Contract Law

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this is the sample case law with the suggested solution, hopefully it will help you in underrstanding how to answer case law.

Qns: On Monday, Andrew posted a letter to Ben offering to buy Ben's Honda car for £12,000. The postman dropped the letter in the street where it was found by Ben's neighbour, C. He did not give the letter to Ben until Friday. In the meantime, on Tuesday, Ben wrote to Andrew offering to sell the car to him for £11,000 and this letter arrived at Andrew's house on Wednesday. Andrew faxed to Ben stating, 'good news' I agree to the deal'. However, because there was a paper failure in Ben's machine the message was never printed out. On Friday, Ben posted a letter to Andrew agreeing to sell the car for £12,000. Ben's letter was not received by Andrew for two weeks.

Advise the parties. What difference, if any, would it make to your advice if the fax had been printed but Ben did not go into the room where the fax machine was situated for three days?

Suggested solution:

The problem raises the following legal issues: offer and acceptance, and postal rules, instantaneous communications.

Andrew appears to have made a clear offer to Ben to buy the car at the price of £12,000 and this offer appears only to be communicated to Ben when the letter is actually handed to him on the Friday.

Ben's offer to sell the car for £11,000 is communicated on the Wednesday. Andrew's fax message in reply does appear to be an acceptance of that offer. The clear issue here is whether that acceptance has been communicated. There is no precise authority on the communication of fax messages. However, in Brinkibon v Stahag stahl (1983) 2 AC 34 the House of Lords held that a telex message is communicated only when it is received. Further it appears from Entores Ltd v Miles Far East Corporation  1955 2 QB 327 that in instantaneous communications, such as

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the telephone, the acceptance is only communicated when it is actually heard. Andrew's faxed acceptance must therefore have been received in order to have been validly communicated. The clear problem is the paper failure in Ben's machine. Ben has not seen Andrew's message of acceptance. The question does not state whether or not Andrew is aware of this. If he is, then he may well know that there has been no communication, and no contract has been concluded as in the Entores case. If he is unaware of the failure, then acceptance may be deemed to have been received by Ben.

If the paper failure can be attributed to fault on the part of Ben then again following the principle stated in Entores Ltd v Miles FarEastern Corporation, Ben would be bound because, as Denning LJ (as he then was) stated he would be estopped from saying that he did not receive the message. Although the case relates to telephone messages it is submitted that there is nothing to prevent it from applying to fax machines. If this is correct the offeror without any fault on his part does not receive the message of acceptance.

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In The Brimnes ( 1975 ) QB 929, the Court of Appeal held that a telex message could be deemed to have been received when it should have been read in the ordinary course of business. However, the only difficulty is that the case involved the termination of a case and not its formation as in the present problem. However the principle may well be applicable and if this is the case then Ben would be deemed to have received Andrew's faxed acceptance when he should have read it and a contract would have been concluded for the sale of the car at £11,000.

Alternatively, on the assumption that no contract has been made at that price the effect of Ben's letter on Andrew should be considered.

There is nothing as in Henshaw v Fraser  ( 1892) 2 CH 27 to suggest that the postal rules should not apply. The use of the post is most clearly within the contemplation of the parties. Andrews offer was by post and Ben decided to use the post to communicate his acceptance. Although the use, of this rule can be vitiated by the principle in Household fire and Carriage Accident Insurance Co Ltd v Grant 1879 4 EX 0 216. However, on the facts there is nothing to support this contention.

Having reviewed the law above the parties should be advised that the better view is that a contract has come into being at £12,000. Andrew would prefer to be able to enforce the contract at a price of £11,000; but he would only be able to do so if he could establish fault on Ben's part, due to the failure of paper supply to the fax machine, or failure to go to the room where the fax machine was situated.