Foundations of the Common Law: Contract Law
A contract can be defined as an agreement between two persons, or more, who intend it to be legally binding. An agreement is composed of an offer and the acceptance of this offer, in other words, the offeror, the party
who makes the offer, offer something to the offeree, who accepts the offer.
In the case we are looking at, on the 1stof July, Barry wrote an offer to Sally to sell her a field for £100,000. Sally offered to pay £95,000 but Barry refused the 8th of July. Then, the 15th of July, Sally proposed him to pay for the land £100,000 and Barry replied by letter that he accepted this offer. Sally did not get the message and Barry decided to sell the land to another person.
The question here is to know if the first letter sent by Barry was an offer or an invitation to treat, then we can look at the particularities of the sale of lands to finally see if there is a breach of obligation made by Barry.
What are the relations between Sally and Barry?
In the matter of sale of land, the rule is normally that the sale of land is considered as an invitation to treat and not as an offer.
This rule as been established in Harvey v Facey , in this case the plaintiffs telegraphed to the defendants “Will you sell us Bumper Hall Pen? Telegraph lowest cash price.”. The defendants answered by telegraph “Lowest cash price for Bumper Hall Pen £900.”. Then the plaintiffs telegraphed “We agree to by Bumper Hall Pen for £900 asked by you…”. The court held that there was no contract between the parties since the second telegraph was an indication of the price the defendants asked for rather than an offer.
The other case in this matter is Clifton v Palumbo , in this case, the plaintiff wrote to the defendant “I…am prepared to offer you…my Lytham estate for£600,000…I also agree that a reasonable and sufficient time shall be granted to you for the examination and consideration of all the data and details necessary for the preparation of the Schedule of Completion.”. The court of appeal held that the letter sent by the plaintiff was not a definitive offer and so the defendant’s acceptance was not effective, that is to say there was no contract.
The courts are in favour to agree that where the subject of the contract is the sale of a land, what can be an offer in a sale of goods contract will only be an invitation to treat.
In our case, Barry wrote a letter to Sally in order to propose her his field. Before writing this letter he already knew that Sally wanted to increase the size of her farm, and in order to do so she needed some field more. He had previously meditated about it before writing to her, as he had the field adjoining Sally’s land and decided to sell it to her.
That is why we can say that Barry, in writing his letter to Sally made an offer.
He offered to sell her the field for £100,000. Sally did not agree on the price and offered to pay £95,000. Barry did not accept Sally’s offer.
Sally came back to her decision and offered to pay him the £100,000 for the field.
The case of reference in the matter of counter-offer is Hyde v Wrench . In Hyde v Wrench, the defendant offered to sell his farm for £1,000 but the plaintiff offered £950 which the defendant refused. Finally, the plaintiff decided to buy the farm for £1,000 but the defendant did not agreed on it. The court held that there was no contract for the purchase of the farm. When a party change the terms of an offer, this creates a counter-offer which ends the prior offer and the first offer does not exist any longer.
Barry did not accept the counter-offer so it would have been the end of their relations but Sally offered him the price he wanted, £100,000. It can be consider as a new offer made by Sally to Barry, and Barry did accept this offer by the message he left on Sally’s answer machine.
There is another way to look at our case, according to the decision taken in Livingstone v Evans . In this case, two persons wanted to buy a property which was offered for $1,800. The buyer counter-offered in saying “will give $1,600 cash.”. The vendor replied “cannot reduce price” after which the buyer accepted. The court stated that a counter-offer normally terminates the original offer. In this case, the judges stated that the sentence “cannot reduce the price” was a renewal of the original offer, so the vendor still wanted to sell his property and was still open to acceptance.
In our case, Barry said to Sally “I do not feel that I am currently in a position to accept your offer.”. It is not a strict rejection of the sale, his paroles could be interpreted as it has been done in the Livingstone case, as a renewal or the original offer. In other words, Barry wanted to sell his field but on the price he told her and this an evidence. If he did not wanted to sell her the field anymore he would have said something like “I do not want to sell it anymore…”.
Regarding to these cases, we can assume that there is a legally binding contract between Sally and Barry, this contract starting when Barry accepted Sally offer of £100,000 or when Sally accepted the first offer of Barry, as it can be said regarding the Livingstone case.
A contract do not have, generally, to be made in writing, a simple oral agreement is enough, but the sale of land is a particular type of contract and the rules which apply in this kind of contract are not the same as the rules which apply in the sale of goods for example.
The rules in the sale of land
The sale of land is a contract which normally needs to be made in writing.
The Law of Property (Miscellaneous Provisions) Act 1989, in its section 2 entitled “Contract for sale etc. of land to be made by signed writing” first paragraph, says:
“A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.”
The rule of the sale of land provide that it is necessary to have something in writing which include the subject of the sale, the name of the parties, the price and the signature.
This rule has been applied in Record v Bell . In this case, the vendor’s solicitor and the buyer’s solicitor have signed a contract for the sale of a house. They exchanged further letters and some telephone calls in order to make the contract. The purchaser had not paid the day he should have arguing that the sale was not made in conformity of the s2 of the Law of Property (Miscellaneous Provisions) Act 1989. It was held by the court that the terms exchanged between the solicitors should be clearly referred to in each of the contract and that was not the case.
Barry knew that Sally wanted to buy the land adjoining her land so in his first letter he might have describe the land he wanted to sell her, told the price and signed. Regarding before, we can admit that this was an offer and that Sally, when she came back to her decision , accepted this offer, regarding the Livingstone case.
In other words, Barry and Sally’s correspondences are in conformity of the Law of land Act 1989. This exchange of letter provides a well forming contract between Barry and Sally.
More over, if theory in the Livingstone case is not admitted, and Sally’s letter which offered to buy the land for £100,000 is considered as an offer, Barry’s call and message left on Sally’s answering machine is an acceptance.
Normally, in the case of sale of land, the contract has to be made in writing.
In Pitt v PHH Management ltd , two persons wanted to buy a property, they both made an offer to buy it for £200,000, but the plaintiff’s offer was accepted “subject to contract”. The other person increased her offer to £210,000. The plaintiff then was told that his offer has been withdrawn so he tried to prevent the sale. The plaintiff and the agent who was charged of the sale, had an oral agreement which said that the defendant (the seller) would sell him the property for £200,000 and would not consider any other offers. The court held that this agreement was a lock-out agreement by which the seller agreed not to consider any other offers during a certain time. The contract between the plaintiff and the seller was a binding contract even if the negotiations continued and that they were subject to contract.
Even if the sale of land or property needs a written contract, oral agreement are not excluded.
Barry agreed to sell his land to Sally for £100,000, the letters constitute the contract and his message of acceptance so there is a binding contract between them which started the day when Barry left the message to Sally.
The rule with instantaneous method of communication was given by Lord Denning in Entores v Miles Far East Corp , the rule is that when instantaneous methods of communication are used, which the telephone is, it will take effect when and where it is received.
So the agreement of Barry took place when Sally got the message.
The contract between Barry and Sally did not give any indication of time so if no time is fixed for an offer to lapse, then it lapses after the passage of a reasonable time.
In Barrick v Clark , a purchaser took twenty-five days to answer to an offer of a farm land. By that time the seller sold the land to another purchaser, an offer is only valid for a reasonable time. In the context of this case, the court held that twenty-five days is too long or unreasonable.
In our case, Barry left the message on Sally’s answering machine while she was on an Organic Farmer’s Conference so she could not get the message as soon as it was left. Barry did not hear anything from her, but she was not there.
A Conference lasts a week but not more, so Barry had sold his land soon after leaving the message to Sally. He did not give her the reasonable time she was legally in right to have.
In other words Barry breached the contract he had with Sally in selling his land to the other adjoining landowner.
To conclude, it has been proved that Barry and Sally had a legally binding contract for the sale of Barry’s field. Sally is in right to sue him for breach of contract since during their contract he decided to sell this field to another purchaser, and sold it.
Unfortunately for Sally the field is sold now so she is unable to get it since it is Tom’s property. She is not able to increase the size of her farm with the field she wanted to buy from Barry.
She can not sue Barry in order to get the field since it is unfair for Tom who bought it and who has nothing to do with Barry and Sally’s agreement.
She can ask for money in order to compensate the lost of the field she wanted to have since if she did get it she would have increase her farm and her production and so therefore would have earned much more money.
? Casebook on contract law, Jill Poole, 5th edition.
? Davies on contract, Upex and Bennet, 9th edition.
? Law of contract, Neil Lucas, Blackstone’s LLB learning texts.
? Law of contract, Paul Richards, 3rd edition.
? Statutes on contract and tort law, F.D Rose, 3rd edition.
? Law teacher.net
? West law web site