This advice will consider whether a legally binding contract for the sale of a computer was formed between Nicole and Lisa. The central issues are whether Lisa made a valid offer, the legal effect of Nicole’s communications, and whether a contract was formed before Lisa’s attempted revocation of her offer. The advice is based on the principles of Australian contract law.
The Legal Issues
To advise Nicole, we must determine the legal status of each communication between the parties. This involves a chronological analysis of the events to establish whether the essential elements of a contract – offer, acceptance, and an intention to create legal relations – are present.
Lisa’s Letter of 1 November: An Offer or an Invitation to Treat?
The first step is to classify Lisa’s letter of 1 November. A legally binding offer is a clear expression of willingness to be bound by specific terms without further negotiation (Australian Woollen Mills Pty Ltd v Commonwealth (1954)). By contrast, an invitation to treat is merely an invitation for others to make offers.
Lisa’s letter states: ‘I am selling my computer… I think it is worth $1500… If you are not interested in buying it for $1500, let me know by November 10, as I am going to sell it at an auction on that day if you do not want to buy it.’ While the phrase ‘I think it is worth $1500’ could be seen as indefinite, the subsequent sentence provides clarity and demonstrates an intention to be bound. It specifies the price ($1500), the subject matter (the computer), and a clear consequence if Nicole does not want to buy it (sale at auction). This indicates a commitment to sell to Nicole if she accepts the terms. Therefore, it is likely that a court would construe this letter as a valid offer.
Nicole’s Letter of 5 November: Counter-Offer or Request for Information?
Nicole’s response on 5 November stated: ‘I would buy your computer for $1500, but would you include the printer in the price…?’. It is important to determine if this letter was a counter-offer or a mere request for further information. A counter-offer rejects the original offer and proposes new terms, thereby terminating the original offer (Hyde v Wrench (1840)). However, a request for information seeks to clarify the terms of the offer without rejecting it (Stevenson, Jacques & Co v McLean (1880)).
Nicole’s language, particularly the use of ‘would you include the printer’, is more suggestive of an enquiry than a new proposal. She did not state that she would only buy the computer if the printer was included. Instead, she was exploring whether the terms of the offer could be improved. On this basis, her letter would be classified as a request for information. Consequently, Lisa’s original offer remained open for acceptance.
Acceptance and Revocation
On 7 November, two letters were posted. Lisa posted a letter withdrawing her offer, while Nicole posted a letter accepting it. The key issue is which of these actions was effective first.
Under the postal acceptance rule, where post is a contemplated means of communication, acceptance is effective as soon as the letter is properly posted (Adams v Lindsell (1818)). Lisa made her offer by post, so it was reasonable for Nicole to accept by the same method. Therefore, Nicole’s unequivocal acceptance in her letter of 7 November (‘I will buy the computer for $1500 without the printer’) formed a binding contract at the moment she posted it on 7 November.
In contrast, the postal rule does not apply to the revocation of an offer. A revocation is only effective when it is received by the offeree and they have been made aware of it (Byrne & Co v Van Tienhoven & Co (1880)). Lisa’s letter of revocation was posted on 7 November but was not received by Nicole until 10 November. By this time, a contract had already been formed. The revocation was therefore ineffective.
Conclusion and Advice
A binding contract was formed between Lisa and Nicole on 7 November when Nicole posted her letter of acceptance. Lisa’s subsequent sale of the computer at auction on 10 November constituted a breach of that contract.
Nicole is advised that she has contractual rights against Lisa. She is entitled to sue for breach of contract and claim damages. The purpose of damages is to compensate her for the loss suffered as a result of the breach, aiming to put her in the position she would have been in had the contract been performed (Robinson v Harman (1848)). The amount of damages would typically be the difference between the contract price ($1500) and the market value of the computer at the time of the breach.
References
- Adams v Lindsell (1818) 1 B & Ald 681.
- Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424.
- Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344.
- Hyde v Wrench (1840) 3 Beav 334.
- Robinson v Harman (1848) 1 Ex 850.
- Stevenson, Jacques & Co v McLean (1880) 5 QBD 346.
