Law Case Study Essay

QUESTION On 1 October, Buyer saw a courier van with a FOR SALE sign that included a telephone number and a price of â€Å"$25,000 cash.† That night, Buyer called Seller. Buyer explained that he would have to borrow the money but could get it next week. Seller provided his address to Buyer and told Buyer, â€Å"If you want the van, mail me a cheque for $5000. Pay the balance by1 November.† Later that day, Buyer mailed Seller a $5000 cheque. The next night, at Buyer’s 18th birthday party, Buyer discussed the deal with Investor. After buying the van, Buyer planned to start a document courier service, and he had spent $1200 on business cards, flyers and a cellular phone. Buyer projected a profit of $50,000 in the first year. Investor was impressed with Buyer’s plans and agreed to loan Buyer $20,000 to buy the van. On 25 October, Buyer called Seller to pick up the van. Seller refused and said someone had offered him $35,000 for the van. Seller had not cashed Buyer’s cheque as yet. Seller offered to deposit the cheque and give him the van if Buyer would pay Seller $20,000 now plus $400 a month for 25 months. Buyer laughed and said, â€Å"Yeah, right.† But without a van, Buyer would not be able to start his courier service. Investor wants to hire you to give Buyer legal advice. Prepare a memorandum addressing the following matters in detail, and including relevant case law to support your arguments: What are Buyer’s potential claims against Seller? What are Seller’s potential defences? Who is likely to prevail in the event this case goes to court? Assume Buyer prevails in his lawsuit against Seller. What damages is Buyer likely to receive from the court? SUMMARY AND RELEVANT FACTS In this case Buyer is plaintiff whereas Seller is defendant. October 1: Buyer saw courier van FOR SALE with a telephone number at the price of  $25000. Buyer called seller later at night and told him that he could borrow money by next week. Seller demanded $5000 by cheque and to pay remaining by November 1. Buyer mailed the cheque. October 2: Buyer became a major. Buyer spent $1200 on courier service advertisement. Investor loaned buyer $20,000. October 25: Seller refused as he had gotten a better offer of $35,000.Seller offered to deposit the buyer’s un-cashed cheque on conditions for the buyer to pay $20,000 for van + $400 for the next 25 months. Buyer refused his new offer. ISSUE(S) The main issue is this scenario is whether it is a valid contract or not. If yes, then what are the rights and damages available to buyer on breach of contract by seller? The following sections of Australian contract law should be satisfied in order to make this contract valid. (see below) These elements need to be explored to determine whether it is applicable. RULE/ RELEVANT LAWS All the agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void. The person making the offer is known as the offerer, proposer, or promisor and the person to whom it is made is called the offeree or proposee. When the offeree accepts the offer, he is called the acceptor or promise. When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing , or promise to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise. Every person is competent to contract if he  is an age of majority, Is a sound mind, And is not disqualified from contracting by any law to which he is subject. APPLICATION A contract is formed valid if there is an offer, acceptance and consideration. FORMATION OF THE VALID CONTRACT OFFER VS. INVITATION TO OFFER There are some kinds of activities which appear to be making offer but legally are not, for instance, distributing broachers and circulars, display of goods for sale and advertising. So the seller could raise the point that he didn’t make an offer. He only made an invitation to make an offer. Partridge vs. Crittenden [1968][1] The FOR SALE sign would not considered as an offer since it is an invitation to make an offer. In this case, buyer made an offer by calling the seller. ACCEPTANCE For making a valid contract following elements should be essential: offer, acceptance and intention/consideration (Graw, S. (2002). An introduction to the law of contract. (4th ed) chapter 2, page 94). Buyer made an offer to the seller but was unable to enter into a contract since he did not have money until the next week. But the seller shows a manifestation of an intention that he wanted to accept his offer. Seller made a counter offer by asking buyer to send him $5000 on the same day by cheque through post and the rest of amount until November 1. The postal rule of acceptance is applied. In this scenario, buyer accepted the offer when he mailed the $5000 the next day because this way seller wanted the acceptance. A valid contract is formed which is irrevocable until November 1. [Routledge v. Grant, (1828) 4 Bing. 653] [2] INTENTION AND CONSIDERATION For the agreement to be viewed as a contract, it must either be supported by consideration or be a formal contract. This is the third essential element required to form a valid contract. (M.L Barron, fundamental of business law, chapter 7, page 207) The consideration is this case is $5000 from the promisor to the promisee to keep the option open [Currie vs. Misa 918750 L.R. 10 ex.153][3]. CAACITY OF PARTIES The buyer was minor at the formation of contract October 1. This could be the seller defends against the buyer that he was a minor at that time and the agreement is ab initio since the consideration would not counted. According to the Australian Consumer Law some people are under a disability when it comes to making contracts (e.g. minors); their capacity to contract is restricted. (M.L Barron, fundamental of business law, chapter 7, page  193). Consideration which passed under the earlier contract cannot be implied into a contract which the minor enters on attaining majority. Thus, the consideration given during the minority is no consideration. If it is necessary a fresh contract may be entered into by the minor on attaining majority provided it is supported by fresh consideration. [Lesile V. Shiell, (1914) 3 K. B. 607][4]. The completion of agreement was November 1 and buyer turned into a major on October 2. And both the parties were agreed till October 24. Seller could not accu se that the contract is ab-initio because they have mutual consideration till October 24. It makes the contract voidable at the option of buyer not the seller at the time since the seller is unaware of the fact that he is a minor. But in the completion period buyer becomes a major. Therefore, seller cannot terminate the contract on basis of that. There is a valid consideration from both of the parties- from buyer that he will pay him until November 1 and sellers agreed on it. The contract becomes irrevocable. In spite of whether seller sending the cheque back, or didn’t cash the cheque. He can argue that he didn’t accept it. But the acceptance is made at the time when he received the cheque. If it is a valid contract and someone does not perform it on their part of bargain. In other words, he is repudiating it, and then the words must be certain. When buyer calls the seller he rejected to sell his van. But buyer has an option available to purchase it until November 1. Seller can argue that there wasn’t a proper contract it was preliminary negotiations . He can argue that he made a counter offer. If the case goes to the court buyer will prevail the law suit. Damages available to buyer  Breaches of contract are normally remedied by an award of â€Å"damages†- an amount of money that is paid as compensation, fairly and reasonably considered to arise naturally from the breach itself. It is reasonably supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach (Gillies, P. (2004). Business law. (12th Ed.) Chapter 8, page 325). If the court gives decision in favour of buyer and it concludes that the contract is valid. Then buyer can sue the seller and immediately return of his $5000 cheque and for any actual, consequential and special damages [Hadley vs. Baxendale][5]. In  order to obtain consequential damages seller must have known about the losses that are caused by his breach. Buyer will argue that he has lost $1200 on cards, flyers and cell phone call as well as $50,000 that he can generate annually from that van. Seller could argue that buyer is not entitled for these damages since there is nothing mention in the contract retaining to these loses. The court will favour seller over here since it is not a unique van that buyer cannot do the business without it. When a contract has been broken, the injured party can recover from the other party such damages as naturally and directly arose in the usual course of things from the breach. This means that the damages must be the proximate consequence of the breach of contract. These damages are known as ordinary and/ or actual damages. Buyer can sue for actual damages, which would be the difference in price of the van and the comparable prevailing price in market. He can also obtain the special damages which would be costs curtailing from the breach like wastage of time and money from searching a new one. CONCLUSION Seller made an inviting gesture for an offer for his good. Buyer made an offer by calling the seller for his good; however he could not enter the contract for lack of money. Seller made a counter offer by asking for a mailed $5000 cheque. Buyer accepted the offer and therefore got into contract. The contract was made on the 2nd of October, one day before the buyer became a major, and was standing until the 1st of November, before which the seller backed out of the contract at the 25th of October. Seller may argue that the contract was not ab initio as the buyer was a minor at the time of contract. However, the buyer may argue that since the seller agreed to the contract, by accepting the mailed cheque, after the buyer was a major the contract is not ab initio and in fact does exist. In case the case goes to court the buyer will prevail in the law suit as the injured party. REFERENCES TEXT BOOK (Graw, S. (2002). An introduction to the law of contract. (4th ed) chapter 2, page 94) (M.L BARRON, fundamental of business law, chapter 7, page 207) (M.L Barron, fundamental of business law, chapter 7, page 193) (Gillies, P. (2004). Business law. (12th Ed.) Chapter 8, page 325) Gibson, A. and Fraser, D, (2007). Business law (3rd ed.) Chapter 7, page 293 CASES Partridge vs. Crittenden [1968][1] Partridge v Crittenden was a landmark 1968 British Court ruling that set legal precedent in that country. The case focused on the nature of advertisements in regard to the obligation of those who post them. Specifically, this case involved the sale of a bird, which the buyer, Crittenden, claimed was misrepresented in the ad. While Partridge initially lost the case, he later won on appeal. The significance of this ruling relates not to the sale of birds in particular, but whether an ad is an offer for sale or an ‘invitation to treat. [Routledge v. Grant, (1828) 4 Bing. 653] [2] Defendant (D) offered to buy plaintiff’s (P) house for a specific price with a definite answer to be given within six weeks. D was not bound to keep the offer open Best CJ if six weeks are given on one side to accept an offer, the other has six weeks to put an end to it. One party cannot be bound without the other. Currie vs. Misa [1875] L.R. 10 ex.153][3] Even relatively trivial things can be sufficient consideration e.g. chocolate wrappers but a promise not to bore someone cannot, because it has no value. [Lesile V. Shiell, (1914) 3 K. B. 607][4]. Defendant obtained loans from plaintiff by fraudulently misrepresenting that he was of full age at the time of contract. Defendant sued him to recover the money. [Hadley vs. Baxendale][5] A shaft in Hadley’s (P) mill broke rendering the mill inoperable. Hadley hired Baxendale (D) to transport the broken mill shaft to an engineer in Greenwich so that he could make a duplicate. Hadley told Baxendale that the shaft must be sent immediately and Baxendale promised to deliver it the next day. Baxendale did not know that the mill would be inoperable until the new shaft arrived. Baxendale was negligent and did not transport the shaft as  promised, causing the mill to remain shut down for an additional five days. Hadley had paid 2 pounds four shillings to ship the shaft and sued for 300 pounds in damages due to lost profits and wages. The jury awarded Hadley 25 pounds beyond the amount already paid to the court and Baxendale appealed.