Legal Possibilities for Arkwright

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Introduction:

The purpose of this report is to assess the legal possibilities for 'Arkwright' concerning the various pieces of correspondence between the 1st and 19th of March.

This case is built upon contract law. Contact law is based upon the Latin phrase 'pacta sunt servanda' meaning 'a pact must be kept.' Contractual obligations arise from a legally enforceable contract between two persons imposing mutual obligation on the parties. Failure by the parties to perform their contractual obligations gives rise to liability for breach of contract, Judge.

Contracts can be defined as agreements enforceable by the law between two or more persons to do or abstain from doing some act or acts, their intention being to create legal restrictions and not merely to exchange mutual promises.

Contracts can be split into two main headings, speciality and simple contracts. In this case a simple contract is in order as the contract is the exchange of a sum of money for specific stock, not by a deed. Under this heading the type of simple contract in use is bilateral. This is one where two parties legally bind each other to the agreement by each having a responsibility to perform his/her obligations, Poussard v Spiers (1876). In Arkwrights case, the offeror offered £8 per pack as long as the offeree agrees to buy 100 or more packs.

As stated by Judge.S (2006 p 39) 'In order for a contract to be legally binding, three vital elements must exist:

  1. A matching offer and acceptance
  2. The promise must be by deed or supported by valuable consideration.
  3. The parties must have intended to create legal relations.'

This applies to Arkwright, as an offer was received on the 2nd March, with Granville accepting the offer. Consideration was given in that there was a suitable time period given in which to accept the offer, and both parties intended to create legal relations through business.

The Offer:

In order for a contract to be legally binding an offer must be made by the offeror and subsequently accepted by the offeree. An offer can be described as an announcement of a person's willingness to enter into a contract. An offer can be made to a particular person or to the public at large. Smiths & Keenans (2006). Offers must be differentiated from an invitation to treat. This being an invitation from the offeror to receive offers from the potential offeree, for example in the case of Fisher v Bell (1961).

An offer cannot be effective until read by the offeree, as they cannot accept something to which they are unaware. This principle applies in the case of Taylor v Layord (1856.) In the case of Arkwright, he himself the, sole proprietor, did not read the offer, however assuming Granville has qualified authority, the offeree can now considered to be Granville.

The offer was communicated via the post in letter form on the 1st March, with the conditions that an order must have a minimum of 100 packs, and the acceptance must arrive before 12 noon on the 6th March.

Conditions of contract:

A contract will set out a series of clauses to set out consideration for both parties and the terms on which consideration is to be performed. There are three main types, express, implied and exclusion. In Arkwrights case the offer set out a condition in the express terms of the contract stating "And provided we receive your order by 1.00pm 6th march from you for at least 100 packs, we will sell at £8 per pack" This being where both parties have agreed upon and intend to incorporate a specific element in the contract.

A similar condition was in the contract between Poussard v Spiers (1876). The condition was that the opera singer was to perform from the frsit night through to the end of the show, however due to illness she could only appear from the second week. The court ruled this as a failed condition on her behalf and so the contract was void.

An exemption clause, that being where one party wishes to limits ones liability by inserting an exemption clause must be communicated in the offer. The common law's position on these clauses it that if the contract is not signed, the clause must be set out clearly to the offeree; if not it must be communicated as to where to find the clause; it must be legible; and most importantly to this case if the clause is brought to the offeree's attention after the letter of offer the contact will be in effective.

In Arkwright's case, a letter on the 15th March was sent out, with an attached invoice, with the clause stating "Our maximum monetary liability for faulty disks is £200." This not being communicated to Arkwright in the offer letter may well be considered to make the contract ineffective. A similar case was that of a parking ticket stating the express terms on the back of the ticket, however as the contract starts when the money was placed in the machine, thus before the ticket could be read, the terms were void.

The Acceptance:

Acceptance under contract law can be described by Treitel as 'A final and unqualified expression of assent to all the terms of an offer.' Richards, P. (2007) Unqualified consent by the offeree to be bound the terms of the offer, occurs when accepting an offer. The acceptance of an offer is only typically legal if accepted by the offeree to whom the offeror communicated to, and must be unconditional and absolute.

The offer letter arrived to Arkwright on the 2nd March, where Granville accepted the offer with 300 packs for £8. If it is presumed that Arkwright is the Sole Proprietor for the company, and Granville has the authority to formally accept the offer on the companies behalf, then the offer may be legally accepted by Granville, as he is an employee of the company in suitable authority. Conversely if it is presumed that Granville did not have the expressed authority to accept an offer on Arkwright's behalf, then the acceptance is invalid and non effective.

In the Law of contract when an offer is accepted it must be communicated either orally or in written form to the offeror. The offer was sent via post on the 1st March. In English Common Law, the 'Posting Law' is an exception from the general rule of contract law, in that the acceptance is in effect as soon as the letter is in the post. This is legally acceptable under the conditions that;

  1. The post is a suitable means of communication
  2. The letter was properly stamped and addressed
  3. It was properly posted

It is customary that if the post is deemed as the proper and logical method of communication between parties, then acceptance is deemed complete immediately as the letter is put in the post, even if lost, delayed or destroyed. Smiths and Keenan, (2006). However the offeror reserves the right to void the postal law, as long as s/he clearly states this in the offer letter.

Granville's let of acceptance took 4 days to reach the offeror. The question arises as to why it was delayed. If suitably stamped via first class, the Royal Mail recommends it takes 1-2 working days to arrive. However there is always possibility for inconsistency. As the contract law states if the letter is appropriately stamped and addressed then Granville's acceptance is legally binding as soon as it enters the post, even if not read by the offeror. A similar example occurred between Adams v. Lindsell (1818).

Revocation of offer:

The offeree may revoke his/her offer at any time before an acceptance has been made, without incurring legal liability accept unless the offeree has given some consideration for the option. Revocation is only effective when communicated effectively; the postal rules of communication do not apply. To be acceptable the revocation must be suitably communicated before the offeree has accepted. Smiths and Keenan, (2006). An exception to this rule is if the offeree changes address without notifying the offeror, then revocation is deemed in effect as soon as it arrives at the offeree's past address.

On the 6th March the letter announcing the revocation of the offer was received by Arkwright. In this case, assuming Granville's letter of acceptance was suitably stamped and addressed, then the acceptance was in the post on the day of the 2nd March, thus a legally binding contract has been entered. The letter of revocation would be ineffective. However if it is deemed that Granville's letter of acceptance was not posted in accordance to the rules, or another more suitable methods of instantaneous communication is deemed more valid, then the acceptance would be deemed ineffective and the revocation letter is in effect.

Byrne v Van Tienhoven (1880) A similar leading English Law case, where revocation of the offer was related to the postal rule, in which the judge ruled that the revocation was only effective if communicated directly. The ruling was that the postal rule did not apply for revocation of offers.

Re Confirmation:

In regards to Arkwright re confirmation letter on the 6th March. This was received on the 15th March. On arrival to The Floppy Disc Co, the disks were sent out immediately with the invoice for the discs at £10 per pack. They included new terms "Our maximum monetary liability for faulty discs is £200." This introduction of new terms of agreement coming after the offer letter has been accepted is a breach of contract, under English Law and so would make the invoice in effective.

Breach of contract:

Either party may break a condition of the contract simply by declaring in advance that s/he will not perform it when the time for performance arrives, Otley, M (2006). This can be either accepted, with the contract continuing or discharged.

As the offer was formally accepted when the letter entered the post on the 2nd March, under the 'postal rule'. It can be proposed that when the invoice was received from the offeror on the 15th March, they were in breach of contract by changing the agreed offer price accepted by the letter of the 2nd March. As these conditions were not declared in advance the defending party reserves the right to terminate the contract or alternatively sue on the grounds of a fundamental breach.

On these grounds the letter of response, regarding Arkwright's refusal to pay the invoice on the 17th March, is unlawful. There would either appear to be confusion from the offeror as they thought the confirmation letter was for 300 packs at £10 per pack, alternatively they ignored the first letter of acceptance, not knowing the legalities of the postal law.

Conclusion:

From the given information above, it could be drawn that assuming Granville had authority to formally accept the offer and posted it correctly to standard, then the offer was formally accepted and the contract entered by both parties on the 2nd March.

Alternatively if Granville had not had the authority and it can be proven, and the letter was not stamped according to the postal law regulation, then the offer was not legally accepted as the postal rule would not apply, thus the letter would be received on the 6th March at 1.00pm, one hour outside the offeror's conditions, with there being no contract.

In my opinion, it is proposed that the letter of acceptance was in effect under the postal law and so the contract was in effect. The revocation letter was thus ineffective and so the offer must be upheld as it is legally binding. The added terms of the contract was a breach of contract and so Arkwright reserves the right to either terminate the contract, or alternatively sue the Floppy Disc Co under the law of fundamental breach for the £600 difference in price and any other financial damages incurred.

References:

  • Elliot ,Catherine and Quinn, Frances (2005). Tort Law. 5th ed. Harlow: Pearsons Ed Ltd.
  • Judge ,Stephen, (2006). Law for Business Students. Hampshire: Palgrave Macmillan. P39
  • Otley, M (2006). Business Law. Thomson:London
  • Richards, P. (2007) Law of Contract. 8th ed. Longman: Pearson Education Limited Rush, J and
  • Smith and Keenan's, (2006). Law for Business. 13th ed. Harlow: Pearsons Ed Ltd

Cases:

  • Adams v. Lindsell (1818).
  • Byrne v Van Tienhoven (1880)
  • Fisher v Bell (1961).
  • Poussard v Spiers (1876).
  • Taylor v Layord (1856.)
  • Hochster v De La Tour (1853)
  • Thornton v Shoe Lane Parking Ltd (1971).

Bibliography:

  • Chantry, Len (2008). Business Law. Oxford Brookes BV.
  • Elliot, C and Quinn, F (2008). Contract Law. 5th ed, Pearsons ed Ltd.
  • Keenan and Riches (2007). Business law, 8th ed. Financial Times/ Pearsons Publishing.
  • Koffman, L andMacdonald, E (2007) The Law of Contract. 6th ed.London: Oxford University Press.
  • Maclntyre, E (2009), Essentials of Business Law, 2nd ed. Pearsons Ed Ltd.
  • Otley, M (2006). Business Law. Thomson:London
  • Richards, P. (2007) Law of Contract. 8th ed. Longman: Pearson Education Limited Rush, J and U50002, Elements of Business Law, Assignment 2.

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