Law Essay

Question 1

1. What are the material facts of the case?

A contract was signed to sell a rural property which included a special clause: “This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions.”^[1] A 1750 pounds of deposit was paid to the supplier’s agent on the same day. When the buyer denies to proceed with the purchase, both parties claimed the deposit money. The purchaser believed that there was no valid agreement and that vendor should refund the deposit money. However, vendor considered that there was legally binding contract and termination to proceed with the purchase mean that the money was confiscated.

1. What was the decision of the High Court in that case?

The decision of the Supreme Court which recorded in the 6/12/1951 memorandum show that there was a binding contract between the parties, and the 1750 pounds as a deposit money had to pay for the vendor. However, the High Court denied the judgment of the Supreme Court. The decision of the High Court in this case is that no binding contract had been made. An evidence suggests that the first agreement signed by the parties is pre-agreement if without a formal agreement acceptable to solicitors of purchaser had been signed. Besides, the High Court deemed both parties had not intended to create legal relationship unless a final formal agreement for sale had been signed. Therefore, the 1750 pounds of deposit money had to be refunded to the purchaser.

1. For what reasons did the Court reach that decision?

According to solve this issue, the Court proposes four questions.

1. whether a legal binding contract was constituted between the respondent and the appellants, or only a clause of record for the formation of a future formal contract? Such as “subject to contract” or “subject to the preparation of a formal contract”, this kind of expression only can be counted as a basis condition but cannot constitute a formal contract. In case Sir George Jessel M.R. said in Crossley v Maycock: “if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce.”^[2] Based on this perspective, this agreement is conditional and clearly elaborated. For the present case, a formal contract signed in the future must be accepted by vendor’s lawyer, not only agreed terms but may also include another clause that a lawyer considers reasonable. Therefore, in this case the parties do not intention to enter into a formal contract.
2. Does the 1750 pounds payment by purchaser for the deposit of the property or merely for the intention to wait formal contract?

The purchaser paid 1750 pounds to the agency rather than the vendor, this implies that the money payment by purchaser aimed to execute a formal contract. The Court of Appeal refers to Chillingworth v Esche, Sargant L.J.’s perspective, 1750 ponds is payable to the vendor company bases on the requirement that the amount should be applied to the deposit only if both parties executed a formal contract. Therefore, for the present case, no formal contract was signed between purchaser and vendor, 1750 ponds cannot be regarded as a deposit.

1. Does the estoppel rule applicable for purchaser to deny the agreement to purchase property from vendor?

The vendor believes that the existence of a binding contract of sale and purchase between the purchaser and herself, because of some behaviour of purchaser mislead her. For example, purchaser required the vendor’s son to help him clean up the wood which had be broken caused by the fire on the property, and bring some of his own goods possess of a room in the property, and insistence required vendor hand over the ownership of the property at 15/3/1952. In order to satisfy this requirement, the vendor sold her sheep and purchased a property in Perth. The vendor is, of course, the most unfortunate. However, she had done a deliberate fact which should be consulted to her solicitor before execution a formal contract. Therefore, the estoppel rule not applicable for this case.

1. For the above reason, the answer to the fourth question is that the sum of 1750 pounds should be refunded to purchaser.

1. Must acceptance of an offer always be communicated to an offeror? Provide reasons for your answer, including relevant authorities.

The primary basis for the rules as to acceptance points out that the communication must be implemented by acceptors to accept an offer made by offeror within the prescribed and an appropriate time which in order to create a valid contract between the parties. The manner in which acceptance is communicated may be used by oral, by writing, by a reasonable action or depending on whether the offeror stipulates a form of communication in the offer. In specific cases, the rational form should be used to convey acceptance, if the offeror does not give any indication.

Another famous rule is the exception to the general rule of acceptance known as the postal acceptance rule. Based on the postal acceptance rule, if the parties approve this form can be used to communicate, the acceptance will come into effect when the acceptor put the mail into the post box rather than the mail arrive and be seen by the offeror. The postal acceptance rule transfers all of the risks of the loss of the acceptance letter to the offeror. In addition, the post rule also can be used to communicate acceptance, if the offer is delivered to the offeree in the form of a letter. Besides, the postal acceptance rule cannot be applied when the terms of an agreement by offeror specifically emphasise that the acceptance cannot be conveyed by post.

In case Holwell Securities v Hughes^[3], a six-month option was granted to Holwell by Hughes to purchase a real property, and Hughes indicate that the option has to be performed “by notice in writing”. Holwell’s solicitor used mail to send a copy of the letter which describes an acceptance of purchaser to the vendor. Vendor refused to sell the real property and purchaser sued for breach. The court determines vendor have the right to refuse to sell. There was clearly that both parties successful enter into a valid contract when the agent of purchaser mailed a copy of acceptance to the vendor, if the postal rule can be used. However, in this case, the use of words “notice in writing” means that vendor needs practical notification, when the requirement of actual communication is included in the terms of the contract, even though the postal rule is one of the desired methods of communication. Therefore, although the purchaser intended to accept the offer by using the post to communication, it was invalid to replace the general rule of acceptance, and the recipient can actually ignore the acceptance, it must be sent by a real paper to the offeror.