Wajid, a plumber, has a mobile phone contract with Telecom until 31st October. He has also had dealings with phone companies Webphone and Savaphone, with a view to getting a cheaper phone contract elsewhere. The current date is 7th October. Wajid has a problem in the area of agreement concerning the three contracts he has sought advice on. Agreement is the meeting of minds or actions of the parties to agree on a contract, within which are two sections, offer and acceptance.
Both offer and acceptance are essential for the formation of a valid and binding contract, so each issue Wajid has needs to be viewed in these terms to discuss whether he is bound to any contracts or not. Individually each contract, or potential contract, will be discussed to decide whether Wajid has a binding contract with any of the three companies which he has dealt with. Telecom Wajid currently has a phone contract with Telecom, which is due to expire on 31st October.
He received a letter from them on 1st October, explaining to him that his contract will automatically be renewed unless they hear from him before the end of his current contract. With reference to acceptance. For a contract to be valid there must be an offer and an acceptance. A valid acceptance must agree to all particulars in the offer, otherwise it becomes a counter-offer. All terms and conditions must be met in order for an acceptance to be valid. See Neale v Merritt (1930), where an offer stipulated full payment on acceptance.
The defendant purported to accept the offer and enclose part payment, and a promise to pay the rest in instalments. This was deemed in court to not be a true acceptance, and the contract declared void. Offers, unless stated otherwise, can be communicated either in writing, orally or by conduct. Wajid would extend his contract with Telecom on 1st November by conduct, as he would not have informed them that he no longer wishes to have a contract with them, however, given the current date is still only 7th October, he has not entered into this new contract yet.
Wajid does not have a binding contract with Telecom apart from that which he is coming to the end of. Unless the 31st October passes and he has not communicated to them his wish to end his contract, then he will not have a binding contract with them, only the contract which he already has, which is coming to its end. Savaphone On 2nd October Wajid telephoned Savaphone, and was quoted a price cheaper than that of Telecom. He said on the phone that he’d sign up and the salesperson sent out the forms for him to sign, which Wajid received on the 4th, signed and promptly posted back on his way to work.
With reference to offer. An offer is made where a person (offeror) unequivocally expresses to another (offeree) his willingness to make a binding agreement on the terms specified by him if they are accepted by the offeree. An offer may be made to a specific person, a group of people or the world at large. An offer to a specific person cannot be accepted by anyone except that person. In relation to invitation to treat. Invitation to treat is not an offer, and its acceptance does not constitute the formation of a contract.
There are many cases where invitations a misconstrued as offers. For example a shop displaying goods for sale with a price tag attached, they are not obliged to sell at that price, and it is only an invitation to buy the products, not an offer, see Fisher v Bell (1966) and Partridge v Crittendon (1968). Wajid received an invitation to treat on the phone from Savaphone, so does not constitute a binding contract. However, when he receives the formal offer letter in the post, signs it and posts it back, he has accepted an offer from Savaphone.
With reference to Postal Rule. The postal rule is that, where acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete immediately the letter has been posted, see Adams v Lindsell (1818) and Household fire insurance co v Grant (1879). The application of the postal rule requires that the letter of acceptance has been posted, addressed and stamped properly; see Re London and Northern Bank (1900) and Getreideimport GmbH v Contimar (1953).
The postal rule does not apply where the means of communication are instantaneous (oral, telephone, telex, fax, e-mail) where the express or implied terms of the offer exclude the postal rule. See Holwell Securities v Hughes, CA, 1974 where it is unreasonable to use the post or where the application of the rule would produce a manifest absurdity, see Holwell Securities v Hughes, CA, 1974. Wajid has a binding contract with Savaphone, because the postal rule states that as soon as a letter of acceptance has been posted, then acceptance is complete and a contract is binding.
With regard to Wajid leaving a telephone message stating he no longer wants a contract with them, after contacting Webphone, the postal rule states that where the rule applies, an offeree who has posted his acceptance is not allowed to revoke it by some quicker means of communication, in this case by phone, see Dunmore v Alexander (1830). Wajid does have a binding contract with Savaphone, as of 4th October, due to the effect of the postal rule, and that he was not allowed to revoke the rule and acceptance by leaving an answer phone message with Savaphone.
Webphone The Webphone case is based on whether an offer has been made and accepted. By clicking on the internet prompts, Wajid had not entered into a contract with Webphone. The website gave an invitation to treat, which Wajid accepted, which would lead to the formal offer letter being sent to him, similar to what happened with Savaphone. However, by the 6th October Wajid had not received the forms from Webphone, and the company had realised that they had made an error on the website, that they had been offering a wrong price (too low).
After Wajid contacted them via e-mail, they replied inviting him to take advantage of the correct price for a contract. Wajid had not accepted an offer at a lower price, as Webphone had realised their error before sending out the official offer documents, so he has no binding contract with Webphone at all, at the correct or lower price. Wajid could have claimed a case of Negligence through common mistake from Webphone, but, using Smith v Eric S Bush (1990), the case gave rise to giving
the defendants suitable time to detect the error and rectify it, which Webphone did in this case. Only if Webphone had sent out the documents with the lower price and then retracted the lower price, would they be liable for negligent charges against them. Wajid has no binding contract with Webphone. When looking for a remedy to this problem, an overview of Wajid’s situation is required. He has a contract with Telecom which expires on 31st October but will automatically renew on 1st November unless he contacts them to cancel.
He has a binding contract with Savaphone because he has signed and posted his acceptance of their offer, and on 7th October has received confirmation of his new mobile phone contract with them. Wajid has no binding contract with Webphone, as they rectified their error and sent no official documents for him to sign. It seems that Wajid now has no choice but to stick with the Savaphone contract to which he is now bound to, which is cheaper than that of Telecom. He would be advised to cancel his Telecom contract before his time runs out, and stick with the Savaphone deal.
He need have no more dealings with Webphone because he has no binding contract with them. Wajid will be left with one mobile phone contract, which is cheaper than that which he originally had, so is better off now than before. He need not pursue any court proceedings for his mobile phone contracts, as he would not have a case against any of them. Advice to Wajid would therefore be to stick with his now binding Savaphone contract.
Law for Accountancy students 7th edition; Richard Card & Jennifer James; Butterworths publishers 2002