Law of contract

Question

On 5 August, X sends a written offer by post to Y, to purchase Y’s ROLEX watch for

R10000. One of the terms in the offer is that the offer will lapse on 20 August. The offer

also stipulates that X must be aware of the acceptance, for any legal obligations to arise.

Y writes the letter of acceptance on 9 August in response to X’s offer, and Y posts this

written acceptance on 10 August. X’s son collects the post from the Post Office on 17

August, and amongst the sealed letters of post collected, is Y’s acceptance. X’s son is

not responsible and only hands all the sealed post to X, on 20 August. On 21 August, X

opens the post and reads the letter of acceptance. Was a legally binding contract

concluded between X and Y? Discuss and substantiate fully.

Answer 1

The issue is whether there was a contract between the parties.

The rule is for a contract to exist there needs 1) offer 2) acceptance and 3) consideration

1. An offer is the manifestation of an intent from the party making that offer to enter into contract. An offer has to be clearly communicated to the offeree in order to be a valid offer. For example an illusory promise ("once in a life time") is not an offer.
2. Acceptance is the manifestation of intent from the offeree to accept or willing to enter into the contract. Acceptance is clearly valid when it is communicated to the offeror. However, there is an exception called the mailbox rule. Under this exception, acceptance is valid only when it is sent by the offeree and not received by the offeror.
3. There is also an important rule about the mailbox rule. If a letter of acceptance and a letter of refusal are sent together or subsequently then the letter that the offeror received is the one that controls the contract. So if the letter of acceptance arrived first then this letter controls the validity of the contract.
4. Consideration is when the parties have a meeting of the minds. Courts use the third party perspective test which is an objective test to see whether a meeting of the minds exist

It is also important to note that for a contract to exist there needs to be essentials terms that are established

1. 1, Was there an offer?
2. There is no question that X intended to enter to a contract when he sent a written offer to Y. It also could be assumed that Y received the communication of X's offer since he wrote a letter of acceptance. Overall, X's offer is a valid offer

1. Was there an acceptance from Y?
2. The facts stated that Y sent a letter of acceptance, Y clearly manifested an intent to accept the contract. However, just like an offer, acceptance must also be clearly communicated. It s clearly shown that Y has read and understood the terms of the offer and wrote back to X his acceptance. Y sent a letter of acceptance on the 10th day of August. Y had until August 20th to communicate his acceptance. Under the mailbox rule, acceptance is valid when the offeree sent the letter. Therefore, Y's acceptance is valid as of the date of August 10th.
3. Was there consideration such that both parties have a meeting of the minds.
4. As explained as supra, Courts use the third party perspective to determine on a case by case whether there was a meeting of the mind. There is no disputable facts that X and Y misunderstood the contracts from a third party perspective. Maybe an argument can be made that Y has multiple Rolex of different sub brand and X was not specific in his offer. However, this is something that the facts do not state and thus based on the facts alone, it can be assumed that meeting of the minds element have been met.

The last question is whether there is a valid contract?

Based on the analysis as supra, a valid contract was formed when Y sent his letter of acceptance of X's offer. However, the facts also states that X did not open Y's acceptance letter until the 21st of August. The issue here is that mailbox rule applies here. Under this rule, Y's acceptance was on August 10th and not when X's opened Y's acceptance letter. Overall a valid contract was eventually formed but other issues that needs to discussed can arise.

Does UCC article 2 applies to this contract?

Since this is a sale of a Rolex which is a tangible good, UCC article 2 controls. Under the UCC article 2 a contract can be formed in any manner and UCC article 2 is less strict in contract formation than common law contract. Under the UCC article 2, Courts look at the conduct of the parties and even if a term is lose then Courts can correct the term and the contract can still be valid and enforced. However, this is not a big issue in this discussion here since it is unclear how much the Rolex was sold for. If the Rolex was sold for more than $500 then we would have a statute of Fraud discussion. However, the price in the facts is undeterminable in the real world application. Overall, there is a contract under the UCC article 2 but this discussion is wouldn't be the main determining factor of the validity of the contract.