Principal Revocation And Breach Of Contract

Principal Revocation And Breach Of Contract

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Principal Revocation And Breach Of Contract

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Principal Revocation And Breach Of Contract

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Discuss About The Principal Revocation And Breach Of Contract?


A contract is a promise made, whereby one part offer another party some terms, and the other party accepts the same for a consideration value. With the intention of forming any contract, there is a need to for the contract to have certain requirements, and these include offer, acceptance, consideration, intention, capacity, clarity and consent (Clarke & Clarke, 2016).
The first step in contract formation is an offer being made, where one of the contracting parties has to offer certain terms to the other party. There is a need to understand that an offer differs from an invitation to treat (Ayres & Klass, 2012). This is because an invitation to treat results in an offer and it shows that the parties want to negotiate. An offer, however, shows that the parties want to start a contract and create legal relations (Andrews, 2015). In case of an invitation to treat, the selling party is not obligated to go actually make the sale, as was held in Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401. In general, the advertisement which is placed in newspaper or in any other mode, is deemed as an invitation to treat and a leading example of this is Partridge v Crittenden [1968] 2 All ER 421. Though, where such advertisements constitutes to a unilateral offer, it is taken to be an offer and an instance of this is Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 and in such case, it is crucial to uphold the terms of the advert (Latimer, 2012).
In the given case study, the advertisement which had been placed by Harper and Associates in the local newspaper for the sale of their business would be deemed as an invitation to treat. This is because unlike Carlill v Carbolic Smoke Ball Company, this advertisement does not have a unilateral offer, which can be accepted by merely performing upon it. And so, it would be deemed as an invitation to treat, based on Partridge v Crittenden and applying verdict given under Pharmaceutical Society of Great Britain v Boots, Harper and Associates would not be liable to go through with the sale of business as per the advertised terms.
When it comes to binding Ben with this advertisement, the agency law comes to play. Under the agency law, for the actions which had been embarked upon by the agent, the principal is legally responsible to the third party (Thampapillai et al, 2015). So, for the advertisement placed by Harper and Associates on Ben’s behalf, Ben would be liable. Had this advertisement been deemed as an offer, it would have been Ben’s offer. Though, this was not the case, so the advertisement placed by Harper and Associates would be deemed as an advertisement placed by Ben owing to the applicability of agency law. An agent has to work as per the authority which has been granted to him, and this authority is broadly classified into actual and apparent authority (Giliker, 2010). In this case, Harper and Associates had been given implied actual authority to arrange for business sale. And it was implied that Harper and Associates could do whatever was necessary for the sale of business, which included placing the advertisement. So, Harper and Associates acted within their authority and right placed the advertisement in the newspaper.
For the actions of an agent, the principal is legally responsible towards the third party. And an agent owes definite responsibilitis to the principal which includes working with the authority which has been given to the agent. However, the principal is not liable to follow the directions or decisions made by the agent, even though it is preferable to do so, or else the purpose of giving authority to the agent is breached. Hence, Ben had the authority to make an offer to another party, without having to consult Harper and Associates and without having to follow the advertisement. This is also because of the fact that the requirement of not selling below $300,000 was contained in an invitation to treat and not in an offer. Hence, this is not a term of the contract which needs to be followed. So, Ben could right sell the business for a price lower than the advertised price.
The next step in the formation of contract is acceptance of the offer which had been made. It is important that the offer is accepted by the party to which the offer was made (Lambiris & Griffin, 2016). Also, it is important that the acceptance is given to the offer in the very same way in which it had been earlier made. It is important that the acceptance is properly communicated and the date on which the acceptance message gets to the offering party, is to be taken for the purpose of date of acceptance (Stone & Devenney, 2017). In case any term is changed, which was made in the offer, when the acceptance is being sent, it results in a counter offer and a leading example of this is Hyde v. Wrench (1840) 3 Beav 334 case (Marson & Ferris, 2015). A key point pertaining to acceptance is the date of acceptance on which the exception is of postal rules. As per the postal rules, the “date of acceptance” is the “date on which the acceptance” is sent by the sender, due to the acceptance being sent through post, and the postal office being deemed as the agent of the offering party (Latimer, 2012). The postal rules are applicable on emails, pursuant to section 14 of the Electronic Transaction Act, 1999 (Federal Register of Legislation 2011).
In the case study given, it is clear that an offer had been made by Fiona Merchant after noticing the invitation to treat, whereby she offered to purchase the cafe for a price of $250,000. This offer was to be accepted by Friday 5pm. The acceptance on this offer was also attained as Ben called Fiona on Wednesday morning and told her that he accepted Fiona’s offer. Had the advertisement been deemed as an offer, the communication on phone between Ben and Fiona would have been deemed as a counter offer based on Hyde v. Wrench and an acceptance would still be attained on this offer, due to Ben’s Wednesday morning communication. Wednesday morning would be the date of acceptance for this case.
An offer can be revoked only before an acceptance is obtained on it. If the revocation comes after acceptance, it is not valid as the contract is deemed to have been formed till that time. And when such happens, the parties can opt for mutual termination of contract (Gibson & Fraser, 2014). Where this is not done, and the party attempting to revoke the contract does not fulfil the promise made under the contract, the contract is said to have been violated. And in such case, the party which performed the contract properly can apply for remedies, which can take form of monetary compensation, or equitable remedies of specific performance, injunction or rescission of contract (Mulcahy, 2008).  
In the given case study, Ben made an attempt to revoke the contract by sending an email to not consider the Wednesday morning email. However, as per the postal rules of acceptance and the Electronic Transaction Act, the acceptance was already given by that time. So, the contract could not be revoked. And by not selling the cafe to Fiona at promised prize, Ben would breach the contract and whereby Fiona can apply for specific performance or injunction to stop Ben from selling the cafe to anyone else.
Hence, it becomes very clear that a contract was indeed formed between Ben and Fiona. And by not selling her the cafe, Ben would breach the contract for which Fiona can apply remedies.
Andrews, N. (2015). Contract Law (2nd ed.). UK: Cambridge University Press
Ayres, I., & Klass, G. (2012). Studies in Contract Law (8th ed.). New York: Foundation Press
Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.). South Melbourne: Oxford University Press.
Federal Register of Legislation. (2011). Electronic Transactions Act 1999. Retrieved from:
Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne: Pearson Education Australia.
Giliker, P. (2010). Vicarious Liability in Tort: A Comparative Perspective. Cambridge: Cambridge University Press.
Lambiris, M., & Griffin, L. (2016). First Principles of Business Law 2016. Sydney: CCH.
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.
Marson, J., & Ferris, K. (2015). Business Law (4th ed.). Oxford: Oxford University Press.
Mulcahy, L. (2008). Contract Law in Perspective (5th ed.). Oxon: Routledge.
Stone, R., & Devenney, J. (2017). The Modern Law of Contract (12th ed.). Oxon: Routledge.
Thampapillai, D., Tan, V., Bozzi, C., & Matthew, A. (2015). Australian Commercial Law. Melbourne: Cambridge University Press.

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