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The issue arising from this problem is whether or not Ann, Bev and
Cathy had a valid contract with David with regards to the sale of his
BMW car. The following must be ascertained: -
1. Whether Ann validly accepted David’s offer and whether the
offer to her was terminated by lapse of time?
2. Was Bev’s acceptance varied and did it amount to a counter
offer?
3. Was Cathy’s acceptance valid and whether her revocation was
effective?
A contract is a legally binding agreement between two or more
persons which is essentially commercially in nature. In order to be
legally binding, a contract must have an offer, acceptance,
consideration and the parties must have an intention to create
legal relations.
As indicated above, a contract must have a valid offer. An offer is
a clear statement of the terms on which the offeror is prepared to
do business with the offeree. The offer must have clearly stated
terms and it cannot be vague. This is supported by the case of
GUNTHING v LYNN where the court held that the term “lucky” was
deemed to be too vague to create a binding contract between the
parties. Also, the offeror must have an intention to do business as
in the case of CARLILL v CARBOLIC SMOKE BALL CO. LTD
where it was held that an offer could indeed be made to the whole
world and the advertisement contained a unilateral offer that could
be accepted by anyone who performed its terms. The offer must
also be communicated as in the case of TAYLOR v LAIRD where
the court held that the defendant had not received any
communication or offer of work in this capacity from the claimant,
and there was therefore no basis for a contract.
In this case it must be determined whether the acceptance of Ann,
Bev and Cathy is valid. Acceptance is defined as an agreement to
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be bound by all the terms of the contract. It must be exactly on the

same terms of the offer and must not be varied otherwise it would
be considered a counter offer. A counter offer terminates or
destroys the original offer as in the case of HYDE v WRENCH.
Here D offered his farm to P for £1,000.00. P then wrote offering
£950.00 for it. D refused and P then said he would pay £1,000.00
after all. By now, D had decided not to sell and P sued for breach.
It was held that his counter offer of £950.00 led to the cancellation
of the original offer to sell at £1,000.00 and thus, P could not
enforce this acceptance. A counter offer is different from a request
for information and a request for information does not terminate an
offer.
Acceptance must be certain and definite. It must be accepted
without qualifications and conditions and it must conclusively
indicate the offeree’s intention to accept. Acceptance that is still
open to the process of negotiations is not valid. In the case of
REES v WARWICK the reply that ‘your order is receiving our
attention’ was vague and indefinite and did not amount to
acceptance.
Acceptance must also be communicated in the manner implied or
expressed in the offer and this may be verbal, in writing or by
conduct. If the offer does not state the mode of acceptance, any
mode can be used so as long as it does not cause delay and it is
one which brings the acceptance to the knowledge of the offeror.
If the offeror has made it clear that no method other than the
prescribed method will be adequate, then the offeree is bound to
this mode. In the case of ELIASON v HENSHAW On February 10,
a letter was written from Eliason to Henshaw proposing to buy flour
at Georgetown and asking “Please write by return of wagon
whether you accept our offer” to Harper’s Ferry. The letter was
delivered to Henshaw on February 14, but the wagoner informed

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them that he would not be returning to Harper's Ferry. Henshaw

wrote in acceptance on February 15 and the letter was sent by the
regular mail carriage to Georgetown on February 19, the next
available wagon. Eliason sent a reply on February 25
acknowledging the receipt of the letter, but said that the response
was too late as it was not returned by the wagon. Henshaw sued
for non-performance. The court said that there was no acceptance
as the contract was not accepted by the correct manner. It should
have been sent by wagon, but was sent by mail.
Where acceptance is being communicated by means of
instantaneous communication, the principle is that acceptance is
not communicated until received as in the case of ENTORES v
MILE FAR EAST CORPORATION. In that case the complainants,
Entores, were a company that was based in London. They had
sent an offer to purchase 100 tons of copper cathodes to the
defendants, Miles Far East Corp. Their company was based in
Amsterdam and this offer was communicated by Telex, a form of
instantaneous communication. The Dutch company sent an
acceptance of this offer by Telex to the complainants. When the
contract was not fulfilled, the complainants tried to sue the
defendants for damages. The court held that the contract and
damages were to be decided by English law. It was stated that the
postal rule did not apply for instantaneous communications. Since
Telex was a form of instant messaging, the normal postal rule of
acceptance would not apply and instead, acceptance would be
when the message by Telex was received.
Also, since acceptance must be communicated to the offeror, it
follows that an acceptance can be revoked at any time before the
acceptance is communicated. The revocation must be
communicated before the acceptance arrives to the offeror. Until
this happens, the revocation has no effect. For example,

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acceptance by post is valid once the letter is posted, therefore a

telephone call or any other form of instantaneous communication
revoking the acceptance would be ineffective though it reached
the offeror before the letter.
In this case, Ann did not validly accept David’s offer as it was not
certain and definite. She merely expressed her interest in buying
the car. Her expression that she wanted a BMW expert to give her
an opinion indicated that her acceptance was not conclusive and
was still open to negotiation depending on the expert’s opinion.
She posted a cheque for $1,000,000.00 to David after the
expiration of the offer and therefore David’s offer would have
terminated by lapse of time. There is no valid contract between
David and Ann.
Bev varied the terms of David’s offer by indicating that she would
pay $800,000.00 for the BMW and this amounted to a counter-
offer. Her counter offer terminated David’s original offer and the
offer is no longer on the table for her to accept at a later time.
Therefore, her acceptance is not valid. There is no valid contract
between David and Bev.
Cathy made a valid acceptance when she posted the letter. Her
acceptance was valid once she posted the letter. Her revocation/
withdrawal of her acceptance was therefore not valid since it was
not received by David and therefore not communicated. There is
therefore a valid contract between David and Cathy.
David however made an invitation to treat when he advertised the
car for sale in the newspaper. The issue in this instance is whether
the contract between David, Mr. and Mrs. Chin would be
enforceable. What must be ascertained is whether Mrs. Chin had
the requisite contractual capacity and whether their statement
relating to their identity is misrepresentation.

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Contractual incapacity makes a contract unenforceable against

the vulnerable party. a minor lacks contractual capacity. A minor
is a person under the age of eighteen years old and contracts
made with minors are unenforceable against the minor unless it is
a contract for necessaries. The term necessaries mean goods
suitable to the condition in life of the minor and to his actual
requirements at the time of the sale and delivery. The court will
look at whether in the circumstances the article is capable of being
necessary. The court will also look at the lifestyle that the minor
was accustomed to living. Goods which are of mere luxury are not
necessaries. In the case of PETERS v FLEMMING, the minor
concerned was a child of a Member of the British Parliament. He
bought rings, pins and watch-chains, but did not pay for these
items. The court held that these goods were commensurate
(matching) with his status in life, and therefore were necessaries.
He had to pay for them. Also, in the case of NASH v INMAN The
defendant, a minor, purchased a number of waistcoats from the
plaintiff. The issue was whether they were necessaries. The court
held that the waistcoats were not necessaries as the minor had an
adequate supply at the time of sale.
There are several factors that may make a contract invalid. Those
factors are misrepresentation, mistake, undue influence and
duress. A misrepresentation is an untrue statement of fact made
by one party before the contract is finalized that caused/induced
the other party to enter into the contract. The statement may be
written, verbal or by conduct. Misrepresentation may be
fraudulent, innocent or negligent. Misrepresentation makes the
contract voidable. As indicated above, misrepresentation may be
fraudulent. Fraudulent misrepresentation is a false statement
which, the person making it/ the representor did not believe to be
true. In the case of DERRY v PEEK, the defendant stated in a
company prospectus the company had the right to use steam
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powered trams as oppose to horse powered trams. However, at

the time the right to use steam powered trams was subject of
approval of the Board of Trade, which was later refused. The
claimant purchased shares in the company in reliance of the
statement made and brought a claim based on the alleged
fraudulent representation of the defendant. The court held that the
statement was not fraudulent but made in the honest belief that
approval was forthcoming. The court said that the absence of an
honest belief is necessary for it to be fraudulent.
In the case of mistaken identity, it is impossible to establish
mistaken identity in face-to-face as the presumption is that there
is an intention to contract with the person physically before you as
in the case of LEWIS v AVERAY The complainant, Mr. Lewis, was
a postgraduate that wanted to sell his car. He met with somebody
interested in buying the car, who was actually a rogue that was
impersonating a famous actor, Richard Greene. They agreed on
the price of £450 for the car and the rogue wanted to pay by
cheque. Mr. Lewis asked for identification before he agreed to
accepting the cheque, with the rogue presenting a pass for
Pinewood Studios and his name and photograph. Once the rogue
had the car, he sold it onto the defendant, Mr. Averay, for £200.
The cheque he had given to Mr. Lewis bounced, but the rogue had
disappeared and could not be found. It was held that the mistake
to the real identity of the rogue did not prevent a valid contract
being created between him and Mr. Lewis. There was a face to
face interaction, where the law presumes contract. However, this
was fraud and impersonation by the rogue, which would render a
contract voidable and it could be set aside. Yet, this must be done
before a third party acquires the rights. In this case, the contract
was not set aside before Mr. Averay, in good faith, purchased the
car.

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It must be noted that where a contract is induced by

misrepresentation, the goods may be recovered if the contract was
avoided before the goods were passed to a third party. the general
rule is that the interests of an innocent third party must prevail over
those of the party mislead. In the case of CAR & UNIVERSAL
CREDIT v CALDWELL Mr. Caldwell sold his Jaguar car on 12th
Jan to a rogue, Norris, who had paid £10 cash deposit and left
another car as security and gave a cheque for £965. The following
day Mr. Caldwell went to cash the cheque and discovered it was
fraudulent and the car left as deposit turned out to be stolen. Mr.
Caldwell reported the incident to the police and used his best
endeavours to co-operate with the police to find Norris in order to
rescind the contract of sale. He also contacted the Automobile
Association to try to locate the car. Norris had acquired a voidable
title to the car as the contract was induced by fraudulent
misrepresentation. Norris sold the car on to a third party on 15th
Jan. The question for the court was whether the actions taken by
Mr. Caldwell were sufficient to avoid the contract. Mr. Caldwell had
successfully rescinded the contract. He had taken all steps
possible to demonstrate that he no longer wished to be bound by
the contract. He should not be prejudiced by the fact that his
endeavours failed to locate Norris. If he had reported the matter
after Norris resold the car, Mr. Caldwell would not be able to
recover the car.
The statements by the Chin’s amounted to fraudulent
misrepresentation as they knew that they were not who they were
pretending to be, that is, owners of a popular supermarket in
downtown. This statement induced David to enter into the contract
and therefore the contract is voidable and could be set aside.
However, the contract cannot be enforced against the lady who
was 17-year-old as she was a minor. This was not a contract for

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necessaires but a mere luxury. The contract is still valid against

the 25-year-old boyfriend. David cannot rely on the principle of
mistaken identity to invalidate the contract as he made no effort to
ensure the Chins were who they pretended to be.
Also, David did not take any steps to demonstrate that he no longer
wished to be bound by the contract before the car was sold to a
third party, that is the UTECH lecturer. He did not report the matter
to the police and he therefore cannot recover the car from the
UTECH lecturer.
Since David had a valid contract with Cathy for the sale of the
BMW Cathy can sue David for damages for breach of contract
since he is unable to recover the car from the UTECH lecturer and
perform the contract with Cathy.
(b)
The issue is The issue is whether the exemption clause is effective
to deny the Sandshore Hotel from liability of the damage to David’s
car and the theft of his Movado watch.
A contract is a legally binding agreement between two or more
persons which is essentially commercially in nature. In order to be
legally binding, a contract must have an offer, acceptance,
consideration and the parties must have an intention to create legal
relations.
A contract may contain exclusion/exemption clauses.
Exclusion/exemption clauses are clauses stated in a contract by
which one party seeks to limit or exclude himself from liability if
certain events occur such as breach of contract, theft or
negligence. For an exclusion clause to be effective, it must be
incorporated within the contract, it must be clear and unambiguous
and it must not be rendered ineffective by statute. These criteria

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must be met for a party to be bound by an exclusion clause,

whether the contract is verbal or in writing.
An exemption clause is binding only if the party had notice of the
term. It must be brought to the attention of the party before the
contract is made. In the case of Olley v Marlborough Court, P
arrived at a hotel and filled out the usual forms at the reception
desk, paying for one week’s stay. On reaching the bedroom, P saw
a notice on the wall stating that the hotel would not be liable for
articles lost or stolen unless handed to the manager for
safekeeping. P’s fur coat was stolen and P sued the hotel which
sought to rely on the clause to be exempted from liability. It was
held that the hotel could not rely on the notice in the bedroom
because it was not brought to P’s notice until after the contract had
been made at the reception desk.
It must be noted that where a party signs a contractual document
containing an exemption clause the clause is binding on the person
signing whether or not he read or understood it. In the case of
L’Estrange v Graucob the seller of a defective vending machine
was protected by an exemption clause contained in the small print
in the sale agreement which the purchaser had signed without
reading. The court held that in signing the order form claimant was
bound by all the terms contained in the form irrespective of whether
she had read the form or not.
In this case, Sandshore Hotel can rely on the exemption clause to
exclude it from liability for the damage to David’s car as it was
brought to his attention/ he had notice of it before the contract was
made at the reception desk. Because David signed the contract
containing the exemption clause, it is binding on him whether he
read or understood it.
However, the hotel cannot rely on the exclusion/exemption clause
to exclude it from liability for the theft of David’s Movado watch as
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he did not have notice of it until after the contract was made at the
reception desk. He had no notice of it before the contract was
made.
David will be successful if she claims against the hotel for liability
for the theft of his watch but he will not be successful if he claims
against the hotel for the damage of his car for the reasons stated
above.

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