Brief statement of facts
In this question, there are three parties, Perry, Athena and Dion. Athena has a house in Templestowe that she has agreed to sell to Perry for $800,000, an offer which is open until 30th January. However, Dion, who had previously bought property from Athena, offers $600,000 for the same house. Athena states that she would take $700, 000 but Dion offers $665, 000.
Athena finally informs Dion that she would only take $680,500 as the lowest price and gives him until 23rd January to make a decision. On 23rd, Dion offers to pay $68,500 and the balance in three months but Athena rejects the offer. On 28th, Dion writes to Athena agreeing to pay the full amount of 680,500 and accepts the same terms of contract as in the previous deal. He meets Perry and informs him that he has bought the house and immediately, Perry wrote to Athena accepting the 3rd January offer.
Analysis of scenarios
The main issue in this question is who between Perry and Dion has a valid contract with Athena for the purchase of the Templestowe house. So as to know who has a valid contract, we have to look at the facts to know where there is a valid offer and acceptance. We have to first analyze whether there was an offer was made by Perry on 2nd January. Secondly, we consider whether Athena’s offer to sell at $ 800,000 amounts to a valid offer.
Third we look at whether Dion’s offer of $ 600,000 was valid and whether Athena’s agreement to sell at $ 700,000 was valid acceptance. Is the final offer for $ 680,500 accepted when Dion agrees to it but varies the terms of payment? Fifthly, does Dion’s acceptance on the 28th of January mean that a contract now exists between them? Finally, we look at whether Perry’s letter to Athena is valid acceptance and whether it means that a contract exists between them.
Analysis of legal issues arising
For a contract to be formed there must be a meeting of minds (McKendrick 2010). For this to be established, an offer must be made and acceptance must occur in the exact terms of the offer. Any variation in acceptance amounts to a counter offer which destroys the original offer.
We now analyze the facts sequentially; First, Perry’s request to buy Athena’s house is not a valid offer since it has no element of consideration. It is thus a mere invitation to treat such as that in Harvey v. Facey [1893]. The actual offer is made on 3rd January when Athena accepts to sell him the house at $ 800,000.
Since Athena gives Perry until 30th January to accept the offer, her dealings with Dion do not revoke the original offer. The only way for her to revoke that offer is to write to Perry before the 30th stating that she has revoked it. Such revocation was upheld in the case of Robophone Facilities Ltd v. Blank [1966]. While Dion’s offer of $ 600,000 is valid, it is not met with an agreement from Athena but instead she demands more money which is a counter offer.
The final offer is made by Athena for $680,500 but again there is no acceptance since Dion purports to alter the terms of the contract which is a counter offer. However, under the UCC Section 2-207(1), acceptance can still be valid even where some terms of the contract are varied by the offeree. Since he had been given until 23rd to accept the final offer, his acceptance on the 28th is void. This is why these dates are so important. Conclusively, it is clear that there is no contract between Dion and Athena.
Since Athena’s offer to Perry was open until the 30th of January, his acceptance of the full terms of contract means that there is a valid contract between Perry and Athena. However, there is no consideration moving from the promissee as is the requirement for a valid contract. Nevertheless, future consideration is sufficient and thus the promise to pay the $ 800,000 validates the contract.
Other issues that come up are promissory estoppel and postal acceptance rules. Promissory estoppel is where a person is precluded from going back on a promise if the other party has already suffered or will suffer considerable damage if this was to be allowed (Bower 2004). Promissory estoppel does not apply here since Perry would not have suffered any harm if the house were to be sold to Dion.
However, if he could have proved damage or loss, it would have been sufficient to defeat a contract between Dion and Athena. Postal acceptance rule or the mailbox rule established in the case of Adams v Lindsell (1818) states that acceptance is made when the acceptance letter is sent by the offeree. Issues of acceptance do not arise in this case since the letters were all received within time.
References
Adams v Lindsell, (1818) B & Ald 681.
Barton vs. Armstrong, (1976) AC 104.
Bower, S. (2004) The Law relating to Estoppel by Representation, 4th edition. London: LexisNexis.
Harvey v. Facey, (1893) A.C. 552.
McKendrick, E. (2010) Contract Law: Text, Cases and Materials. Oxford: OUP.
Robophone Facilities Ltd v. Blank, [1966] 3 All E.R. 128.
Smith v. Hughes, (1870) LR 6 QB 597.
Uniform Commercial Code (UCC), Section 2-207(1).