Validity of Contract in Business Law Essay

Submitted By JANDN6
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Pages: 6
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Daniel,
I have reviewed your dealings with Peter as to your desire to purchase the '62 Harley Davidson. From the facts which you have sent me, I have surmised that a valid and enforceable contract has in fact been established. Furthermore, Peter is in breach of said contract by refusing to sell you the motorbike. I have composed a legal evaluation of your communications with Peter so that you may see at what point this contract was made.

The Six Elements of a Legally Binding Contract
For you to have a legally binding contract with Peter, six elements must be present. Namely: 1. Offer and Acceptance 2. Intention to create legal relations 3. Consideration 4. Legal Capacity of the parties 5. Genuine Consent 6. Legality of objects in the agreement
We must therefore establish whether all elements are present (they are).

The Offer
The first step in establishing whether a valid contract exists is to determine at what point an offer was made, and who made it. Your post on the Harley Davidson website, ‘Wanted: a ’62 Harley Davidson Roadster,' did not yet constitute an offer. At this stage, you had posted a mere invitation to treat. Peter's consequent phone call to you on the 3rd of November however, did amount to an offer. In the phone call, a price was clearly established of $30,000, the amount of which Peter would accept for his Harley Davidson. Therefore the offer existed as at 3rd of November following this phone call, and was made by Peter to you.

Was there an option?
You did not immediately accept the offer, stating that you needed time to arrange finances, following which Peter agreed to keep the offer open for a week. This promise by Peter that he would keep the offer open was not an option. At any point following their phone call, Peter could legally revoke the offer. The reason for this is that no valuable consideration had been given by yourself in return for the promise. Had you paid something for Peter's promise, such as a $50 deposit, or given something as valuable consideration, a valid option would exist and Peter would be unable to revoke until the expiry of said option. The offer is still open at this time, however can be revoked at any time by Peter provided he communicates the revocation to you. What Peter has done, is effectively put a time-lapse on the offer. If you had not accepted within the 1 week period, the offer would no longer exist.

Acceptance or Counter-Offer?
Upon arranging your loan on November 5, you decided to accept Peter’s offer. Your acceptance at this point is invalid as it has not been communicated (acceptance must be communicated to the offeror). However, the next day, November 6, after trying to reach Peter by phone and failing, you mailed a letter of acceptance. We must now look into your letter of acceptance to decide whether it was an unconditional acceptance of the offer or a counter offer. In your letter of acceptance, you asked whether Peter would arrange delivery. Should this be construed as a counter-offer, it would effectively result in you never forming a valid contract with Peter. However, your payment of a deposit for $3000, as well as the wording of your question, means that it was a mere request for information, rather than you attempting to impose new or different terms. This distinction was established in Stevenson Jaques & Co v McLean, where Stevenson asked a question about payment prior to accepting the offer, and it was held that this question should not have been treated as a counter-offer due to their being no new proposal. Your letter of acceptance was, in fact, an unconditional acceptance of the offer.

Rule to acceptance / Revocation
The general rule to acceptance is that it must be communicated to the offeror for there to be a binding contract. Peter was overseas, and as such, the letter of acceptance did not reach him until November 10. Prior to that, Peter had emailed you revocation of the offer, on November 9. On
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