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Jordan Mitchell loves to collect sports memorabilia and has assembled a large number of interesting items including team caps and tee shirts from the West Indian Cricket Association. Jordan is an associate at a Perth Stockbroking firm and has saved enough money over the past year for a trip to the West Indies where he hopes to attend cricket matches and purchase more memorabilia. On Monday morning he telephones his uncle Will who runs a travel agency in the Perth CBD that specialises in sports tourism called Kick-off Pty Ltd in order to organise the trip especially the flights and accommodation. Will sends the following email to Jordan at 11am Monday:
Kick-off can supply airline tickets to the West Indies and accommodation in Antigua, Barbuda and Dominica which will allow you to attend a number of cricket matches and also have the opportunity to buy merchandise. You will arrive on Friday before the first match of the season and remain in the West Indies for a three week period. The price is $12200. If this is suitable please confirm by post before 12noon Thursday.
Kind regards Will
Jordan sends Will a letter confirming that he is happy with the ticketing and accommodation arrangements on Monday afternoon. He also books two tours online. One is an Antigua by jetboatexperience as he wants to see the sights along with another tour of nearby St Vincent and the Grenadines as Jordan is a fan of a hit reality TV program based in the area. Unfortunately, Perth Australia Post workers including mail delivery personnel participated in industrial strike action on Monday and Tuesday of that same week causing significant mail delivery delays. As a result Will did not read Jordan’s letter until Monday morning of the following week when his mail was finally delivered. Unfortunately Will can now no longer provide the package at the quoted price of $12200 for the original dates as he has missed the airline and hotel booking deadlines. He advises Jordan who is by now extremely upset and disappointed as he paid for the two online tours by credit card and they cannot be rescheduled. Will can however provide another package for Jordan next cricket season for the discounted price of $13900 as they are family.
1) Discuss and apply the element of agreement in the above scenario involving Jordan and Will.
2) Consider whether the elements of intention and consideration have been satisfied in the above scenario.
The issue in the above case relates to the communication of the acceptance by the offeror on which the validity of the contract depends.
In accordance to the general rules of contract under the Australian law, once an offer is accepted and communicated to the offeror the contract becomes valid (Willmott, Christensen and Butler 2005). Since in the given case the acceptance was supposed to be delivered through post, the postal rules of acceptance would be applicable.
In the case of Adams v Lindsell (Adams v Lindsell 1818), the postal rule was established according to which under normal circumstances any acceptance needs to be communicated expressly to the offeror but in cases of postal delivery, the letter of acceptance once posted it is said that the offer is accepted “in course of post”.
However, this postal rule was overridden in the Holwell Securities Ltd v Hughes (Holwell Securities Ltd v Hughes 1974). In this case the judge stated that the postal rule does not apply when the contract expressly states that the acceptance must reach the offeror.
Observing the given case, a contract was made between Jordan Mitchell and Kick-off Pty Ltd. when Jordan telephones his uncle about arranging a trip to watch the cricket matches, it was an invitation to offer. The letter that was sent by Uncle Will is the offer. Even though the offer was made through electronic post it was specifically mentioned that the acceptance must reach the offeror by postal delivery. Due to the presence of this clause it was essential that the acceptance be made through post which was accordingly done by Jordan. However, the acceptance letter did not reach the offeror due to some unavoidable circumstances that was beyond the control of both the parties. In such a case the postal rule would apply as the acceptance was posted and was in course of post.
With regard to the above scenario, when though the contract was not further completed by both parties, the agreement was a valid contract despite the fact that the acceptance did not reach the offeror on time. This is because the communication of the acceptance was done accordingly by the acceptor.
The issue in the case is regarding the intention to create legal relations between the parties and the payment of adequate consideration.
In order to create a valid contract between two or more parties it is essential that the parties must have intention to create legal relations. Generally, the presence of consideration proves that the parties have the intention to create legal relations (Willmott, Christensen and Butler 2005).
Usually, the presence of consideration will provide evidence of this - if the promisor has specified something as the price for the promise this - in most cases - carries with it an intention that the parties be bound (Willmott, Christensen and Butler 2005). Nevertheless, intention is still an independent condition and it needs to be considered separately. Further, there are also such cases where even though consideration is present there is no existence of any contract as the pre-conditions have not been fulfilled. To determine the contractual intention usually the objective approach is taken.
In the case of Rose and Frank Co v. JR Crompton & Bros Ltd (Rose and frank Co v. JR Crompton & Bros Ltd 1925) it was stated that the rule is in order to create a contract there must be present the common intention of the parties to enter into a legal obligation which is mutually communicated either expressly or impliedly.
Due to the presence of family relation between Will and Jordan, it is essential to understand from the agreement whether the parties have the intention to create legal relations. First criterion is the presence of consideration in the agreement. Since the agreement mentions about the presence of consideration, it implies that the parties had the intention to create legal relations. Even though the element of consideration is present it is not sufficient to prove the presence of legal relations.
In the given scenario, when the acceptance was not communicated Jordan did not sue the other party for breach of contract. Whereas Will gave him another offer for the next cricket season at a discounted price of $13900 due to their family relations. This establishes that the offer made later by Uncle Will was an informal agreement with no intention to create a legal relationship. However, in the first part, a formal mail was sent by Uncle to Jordan, which expressed stated about the agreement.
Analyzing the above circumstances it can be stated that in the first part when Uncle Will sends a formal letter and required a formal acceptance it depicted that both parties had the intention to create a legal relation. However, the second part when Will offers a discounted amount there is no evidence of any intention to create legal relations.
Adams v Lindsell. 1818, 106 ER 250.
Holwell Securities Ltd v Hughes. 1974, 1 WLR 155.
Rose and frank Co v. JR Crompton & Bros Ltd. 1925 AC 445.
Willmott, Lindy, Sharon Christensen, and D. A Butler. 2005. Contract Law. South Melbourne, Victoria, Australia: Oxford University Press.