1
Sample B – Final Version
I
QUESTION 1
The first issue is whether Howard’s advertisement dated 3 April is a valid offer. An
offer must evince an intention to be legally bound by the offeror immediately on
acceptance; and it must contain the essential terms of the agreement. 1 The
advertisement contains essential terms such as the brand, model, condition and
price. The advertisement uses the words ‘I may be prepared to sell …’. They
indicate that Howard did not intend to be legally bound by an acceptance.
It follows that the advertisement is not a valid offer. An indication by an owner of
property that they may be interested in selling at a certain price has been regarded
an invitation to treat. 2 In the present scenario, the language can be interpreted
objectively to suggest an intention to invite offers. In the present case, Howard has
one car and his offer is open to the public. He would not want to be legally bound
to supply a car to everyone who rings in response to the advertisement and says ‘I’ll
buy it.’ 3 For this reason, the advertisement constitutes an invitation to treat.
The next issue is whether Clair’s email dated 12 April constitutes a valid offer. The
essential elements of a valid offer are defined above. The email uses the word
‘offer’ which supports the inference that there is an intention to be legally bound.
Clair’s email is in response to the advertisement, which contains all essential terms.
Moreover, it quoted a price. For these reasons, Clair’s email satisfies the rules of a
valid offer. It follows that the email that Clair sends on 12 April is a valid offer.
The next issue is whether Howard’s email dated 13 April is a valid acceptance. Two
elements of a valid acceptance are contentious in the situation. They are: acceptance
is not effective unless communicated to the offeror; 4 and, acceptance should be in
the mode prescribed by the offeror. 5 The former is subject to the latter. For this
1
Carllil v Carbolic Smoke Ball (1893) 1 QB 256.
2
Gibson v Manchester City Council (1979) UKHL 6.
3
Carllil v Carbolic Smoke Ball (1893) 1 QB 256.
4
Ibid.
5
Ibid.
2
reason, the next issue that should be determined is whether Clair’s email dated 12
April prescribes a mode of acceptance.
If the offeror prescribes a particular mode of acceptance, he/she must expressly
exclude any other mode of acceptance. 6 Clair’s email uses the words ‘ring me’,
which suggest that Clair wants Howard to give her a call. However, Clair does not
insist that acceptance in any other mode shall be invalid. It follows that Clair does
not prescribe a phone call as a mode of acceptance. She merely stipulates it.
A related issue is whether email is less advantageous to Clair in these
circumstances. If the offeror merely stipulates a mode of acceptance, other modes
of acceptance will be valid as long as they are no less advantageous to the offeror. 7
On an objective analysis, it is not sufficiently clear from Clair’s email that she is
urgently looking to buy a car. It also does not suggest anything about Clair’s
lifestyle or travelling plan. Further, Howard receives Clair’s offer through an email,
and therefore, he can safely assume that Clair anticipates to receive a response
though email. For this reason, email is no less advantageous to Clair. It follows that
email is a valid mode of acceptance in this scenario.
The next issue is whether Clair’s email dated 12 April was communicated. The
Electronic Transactions Act, 8 is relevant to this situation. It provides that if a
recipient does not designate an email address, he/she will not be considered to have
received an email until it is both capable of being retrieved, and he/she has become
aware that it has been sent. A designated electronic address is intended to cover a
system that has been specifically designated by a party. The mere indication of an
electronic mail or telecopy address on a letterhead or other document is not regarded
as express designation. 9
In the present case, Clair does not appear to designate an email address. For this
reason, Howard’s email is effective when it is capable of being retrieved and when
Clair reads it. However, Clair reads Howard’s email on 18 April, which is after the
deadline of 13 April. It follows that Howard’s email is not communicated, and
6
Manchester Diocesan Council v Commercial and General (1969) 3 All ER 1593.
7
Ibid.
8
Electronic Transactions Act 2000 (NSW) s 13A(1)(b).
9
Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce, GA Res 51/162, UN
GAOR, 85th plen mtg, UN Doc A/51/628 (16 December 1996) [8].
3
therefore, is not effective. That is, there is no binding agreement between Howard
and Clair.
II QUESTION 2
The first issue is whether Simon’s letter dated 3 April is a valid offer. Rules of a
valid offer have been defined in question 1. Simon’s letter is in response to the
advertisement, which had the essential terms. Moreover, Simon’s letter offers a
price. That is, the letter fulfils the rule related to essential terms. In Simon’s letter,
the words ‘I offer to pay…’ evinces Simon’s intention to be bound on acceptance.
It follows that Simon’s letter is a valid offer.
The next issue is whether Howard’s letter dated 5 April is a valid acceptance. The
two relevant rules of acceptance are: acceptance must correspond to the offer; 10
and, the acceptance must be unequivocal. 11
Howard’s letter shows that he puts forward a price different from that in Simon’s
offer. That is, Howard’s acceptance does not correspond to the offer and is not
unequivocal. For this reason, Howard’s letter is not a valid acceptance. However,
if a reply to an offer proposes a new term, it can be regarded as a counter-offer. 12
Howard’s letter proposes a new price. For this reason, it can be regarded as a
counter-offer.
The next issue is whether Howard can revoke his offer dated 5 April. An offer can
be revoked any time before it is accepted. 13 However, if an offer is an option, the
offeror cannot withdraw the offer before it expires. 14 Therefore, the next issue is
whether Howard’s letter dated 12 April constitutes an option. An option must be
supported by consideration. 15 Howard’s promise to keep the offer open until 12
April is not supported by consideration. For this reason, it is not an option and
Howard can revoke his offer before Simon accepts it.
10
Butler Machine Tool Co v Ex-Cell-O Corp (1977) EWCA Civ 9.
11
Ibid.
12
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
13
Goldborough, Mort & Co Ltd v Quinn (1910) 10 CLR 674.
14
Ibid.
15
Ibid.
4
Simon posted a letter on 13 April. Therefore, the next issue is whether Simon’s
letter constitutes a valid acceptance. The answer to this issue depends on two
different but related rules and issues. Firstly, whether Howard’s letter dated 5 April
prescribed a mode of acceptance. The relevant rules have been defined in question
1. The letter uses the words ‘contact me’, which cannot be regarded as prescribing
a particular mode of acceptance. Further, the letter does not objectively suggest the
presence of immediacy. For this reason, it could also be inferred that the post is no
less advantageous to Howard.
Secondly, whether the postal acceptance rule will apply to this situation. Where this
rule operates, the acceptance is effective from the time of posting, not the time of
receipt. 16 However, it operates if it was within the contemplation of the parties that,
according to the ordinary usage of mankind, post might be used as a means of
communicating acceptance. 17 Simon and Howard communicate through letters that
they post to each other. For this reason, it is safe to infer that it is within Howard’s
contemplation that Simon can send his reply by post. For this reason, the postal
acceptance rule will apply to this situation. It follows that Simon accepts Howard’s
offer on 13 April.
Howard posts the letter of withdrawal before Simon posts his acceptance. Thus, the
next issue is whether Howard’s withdrawal is effective. A revocation is not
effective until it is communicated and the postal acceptance rule does not apply to
revocations. 18 Simon receives Howard’s withdrawal after he accepts Howard’s
offer. It follows that Howard’s withdrawal was communicated after the acceptance,
and therefore, is not valid.
The next issue is whether the parties have the intention to create legal relations. The
presumption for agreements entered in a commercial setting is that the parties have
intentions to create legal relations. 19 The facts show that the agreement has been
formed in a commercial setting. The facts do not suggest anything that would rebut
the presumption. For this reason, it can be inferred that the parties had the intention
to create legal relations.
16
Bressan v Squires (1974) 2 NSWLR 460.
17
Henthorn v Fraser (1892) 2 Ch 27.
18
Byrne v Van Tienhoven (1880) LR 5 CPD 344.
19
Masters v Cameron (1954) 91 CLR 353.
5
The next issue is whether valid consideration exists. For a valid consideration to
exist, a bargain should exist between the parties, 20 and they should suffer a
detriment and gain a benefit in their parts as promisee and promisor respectively. 21
Howard promises to sell the car. In exchange, Simon promised to pay $5,100. Thus,
a valid consideration exists.
The next issue is whether elements of certainty exist. Certainty has two main
components: completeness and certainty. 22 The agreement identifies essential terms
such as price, model of the car, and therefore, satisfies the element of completeness.
Its terms are precise, and therefore, it also satisfies the element of certainty.
It follows that a binding contract exists between Howard and Simon.
III QUESTION 3
The rules for the formation of an agreement and contract have been defined in
questions 1 and 2. The first issue is whether there was an agreement between
Howard and Raffi. Raffi’s proposal includes a price and a time frame to repair the
car. It also evinces an intention to be bound, if Howard accepts. For these reasons,
it is a valid offer. Howard agrees to Raffi’s offer without any change. His conduct
constitutes a valid acceptance. It follows that a binding agreement exists.
The next issue is whether a valid consideration exits. Howard promises to pay $300.
In exchange, Raffi promises to repair the car. That is, there is a bargain and both
parties suffer a detriment, and gain a benefit, in their parts as promisee and
promisor. That is, a valid consideration exists.
The next issue is whether the parties have intention to create legal relations. The
transaction happens in a commercial setting, and therefore, it can be presumed that
parties have the intention to create legal relations.
The next issue is whether the agreement was certain. The facts show that the
agreement contained essential terms and the terms were precise. That is, the
agreement was complete and certain. It follows that the first exchange of promises
constitutes a contract.
20
Australian Woollen Milles v Commonwealth (1954) 92 CLR 424.
21
Beaton v McDivitt (1987) 13 NSWLR 162.
22
Australian Goldfield NL (in Liq) v North Australian Diamonds (2009) WASCA 98.
6
The next issue is whether the second set of transactions constitute a valid contract.
Raffi offers to complete the repair for an extra $200. That is, he makes an offer.
Howard’s agrees unconditionally. That is Howard accepts Raffi’s offer. The
elements of intention to create legal relations and certainty remain unchanged;
however, the contentious issue is whether valid consideration exists.
Raffi promises to repair the same damage in the car, whereas Howard promises to
pay more than the original agreed amount. That is, Raffi promises to perform a preexisting legal duty. Promise to perform a pre-existing duty is not a valid
consideration. 23
Several exceptions exist to the pre-existing legal duty rule; however, the relevant
exception is practical benefit. In Musumeci v Winadell Pty Ltd, 24 Santow J laid
down rules for applying this exception. Essentially, he held that, for the practical
benefit exception to operate, the promise to pay extra should not be made under
unfair pressure, and that the party promising to pay extra should derive a practical
benefit that is worth more than any likely remedy against the other party.
Howard is able to get his car repaired on time and is able to sell his car. This
practical benefit for Howard can be regarded as worth more than any likely remedy
against Raffi. Further, it can be reasonably concluded that there is no unfair pressure
from Raffi. That is, the facts satisfy the exception of the practical benefit. It follows
that a valid consideration, and therefore, a contract exists. Consequently, Howard
will have to pay the extra $200.
23
Stilk v Myrick (1809) EWHC KB J58.
24
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.
7
BIBLIOGRAPHY
A Cases
Australian Goldfield NL (in Liq) v North Australian Diamonds (2009) WASCA
98
Australian Woollen Milles v Commonwealth (1954) 92 CLR 424
Beaton v McDivitt (1987) 13 NSWLR 162
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Bressan v Squires (1974) 2 NSWLR 460
Butler Machine Tool Co v Ex-Cell-O Corp (1977) EWCA Civ 9
Byrne v Van Tienhoven (1880) LR 5 CPD 344
Carllil v Carbolic Smoke Ball (1893) 1 QB 256
Gibson v Manchester City Council (1979) UKHL 6
Goldborough, Mort & Co Ltd v Quinn (1910) 10 CLR 674
Henthorn v Fraser (1892) 2 Ch 27
Manchester Diocesan Council v Commercial and General (1969) 3 All ER 1593
Masters v Cameron (1954) 91 CLR 353
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Stilk v Myrick (1809) EWHC KB J58
B Legislation
Electronic Transactions Act 2000 (NSW)
C Other
Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce, GA
Res 51/162, UN GAOR, 85th plen mtg, UN Doc A/51/628 (16 December 1996)