Contract Law Between Tom and Lisa Assessment Answer

Issue

The question of law occurred in the given scenario whether a contract has been established between Tom and Lisa or not and if Lisa own Tom anything at the end of transaction.

Rule

A contract is an agreement in either oral or written format which is enforceable by law. It can be held for both formal and informal purpose. To execute a legally binding contract, certain essential elements are required to be present in the contract which is discussed hereunder: 

Offer: The first and major element in a legal and valid contract is offer. To initiate a contract, an offer or promise shall be made by the offeror which can be in both oral and written form. To make an offer, at least two parties are required which are legally competent to enter into a contract. The party to whom the offer is made should have clear and unambiguous knowledge of terms of offer while accepting it (Peng, and Jianju, 2017). For example, a couple has made arrangements with a tour agency to have their honeymoon in Sydney for a week and received a form of rules and regulations related to their tour to sign. In that case the couple should be clear with the rules and regulations described under the form before signing it. Hence the offeree should have clear picture about the matter of offer to avoid the future contingencies. Also the offer made in oral or through a telephonic mode shall be valid and legally binding if the offeree has clear and unambiguous knowledge about the terms of offer. In the case of “Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256” the Carbolic company produced a product smoke ball by claiming that it will be a cure to influenza and many other diseases and the company will provide a reward of £100 to any person if its smoke balls will cause rise in influenza colds, or any other disease caused by taking cold after using the smoke balls. The plaintiff, Carlill purchased a packet of smoke balls by believing on the statement made by the company in its advertisement and used as per the given instructions. She used the smoke balls for approx. two months and later on a date she had an influenza attack (Pfeiffer, 2016). Thereafter she wrote a letter to the company to pay an amount of £100 as promised in the advertisement on which the company refused to pay the amount. In this case the court held that the advertisement made by company was unilateral offer to the public and purchase or use of smoke balls made by Carlill as per the instructions given with product made the contract legally binding on the company to pay the promised amount of reward to her. 

Acceptance: The second essential element of contract is acceptance which is required to be made by the offeree. Before providing the acceptance on the offer, the offeree should be clear with the offer and the other associated rules and regulations. If the parties are still discussing or negotiating on the terms of offer then it shall not be treated as contract (Kumarage, 2016). The mode of giving acceptance can be oral or written but it should be clear and free from any influence. For example a couple has asked for the booking in hotel by requesting the information about the cost and availability of rooms. The hotel responded to couple with the full information about the accommodation and its relevant costs and also suggested that if the couple deposits an amount of £100 in advance then the room will surely allocated to them. In this scenario if the couple deposits the advance amount of £100 then contract shall be established between the couple and hotel. It was held in a case of “Hyde v Wrench (1840) 49 ER 132” that a contract cannot be claimed as breached if it is not completed. In this case Mr. Wrench made an offer to Hyde to sell a farm for £1,200 which was refused by Mr. Hyde. Later Mr. Wrench has given a counter offer to Hyde to sell the farm for £1,000 but Mr. Hyde against rejected the offer. However he agreed with the offer after sometime and wrote to Mr. Wrench that he is agreed to purchase the farm. Mr. Wrench denied selling the farm and Hyde claimed against Wrench for breach of contract (Viscasillas, 2016). The Court held that there was no contract has been created as both the offers were not accepted by Mr. Wrench hence there was no binding condition on the party to sell the land. 

Consideration: It is also a very significant element in the creation of contract. Consideration is the exchange of a valuable thing against the performance of contract. Without having a consideration, a contract cannot be legally enforceable. For instance a customer purchased a refrigerator from a store by paying an amount of £1,000. In this scenario, it is considered as a contract between the store and buyer hence the buyer may present a claim against the store in case of any defect found in the refrigerator (Morris, 2016). In the case of “Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674” John Quinn agreed to sell to his 2 590 acres land to Goldsborough, Mort & Co. and granted one week to Goldsbrough to purchase the land for £1 10s per acre. Before the expiry of one week the Quinn repudiated the offer, alleging to have made a mistake. It was held by the Court that an option is also an offer for sell with certain conditions i.e. conditional contract. If there was a promise to not to withdraw the offer for a specific period of time then it is an irrevocable offer and the breach of this offer can be compensated for the loss or damages. However an offer can be revoked at any time before the acceptance is made by the offeree (Farrell, Machin, and Hinchliffe, 2017). The Court stated that an option made for value is not revocable during the period for which it is given hence Quinn shall be liable for the breach of promise.  

Intention to Create Legal Relations: This is an essential element in the formation of a contract. While creating a contract the intention of parties must be fair and common to make the contractual terms binding and legally enforceable. A contract made in the absence of common intention of parties may result into a lawsuit. For example, two partners entered into a partnership contract for doing business by sharing equal profits in business (Carter, and Courtney, 2017). In this case if the partners do not carry the common interest to run the business efficiently and distributing the profits equally then it could lead to a lawsuit. 

In addition to this there are some other elements such as legal capacity of parties which is necessary to make the contract legally binding. Hence the formation of a valid contract begins with an appropriate offer which is made by the offeror. It was held in the case of Routledge v Grant [1828] 4 Bing 653 that if an offer withdrawn by the offeror before the acceptance shall not be considered as breach of promise or contract. In this case the defendant approached the claimant to purchase the lease of his home for which he stated that his offer would remain open for next six weeks. Before the expiry of period, the defendant changed his mind and wrote a letter to claimant to inform about the withdrawal of offer (Hayward, 2017). Also the claimant received the letter before he accepted the offer but even after getting informed about the intention of defendant he accepted the offer. The Court held in this case that the letter sent for withdrawal of offer did not made the defendant binding because it has been legally withdrawn by him within the specific time and before the acceptance. 

Application

Lisa was planning to start a coffee shop for which she needed some modern chairs and tables. For such purpose she contacted her friend Tom who was a carpenter and asked for the help in providing tables and chairs. Tom quoted an estimate of $3000 for six tables and also stated that he had to talk with Bob to provide the appropriate timber. After getting confirmation from Bob, he informed Lisa for making of tables for her coffee shop and quoted the final price of $3000 including the labour. After few days Tom informed Lisa about the price increase hence the making of tables will cost $3600 to her. He also informed her that he cannot assure for the color of tables as it varies with the batches of timber. Tom demanded $500 to pay as deposit to the timber merchant. The very next day, Lisa transferred the amount to Tom and few weeks later the tables was delivered by Tom but Lisa was unhappy with the color of tables because it was too dark (Kwan, 2017). Lisa asked Tom to take the delivered tables back and return back the amount of $500 to her. 

Has a contract been formed in this scenario?

As per the given scenario, Lisa and Tom were entered into a contract. Although there was no written contract but they have made an oral contract which was legally binding on both the parties. The transaction held between Tom and Lisa comprised all the elements of a valid contract. Lisa made an offer to Tom for providing her the tables for her coffee shop and Tom has given his acceptance on Lisa’s offer. Also the consideration had been promised by Lisa for the making of tables. Therefore, they entered into an oral contract which includes all the elements of contract (Tavakkoli, 2017). Also Tom has informed her about the color differentiation of tables on which she did not reacted at that time thus Tom cannot be held liable for such default. Also she cannot revoke the contract after getting the delivery of tables as it is described by law that an offer cannot be revoked after the acceptance and if it includes a valuable consideration. Hence this contract is binding on Lisa and Tom and Tom can enforce Lisa for the specific performance of contract. In addition to that Tom may present his claim before the Court and held Lisa guilty for the breach of contract. 

Does Lisa own Tom anything?

The consideration agreed between Lisa and Tom was $3600 and an advance for deposit of $500 was paid by Lisa to Tom. As per the terms of contract she is liable to pay the remaining agreed amount of contract to Tom after getting the delivery of tables. Lisa refused to pay the remaining amount and also asked Tom for returning the amount of deposit paid by her. Here in that case Lisa own Tom for the remaining amount of agreed consideration in the contract for the making of tables (Schnitzler, Dürmuth, and Pöpper, 2019). However she stated about the $700 which she own Tom from one of their previous trips but this amount was not the part of this contract hence this amount would not be considered under the remaining amount. 

Conclusion 

The above-mentioned rules and discussion of the given scenario reveals that an offer made for acceptance can be revoked by the offeror at any time before the acceptance but it cannot be withdrawn after the acceptance. Also an offer involved the consideration cannot be revoked after the acceptance made by the offeree. In the given case Lisa and Tom were bound under an oral contract and Lisa is obligate to perform the contract completely. As the offer was accepted by Tom and part of consideration had been exchanged between the parties, the offer cannot be revoked by Lisa. Also she is liable to pay the remaining contractual amount to Tom.