CONTRACT LAW

Q&A

Private Law Tutor Publishing

 CONTRACT LAW Q&As
Private Law Tutor Publishing
Chapter 1 - Introduction/Overview

Chapter 2 and 3 – offer/Acceptance/Revocation

Question and Answers
 Offer and Acceptance problem 1
 Offer and Acceptance Problem 2
 Battle of the Forms Essay
 Postal Rule and Instantaneous Communication Essay

Chapter 4 - Consideration
Question and Answers
 Consideration Essay Question
 Consideration Problem Question

Chapter 5 – Duress
Question and Answer
 Duress Essay Question

Chapter 6 – Promissory Estoppel

Question and Answer
 Promissory Estoppel Essay

Chapter 7 - Intention to Create Legal Relations

Question and Answer
 Problem Question Intention to Create Legal Relations

Chapter 8- Privity of Contract

Question and Answer
 Privity of Contract Problem Question

Chapter 9 - Terms of the Contract

Question and Answers
 Problem question on Implied Terms
 Terms of Contract Essay Question
 Terms of Contract Problem Question

Chapter 10 - Exemption Clauses

Question and Answers
 Unfair Contract Terms Act 1979 Essay
 Exclusion clause Problem Question

Chapter 11 – Misrepresentation
Question and Answer
 Misrepresentation Problem Question

Chapter 12 - Mistake
Question and Answer
 Mistake Problem Question

Chapter 13 - Remedies
Question and Answers
 Remedies Problem Question

2
 Chapter 1 - Welcome/Introduction/Overview
This book provides you with basic information as a basis for you
to form your own critical opinions on this area of law. Once you
have mastered the basics, you will be inspired to question contract
principles in your essays and apply them in mock client advisory
scenarios. Again, for your convenience, we have provided you
with examples of how to answer such questions and how to apply
your knowledge as effectively as possible to help you get the best
possible marks.

This aid is a fully-fledged source of basic information, which tries

to give the student comprehensive understanding for this module.
However, it is recommended that you compliment it with the
further reading suggestions provided at the end of each topic, as
well as read the cases themselves for more in-depth information.
This book provides an analysis of the basic principles of modern
Contract Law. The following is a summary of the Book content:

 An introduction to the Law of Contract;

 How contracts are formed;
 What goes into a contract: Its content;
 The means of obtaining remedies when there is a breach of
contract;

The aim of this Book is to:

 Provide an introduction to anyone studying or interested in

studying Law to the key principles and concepts that exist
in the Law of Contract.
 To provide a framework to consider Contract Law within
the context of examinations.
 Provide a detailed learning resource in order for legal
written examination skills to be developed.
 Facilitate the development of written and critical thinking
skills.
 Promote the practice of problem solving skills.
 To establish a platform for students to gain a solid
understanding of the basic principles and concepts of

3
 Contract Law, this can then be expanded upon through
confident independent learning.

Through this Book, students will be able to demonstrate the ability

to:

 Demonstrate an awareness of the core principles of

Contract Law.
 Critically assess challenging mock factual scenarios and
be able to pick out legal issues in the various areas of
Contract Law.
 Apply their knowledge when writing a formal assessment.
 Present a reasoned argument and make a judgment on
competing viewpoints.
 Make use of technical legalistic vocabulary in the
appropriate manner.
 Be responsible for their learning process and work in an
adaptable and flexible way.

Studying Contract Law

Contract is one of the seven core subjects that the Law Society and
the Bar Council deem essential in a qualifying law degree.
Therefore, it is vital that a student successfully pass this subject to
become a lawyer. Additionally, a knowledge and understanding of
contractual principles is needed in order to study other law subjects
such as company, employment, international trade, commercial, or
even family law. The primary method by which your
understanding of the law of contract will develop is by
understanding how to solve problem questions. You will also be
given essay questions in your examinations. The methods by
which these types of question should be approached are somewhat
different.

Tackling Problems and Essay Questions

There are various ways of approaching problem questions and

essay questions. We have provided students with an in-depth
analysis with suggested questions and answers at the end of each
chapter.

4
Chapter 2 and 3 - Offer and Acceptance and
Revocation
Questions and Answers

 Offer and Acceptance problem 1

 Offer and Acceptance Problem 2
 Battle of the forms essay
 Postal rule and instantaneous communication essay

5
 Offer and Acceptance Problem Question One
On 9th December 2009, Abdul placed a notice on the University
noticeboard as follows:

“Second-hand computer. Good condition. Worth £1,000. Selling

for £175. Will sell to the first person to notify me by 13th January
2010. Telephone: 020 7320 9876. Email [email protected]
Address: 1A, High Street, New Town, London E1.”

Samson posted a letter on 8th January 2010, by first class recorded

delivery post, agreeing to buy the computer for £175. Owing to
the negligence of the Post Office, the letter was delivered to Abdul
only on 14th January 2010.

Diana read the notice, telephoned Abdul on 12th January and left a
message on his answer-phone, agreeing to buy the computer for
£175. She also asked whether she could pay for the computer
when she received her student loan money. Abdul listened to this
message only on 14th January.

Maggie sent an email on 10th January, agreeing to buy the

computer for £175. Abdul read the email on the 12th and sent a
reply to Maggie, giving her an appointment to collect the computer
on 16th January at 8 pm. Maggie responded by email, saying that
she would pay the money when she collects the computer.

On 16th January, a leading computer shop in London decides to do

a clearance sale and is selling good, brand new computers at £150
each.

Samson, Diana, and Maggie no longer wish to buy Abdul’s

computer.

Advise Abdul whether Samson, Diana and Maggie are under a

contractual obligation to buy his computer.

6
 Offer and Acceptance Problem Question One:
Answer
Introduction

This paper is an advice for Abdul, Samson, Diana and Maggie in

relation to the recent negotiation in relation to the sale of the
computer. First, this paper will advise the parties as to whether a
legally enforceable contact has been formed. The paper will do this
by advising on the issue of the advertisement, and whether this will
be viewed by the courts as a unilateral offer or an invitation to
treat. Second, this paper will discuss the issue of Samson’s
acceptance by post, using the relevant case law. Third, this paper
will discuss the issue of whether Diana’s message was capable of
acceptance. Fourth, this paper will critically discuss whether
Maggie’s acceptance through email was valid. Lastly, this paper
will conclude its findings.

Unilateral offer or invitation to treat

For a contract to exist one party (“the offeror”) needs to make a

clear and certain offer and the other party (the offeree) needs to
communicate their equally clear and unequivocal acceptance. It is
important to establish whether the advertisement placed on the
notice board is an invitation to treat or an offer. If it is an offer, it
will be capable of being accepted by the parties. However, if it is
an invitation to treat, the parties must make the offer to Abdul,
who may then choose to accept or reject it.

On 9th December 2009, Abdul, placed a notice on the University

notice board as follows: “Second-hand computer. Good condition.
Worth £1,000. Selling for £175. Will sell to the first person to
notify me by 13th January 2010. Telephone: 020 7320 9876.
Email [email protected] Address: 1A, High Street, New Town,
London E1.”

Generally, advertisements are regarded by the courts as statements

inviting further negotiations or invitations to treat. An example of

7
this was seen in Partridge v Crittenden1 where a notice reading
‘Bramblefinch cocks and hens, 25s each’ was placed in the
classified advertisement page of a periodical. The Court of Appeal
held that newspaper advertisements are ordinarily to be treated as
invitations to treat and not offers. The logic of this decision was set
out by Lord Parker CJ, who noted the “business sense in
[advertisements] being construed as invitations to treat and not as
offers”2. Moreover, Lord Parker CJ in agreement cited Lord
Herschell in Grainger & Son v Gough3, where he made the point
that it would be wrong to regard these types of advertisements as
offers because “the merchant might find himself involved in any
number of contractual obligations to supply wine of a particular
description which he would be quite unable to carry out,” because
the merchant would have a limited supply.

A possible line of argument that might be raised by the parties is

that this advertisement constitutes a unilateral contract. A
unilateral offer is where one party makes an offer or proposal,
which is open to the world and is capable of acceptance by anyone.
The other party ‘accepts’ the offer by performing the act in
accordance with the requirements of the offer. Using Carlill v
Carbolic Smoke Ball Co.4, which is the authority on unilateral
contracts, it can be argued the advertisement is in very firm terms
and because the price and description of the computer are stated, it
requires no further negation and is capable of being accepted by
performance of payment. The advertisement states Abdul “[w]ill
sell to the first person to notify [him] by 13th January 2010”. This
may be interpreted by the court to be a unilateral offer.

However, the opposing argument to this can be drawn from what

was argued by Finlay, Q.C., and T. Terrell for the defendant
Smoke ball company in Carlill that “the offer, the terms of which
are too vague to be treated as a definite offer”5. This argument is
on a balance of probabilities likely to prevail because the
advertisement is not clear, precise and unequivocal. For example,
although the advertisement has a good description of the computer,

1
[1968] 1 WLR 1204
2
Partridge v Critenden [1986] 1 WLR 1204 per Lord Parker para 1209
3
[1896] AC 325
4
(1893) 1 QB 256
5
(1893) 1 QB 256 at p 257

8
it lacks information about the way in which acceptance should take
place through performance or the way in which payment should be
made, i.e. how is Abdul to be contracted. It is, therefore, merely an
invitation to treat and not an offer. This means that the parties must
make the offer to Abdul, who can choose to accept or reject it.

Furthermore, Abdul is stipulating when acceptance must take

place. This would suggest the offer is only open until 13th January
2010 and will lapse after this time. The leading case on this point
is Ramsgate Victoria Hotel Co. v Montefiore, in which the
courts stated, even an offer that has not been formally withdrawn
would expire after “a reasonable time”. In this case, the offer was
for the sale of shares and the court felt six months was beyond
what was reasonable.

Samson

Samson has posted a letter on 8th January 2010 by first class

recorded delivery post, agreeing to buy the computer for £175.
Owing to the negligence of the Post Office, the letter was delivered
to Abdul only on 14th January 2010. If the advert is deemed a
unilateral offer, then acceptance is normally effectual and the
contract binding once acceptance is received by the offeror.
However, the courts have introduced the postal rule to overcome
the problem of the time a letter spends in the postal system. The
problem with the postal system is that it creates a period of
uncertainty for the parties, because the offeror is unaware if the
offer has been accepted and the offeree is unaware whether the
offer has been revoked. The postal rule was laid down in Adams v
Lindsell. 6 Where post is deemed to be the proper means of
communication, the acceptance takes effect from the moment the
letter of acceptance is properly posted.

We are not told whether the post was Abdul’s preferred method of
communication. It would appear the postal rule that applies
Samson’s acceptance is valid, even though it was only read by
Abdul on 14th January 2010. An illustration of this was seen in
Henthorn v Fraser.7 Fraser offered, in writing, to sell certain

6
(1818) 1 B & Ald 681
7
[1892] 2 Ch 27

9
houses to Henthorn, with the offer to remain open for 14 days.
Henthorn received the offer in person. The next day, at midday, the
society posted a letter to Henthorn revoking the offer. At 3:50pm,
Henthorn posted a letter to the society accepting the offer. At
5:00pm, Henthorn received the society's revocation. The court in
this case held a contract was made at 3:50pm when Henthorn
posted his letter of acceptance.

Therefore, applying both cases above, it would appear Samson has

benefited under the postal rule and accepted the offer and has a
binding contract. However, the lawyers for Abdul may
alternatively argue that Samson should not be allowed to benefit
under the postal rule and there is no binding agreement, because
the advert was at all times an invitation to treat; therefore, his letter
will be construed as an offer. The authority for this proposition is
Thornton v Shoe Lane Parking Ltd8, which concerned the
purchase of a ticket from the machine where he parked his car. In
this case, Lord Denning went to great lengths to describe where an
offer takes place and where an acceptance takes place.

Diana

Diana read the notice, telephoned Abdul on 12th January and left a
message on his answer-phone, agreeing to buy the computer for
£175, but asked whether she could pay for the computer when she
received her student loan money. Abdul listened to this message
only on 14th January. Again, if the advertisement is deemed
invitation to treat using Thornton v Shoe Lane Parking Ltd,
Diana’s telephone call will be an offer, which Abdul can choose to
accept or reject. If the court views this as a unilateral contract, then
the offer of £175 could be a binding acceptance.

However, a reason why there is no binding acceptance is because

acceptance must communicated. Here, Abdul listened to this
message only on 14th January once the offer had expired. The onus
is on Diana to communicate acceptance. This principle is found in
the case of Entores v Miles Far East 9 where Lord Denning said:

8
[1971] 2 QB 163
9
[1955] 2 Q.B. 327

10
 “Suppose, for instance, that I shout an offer to a man
across a river or a courtyard but I do not hear his
reply because it is drowned by an aircraft flying
overhead. There is no contract at that moment. If he
wishes to make a contract, he must wait till the
aircraft is gone and then shout back his acceptance
so that I can hear what he says. Not until I have his
answer am I bound.”10

Another reason why the courts will not submit to the view that this
is a unilateral offer and Diana’s message is a valid acceptance is
because Diana has varied the contract by asking for late payment.
One of the general principles in contract law is that the acceptance
must mirror the offer. The “mirror image rule” stipulates that, if
Diana wants to accept the offer, she must accept an offer exactly,
without any modifications; because Diana has changed the offer,
this hypothetically becomes a counter-offer that kills the original
offer, as seen in the case of Hyde v. Wrench.11 Therefore, we are
left in the same position that Diana’s message is an offer that
Abdul can either accept or reject. Diana may argue that this was
only a request for further information as in Stevenson v McLean,
in which the judge said there was no counter-offer, merely an
enquiry that should have been answered. This line of argument is
unlikely to succeed, however, because in Stevenson v McLean, a
variation of delivery was sought. Here, there is late payment that
is varying the contract.

Maggie

Maggie sent an email on 10th January agreeing to buy the

computer for £175. The advertisement is deemed a unilateral offer
that will be binding. However, this is unlikely because it may have
already have been sold. Thus, Maggie’s email will be an offer.
Abdul read the email on the 12th with the prescribed period of
acceptance Ramsgate Victoria Hotel Co. v Montefiore and sent a
reply to Maggie giving her an appointment to collect the computer
on 16th January at 8 pm. This can be seen as the acceptance of the
offer. Thornton v Shoe Lane Parking Ltd. Maggie responded by

10
[1955] 2 Q.B. 327 at 332
11
(1840) 3 Beav 334

11
email, saying that she will pay the money when she collects the
computer, which can be seen as an acknowledgement of the
acceptance.

Conclusion

Abdul has no contract with Samson because he should not be

allowed to benefit under the postal rule, and there is no binding
agreement because the advert was at all times an invitation to treat.
Abdul has no contract with Diana because acceptance must
communicated by Diana. Here, Abdul listened to this message
only on 14th January once the offer had expired. Also, Diana varied
the offer and made a counter offer. Abdul has a binding contact
with Maggie.

12
 Offer and Acceptance Problem Question Two
On Monday, Golden Antiques places the following advertisement
on their website: ‘For sale, three Victorian style beds, gorgeous,
£5000 each, cash, will brighten up any bed room!’

David, the manager of White Halls Ltd. Email Golden Antiques,

immediately replies: ‘White Halls Ltd. Will buy all three beds at
£4500 each, please advise if credit facility is available’.

On Tuesday morning, Golden Antiques replies by email to say,

‘We are not prepared to sell for less than £5000 each. Credit
facility only available if your grantor is acceptable to us. Please
confirm by close of business today if interested’.

On Tuesday afternoon, David faxes Golden Antiques to say he is

willing to accept their original terms and will buy all three beds at
£5000 each. He also faxes a letter he receives from Black Halls
Ltd. (the guarantor) which states: ‘It is our policy to ensure that
our subsidiary, White Halls Ltd., remain solvent at all times”.
However, the fax was not properly transmitted, as indicated by the
status report. David then posts a letter at 5pm accepting Golden
Antiques’ terms on Tuesday evening, although he knows there is a
postal strike that day.

Roger, an accountant, telephones Golden Antiques on Wednesday

morning stating that he wants to buy Victorian beds. He persuades
the manager of Golden Antiques to sell the beds to him, on the
basis that he had prepared the financial accounts for Golden
Antiques the year before for half the fee he normally charges.
Golden Antiques agrees to sell to Roger, so they send David a fax
on Wednesday evening saying that the beds are no longer available
for sale.

Golden Antiques receive David’s letter at 3.45pm on Thursday.

David does not read the fax from Golden Antiques until 4.00pm on
Thursday.

Advise the parties as to their legal positions.

13
 Offer and Acceptance Problem Question Two:
Answer
Introduction

This paper is an advice for Golden Antiques, David, the manager

of White Halls Ltd., and Roger, the accountant, (“the parties”) in
relation to the recent negotiation regarding the sale of three
Victorian style beds. This paper will advise the parties as to
whether a legally enforceable contact has been formed. The paper
will do this by first, advising on the issue of the advertisement, and
whether this will be viewed by the courts as a unilateral offer or an
invitation to treat. Second, this paper will advise whether a valid
offer has been made by Golden Antiques. Third, this paper will
critically discuss whether David’s acceptance through fax was
valid. Fourth, this paper will critically discuss the issue of David’s
acceptance by post, using the relevant case law. Fifth, this paper
will discuss the issue of the sale of the beds to Roger and whether
this agreement provided the necessary consideration. Sixth, this
paper will discuss whether Golden Antiques revocation took place
before David’s acceptance. Lastly, this paper will conclude its
findings.

Unilateral offer or invitation to treat

For a contract to exist one party (“the offeror”) needs to make a

clear and certain offer and the other party (the offeree) needs to
communicate their equally clear and unequivocal acceptance. It is
important to establish whether the advertisement placed on their
website is an invitation to treat or an offer. If it is an offer, it will
be capable of being accepted by David. However, if it is an
invitation to treat, David must make the offer to Golden Antiques
who may then choose to accept or reject it. On Monday, Golden
Antiques places the following advertisement on their website ‘For
sale, three Victorian style beds, gorgeous, £5000 each, cash, will
brighten up any bed room!’.

Generally advertisements are regarded by the courts as statements

inviting further negotiations or invitations to treat. An example of

14
this was seen in Partridge v Crittenden12, where a notice reading
‘Bramblefinch cocks and hens, 25s each’ was placed in the
classified advertisement page of a periodical. The Court of Appeal
held that newspaper advertisements are ordinarily to be treated as
invitations to treat and not offers. The logic of this decision was set
out by Lord Parker CJ who noted the “business sense in
[advertisements] being construed as invitations to treat and not as
offers”13. Moreover, Lord Parker CJ in agreement cited Lord
Herschell in Grainger & Son v Gough14, where he made the point
that it would be wrong to regard these types of advertisements as
offers because “the merchant might find himself involved in any
number of contractual obligations to supply wine of a particular
description which he would be quite unable to carry out,”, because
the merchant would have a limited supply. Ewan Mckendrick
points out “this argument is not conclusive because it could be
implied that the offer is only capable of acceptance while stocks
last”.15

A possible line of argument that might be raised by Golden

Antiques is that this advertisement constitutes a unilateral
contract.16 A unilateral offer is where one party makes an offer or
proposal that is open to the world and capable of acceptance by
anyone. The other party ‘accepts’ the offer by performing the act
in accordance with the requirements of the offer. Using Carlill v
Carbolic Smoke Ball Co.,17 which is the authority on unilateral
contracts, it can be argued the advertisement is in very firm terms,
and because the price and description of the bed is stated, it
requires no further negation and is capable of being accepted by
performance of payment. 18

However, the opposing argument to this can be drawn from what

was argued by Finlay, Q.C., and T. Terrell for the defendant
Smoke ball company in Carlill that “the offer, the terms of which
are too vague to be treated as a definite offer”19. This argument is
12
[1968] 1 WLR 1204
13
Partridge v Critenden [1986] 1 WLR 1204 per Lord Parker para 1209
14
[1896] AC 325
15
Mckendrick E, Contract Law, Palgrove Macmillan Law Masters 7 th Ed
16
G.H. Treitel, The Law of Contract, 11th ed
17
(1893) 1 QB 256
18
G.H. Treitel, The Law of Contract, 11th ed
19
(1893) 1 QB 256 at p 257

15
on a balance of probabilities likely to work because the
advertisement is not clear, precise and unequivocal. For example,
although the advertisement has a good description of the bed, it
lacks information about the way in which acceptance should take
place or the way in which payment should be made. It is, therefore,
merely an invitation to treat and not an offer. This means that
David must make the offer to Golden Antiques who can choose to
accept or reject it.

A valid offer?

David is the manager of White Halls Ltd. and is acting in his

capacity of agent for the White Halls Ltd. He has emailed Golden
Antiques saying: ‘White Halls Ltd. Will buy all three beds at
£4500 each, please advise if credit facility is available’. It is likely
the advertisement is an invitation to treat; therefore, his email will
be construed as an offer to Golden Antiques.

Another reason why the courts will not submit to the view that this
is a unilateral offer and David’s email is a valid acceptance is
because David has varied the price of each bed to £4,500. One of
the general principles in contract law is that the acceptance must
mirror the offer. The “mirror image rule” stipulates that, if David
wants to accept Golden Antiques offer, he must accept an offer
exactly, without any modifications;20 because David has changed
the offer, this hypothetically becomes a counter-offer that kills the
original offer, as seen in the case of Hyde v. Wrench.21 Therefore,
we are left in the same position that David’s email is an offer that
Golden Antiques can either accept or reject.

On Tuesday, Golden Antiques replies by email ‘We are not

prepared to sell for less than £5000 each. This can be interpreted
as a firm refusal by Golden Antiques of the offer presented by
David. They have reaffirmed the price of the bed being £5,000.
Using the authority of Hyde v. Wrench Golden Antiques have
made a counter-offer which can now be accepted or rejected by
David. Golden Antiques email further reads: Credit facility only
available if your grantor is acceptable to us.’ The statement about

20
Mckendrick E, Contract Law, Palgrove Macmillan Law Masters 7 th Ed
21
(1840) 3 Beav 334

16
the credit facility is quite ambiguous because of the use of the
phrase ‘if your grantor is acceptable to us’. Golden Antiques have
not specified what the criteria are for the grantor to be acceptable.
Lastly, the email reads: ‘Please confirm by close of business today
if interested’. Golden Antiques are stipulating by when acceptance
must take place. This would suggest the offer is only open for one
day and will lapse at close of business. The leading case on this
point is Ramsgate Victoria Hotel Co. v Montefiore22, in which
the courts said even if an offer has not been formally withdrawn, it
would expire after “a reasonable time”. In this case, the offer was
for the sale of shares and the court felt six months was beyond
what was reasonable.

The statement ‘please advise if credit facility is available’ will be

seen by the courts as a request for further information. Similarly in
Stevenson, Jacques & Co. v McLean23, when a customer asked
for delivery over two months the courts held the plaintiff had not
made a counter-offer but had made a mere enquiry which did not
serve to reject the offer. A binding contract had been made when
the plaintiffs sent the telegram accepting the offer.

David’s acceptance through fax

On Tuesday afternoon, David faxes Golden Antiques to say he is

willing to accept their original terms and will buy all three beds at
£5000 each. David is accepting Golden Antiques offer, but the fax
was not properly transmitted, as indicated by the status report. The
general principle in contract law is that the acceptance must be
communicated to the offeror. This principle is found in the case of
Entores v Miles Far East 24, where Lord Denning said:

“Suppose, for instance, that I shout an offer to a man

across a river or a courtyard but I do not hear his
reply because it is drowned by an aircraft flying
overhead. There is no contract at that moment. If he
wishes to make a contract, he must wait till the
aircraft is gone and then shout back his acceptance

22
(1866) LR 1 Ex 109
23
(1880) 5 QBD 346
24
[1955] 2 Q.B. 327

17
 so that I can hear what he says. Not until I have his
answer am I bound.”25

Furthermore, in Brinkibon v Stahag Stahl26, Lord Wilberforce

suggested there was no general rule that could cover all the
possible situations in these types of cases. He added each case
should be resolved with reference to the intention of the parties, to
sound business practice, and, in some cases, to a judgment as to
where the risks should lie. The case of Entores suggests that
acceptance should take place only upon receipt of the fax.
Therefore, the onus is on David to retransmit the fax until he is
sure that Golden Antiques have received his acceptance. Failing
this, there is no valid or enforceable contract between David and
Golden Antiques.

David’s acceptance by post

David then posts a letter at 5pm accepting Golden Antiques’ terms

on Tuesday evening; although he knows there is a postal strike that
day. Acceptance is normally effectual and the contract binding
once acceptance is received by the offeror. However, the courts
have introduced the postal rule to overcome the problem of the
time a letter spends in the postal system. The reason for this rule is
to facilitate business and “promote certainly within contractual
formation at a time when the principle method of communication
was slow”.27

The postal rule was laid down in Adams v Lindsell. 28 Where post
is deemed to be the proper means of communication, the
acceptance takes effect from the moment the letter of acceptance is
properly posted. We are not told whether the post was Golden
Antiques preferred method of communication. But, because David
has failed to successfully send the fax, he has opted for the post as
a method of acceptance. An illustration of this was seen in
Henthorn v Fraser.29 The court, in this case, held a contract was

25
[1955] 2 Q.B. 327 at 332
26
[1982] 1 All ER 293
27
Capps D, ‘You’ve got Mail’ 153 New Law Journal 906
28
(1818) 1 B & Ald 681
29
[1892] 2 Ch 27

18
made at 3:50pm when Henthorn posted his letter of acceptance.

Therefore, applying both cases above, it would appear David has

benefited under the postal rule and accepted the offer and has a
binding contract. However, the lawyers for Golden Antiques may
alternatively argue that David should not be allowed to benefit
under the postal rule and there is no binding agreement for two
reasons:

First, the offer has lapsed under the Ramsgate Victoria Hotel Co.
v Montefiore.30 Golden Antiques stated in their email ‘Please
confirm by close of business today if interested’. David had posted
the letter at the close of business i.e. 5 o’clock. Thus the
acceptance has come a moment too late. Another case which could
be used in support of this argument (although this concerns telex
and is not directly relevant) is Tenax Steamship v The Brimnes
(The Brimnes) 31, where Cairns LJ felt that the sender should not
rely on the recipients' reading every communication at once, and
that, in some circumstances, a notice arriving late in the working
day might quite legitimately not be “received” until the following
morning.

Second, it could be argued that, because David knows there is a

postal strike that day, it would be wrong to allow the postal rule to
operate in this way. Lawton LJ in Holwell Securities v Hughes 32
seemed to support this proposition, when he said that the rule will
not be applied where it would lead to: ‘a manifest inconvenience
and absurdity.’33 However, in the absence of authority on this
point, the courts may feel it right to allow the postal rule to apply.

Sale of the beds to Roger

Roger, an accountant, telephones Golden Antiques on Wednesday

morning stating that he wants to buy Victorian beds. He persuades
the manager of Golden Antiques to sell the beds to him, on the
basis that he had prepared the financial accounts for Golden

30
(1866) LR 1 Ex 109
31
[1974] 3 All ER 88
32
[1974] 1 WLR 155
33
[1974] 1 WLR 155 at 161

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Antiques the year before for half the fee he normally charges.
Golden Antiques agrees to sell to Roger. This is a breach of
contract because the contract with David is binding if the postal
rule applies.

If Golden Antiques want to change their mind and ultimately sell

to David, they are able to do so, because the contract with Rodger
may be unenforceable due to lack of consideration. The classic
definition of consideration, found in the case of Currie v Misa,34
is that consideration, ‘may consist either in some right, interest,
profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility given, suffered, or undertaken by
the other’. This means Roger must provide something in return of
the beds, i.e. money. We are told ‘the manager of Golden Antiques
to sell the beds to him’. If Roger has paid money, this will be valid
consideration.35 If, however, Roger has not paid any money for the
beds and he is relying on the fact he had prepared the financial
accounts for Golden Antiques the year before for half the fee he
normally charges, this will not be valid consideration for two
reasons:

First, consideration must not be past. It is not possible to use

consideration as some act that has taken place prior to the contract.
Consideration must be given in return for the beds. This is a matter
of fact and it is unlikely that the earlier work done at a discount by
Roger will be valid consideration as payment for the beds. The
discount was provided probably in order to secure the work rather
than as consideration for the future.

The general rule that consideration cannot be past was illustrated

in Eastwood v Kenyon36. In this case, it was held a promise was
insufficient where the consideration was wholly past. Moreover, in
Roscorla v Thomas37, Roscorla bought Thomas' horse for £30.
After the sale, Thomas promised Roscorla that the horse was
sound and free from vice. The horse proved to be vicious. The
court held there was no consideration to support Thomas' promise

34
(1875) LR 10 Ex 153 per Lush J
35
Chappell v Nestlé [1959] 2 All ER 701
36
(1840) 11 A & E 438
37
(1842) 3 QB 234

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and he was not bound. The sale itself could not be valuable
consideration, for it was completed prior to the promise being
given.

However, in Roger’s case, it can be argued that, because this is a

transaction of a commercial nature, an implied promise to pay
arises. This was acknowledged in the case of Re Casey's
Patents38, where the owners of patent rights promised their
manager a share in those rights as consideration for his previous
services for them. Bowen LJ said,

‘The fact of a past service raises an implication that at

the time it was rendered it was to be paid for, and, if it
was a service which was to be paid for, when you get
in a subsequent document a promise to pay, that
promise may be treated as an admission which
evidences or as a positive bargain which fixes the
amount of that reasonable remuneration on the faith
of which the service was originally rendered.’

However, the success of this argument swaying the courts is

unlikely, because the courts will view this as past consideration.

The second reason this will not be valid consideration is because

this is an existing obligation under a contract. The authority for
this is Stilk v Myrick39, in which the captain of a ship promised
his crew that, if they shared between them the work of two seamen
who had deserted, the wages of the deserters would be distributed
out between them. The court held that the promise was not binding
because the seamen gave no new consideration: they were already
contractually bound to do any extra work to complete the voyage.

We have to ask whether Roger has done any more than what he
was bound to do under a previous contract with the Golden
Antiques. If the answer is no, then there is no consideration. It is
unlikely that the earlier work done at a discount by Roger will be
valid consideration as payment for the beds. The discount was
provided probably in order to secure the work.
38
[1892] 1 Ch 104
39
(1809) 2 Camp 317

21
Golden Antiques revocation

Golden Antiques sent David a fax on Wednesday evening saying

that the beds were no longer available for sale. Golden Antiques
received David’s letter at 3.45pm on Thursday. David did not read
the fax from Golden Antiques until 4.00pm on Thursday. The
revocation of the offer can only take place if the offer has not been
accepted. This will all hinge on whether the courts will apply the
postal rule. If the Court applies the postal rule, then acceptance has
taken place before revocation and there is a binding contract with
David. The authority for this is Byrne v Van Tienhoven40, where
an offeror posted a letter on 1 October offering to sell the offeree a
quantity of tinplate, then posted another letter on 8 October
withdrawing the offer. The first letter reached PP on 11 October
and they accepted the offer at once by telegram, following with a
confirmatory letter four days later. The second letter purporting to
withdraw the offer arrived on 20 October, by which time the offer
had been accepted and it was too late for DD to withdraw.

Conclusion

First, the advertisement of the beds is not clear, precise and

unequivocal and therefore likely to be an invitation to treat.
Second, David’s email is an offer that Golden Antiques can either
accept or reject. Golden Antiques have reaffirmed the price of the
bed as £5,000; this is a counter offer. Third, the statement ‘please
advise if credit facility is available’ will be seen by the courts as a
request for further information. David’s acceptance by fax is
incomplete; he must communicate his acceptance. Fourth, it would
appear David has benefited under the postal rule and accepted the
offer, and thus has a binding contract. Fifth, if the Court applies
the postal rule, then acceptance has taken place before revocation
and there is a binding contract with David. If Golden Antiques
decides to sell to Roger, this is a breach of contract with David.
Lastly, if Golden Antiques want to change their mind and does
ultimately sell to David, they can because the contract with Roger
may be unenforceable due to lack of consideration.

40
(1880) LR 5 CPD 344

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Endnote

Hopefully you enjoyed and found the sample to be of value.

Purchase of the whole book is available on Amazon as well. In the
case of Private Law Tutor Publishing, our goal is to give students
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