Similarly a party who is in breach can be said to have overlooked or disregarded the obligations set out in the terms of the contract. The party who has breached the contract is liable for the breach because a contract gives rise to legal obligations thus it is enforceable. However, not all cases relating to breach of contract are brought to courts; the parties may decide to settle the matter out of court.
The consequences and remedies for breach of contract
For breach of contract to be sufficiently established, the following factors must be present. First, there must be an existence of a valid contract between the parties. Breach cannot be established in cases where the existence of a valid contract cannot be proved. The second factor is that the plaintiff must prove to the court that they performed their required part of the contract. They must establish that they did not participate in causing the breach rather they fulfilled all their contractual obligations arising from the contract. The third factor is they must establish the defendant’s breach. It is not sufficient to just claim that the defendant breached his contractual duty rather the plaintiff should establish the breach and further give a detailed account of the loss occasioned as a result of the breach. The fourth factor constituting breach is the awarding of damages. Where the existence of breach has been sufficiently proven, the court may award damages to the plaintiff. Additionally, the consequences for breach of contract include an order for specific performance, restoration to the state in which the claimant was in before the breach took place, reformation and monetary damages. Rescission only takes place where the breach is a fundamental one.
Analysis
From the given fact pattern, Alan made an offer to Bob for a stamp at $500. After giving it thought, Bob declined the offer and instead requested Alan to buy the stamp at $8000. Since an offer creates an intention to create legal relations, a counter offer may bring the contract to an end should the offeror decline the new terms of the contract. As it has earlier been established, in Hyde v Wrench, the issue in this case was whether a valid contract existed where a counter offer had been made. In response, the court invalidated the claim that the contract was made invalid by a counter offer. A counter-offer destroys the original offer. Thus the original offer becomes void. Again, Bob made a conditional offer to Alan when he wrote to him instructing Alan to pay him the money in person by July 1. From our given fact pattern, it is evident that after Alan made an offer to Bob, Bob made a counter offer to Alan which contained certain conditions therefore making it a conditional offer. From the fact pattern, Bob and Alan had entered into a contract because Alan accepted the conditional offer given by Bob. As outlined in the case Food Corporation of India and Another v Ram Kesh Yadav and Another, once you accept a conditional offer you are therefore bound by all the conditions in the offer. Alan had consequently breached the terms of the contract by introducing Debbie as a party to the contract without informing Bob.
Where there is breach, the claimant Debbie should sue the breaching party Bob who is also the defendant.
Therefore, since Debbie cannot prove the existence of a valid contract between Bob and herself, she cannot therefore sustain a claim of breach of contract against Bob who was initially in a contract with Alan.
Conclusion
Since Bob’s refusal to sell the stamp to Debbie cannot be adequately proven to constitute a breach of contract, Bob cannot therefore be held liable. The consequences resulting from breach of contract cannot therefore be applied in the given case. However, Debbie can recover her $1,000 from Alan because she did not get the stamps she sought. Further, because she fully relied on the existing contract between Bob and Alan thus agreeing to pay Alan the money for the stamp.
BIBLIOGRAPHY
Carlill v. Carbolic Smoke Ball Co (1892) EWCA Civ 1.
Food Corporation of India and Another v. Ram Kesh Yadav and Another (2007) 3 AWC 2857 SC.
Hyde v. Wrench (1840) EWHC Ch J90.
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