Business Case

Question 1

Issue

To advice Adam and Bill on whether or not to take up a legal action against John for selling his house for $2 million dollars.

Rule of Law

Counter Offer

Counter offer occurs when an offeree makes an alternative off to the offer made to him, this amounts to a counter-offer which effectively destroys the original offer. Hyde v Wrench (1840).

Acceptance

Acceptance must be positive and not passive. Felthouse v Bindley (1862) shows that the party accepting the contract must actively accept an offer, otherwise he cannot be deemed to have accepted the offer by doing nothing.

Subject to Contract

Subject to Contract shows that the offeree is agreeable to the terms of the offer but proposes that the parties negotiate a formal contract on the basis of the offer.

Application of the law to the facts

Adam’s Counter Offer

In Adam’s case, he came to view the property and told John he would buy the house for $1.8 million dollars. However, John had placed an advertisement in the newspaper to sell his house for $2 million. The general principal is that an offer cannot be accepted once it has been expired.

For example, in Hyde v Wrench (1840), where in response to an offer to sell an estate at a certain price, the plaintiff made an offer to buy at a lower price. This offer was refused and subsequently, the plaintiffs sought to accept the initial offer. It was held that no contract was made as the initial offer did not exist at the time that the plaintiff tried to accept it, the offer having been terminated by the counter offer.

Therefore in this case, there seems to be a problem in regards to Adam’s acceptance of John’s offer. The power of the original offer of $2 million dollars by John has been destroyed because Adam’s response would take the form of a counter-offer and John would have the right to reject $1.8 million dollars.

Adam’s Acceptance

An agreement comes into existence when the offer is accepted and it must be communicated. For example, in Felthouse v Bindley (1862), F offered by letter to buy his nephew’s horse for $30, saying that “If I hear no more about him, I shall consider the horse mind for $30.” The nephew did not reply and the horse was sold.

This is clearly lacking in John’s response to Adam’s counter-offer as silence does not constitute to acceptance. Therefore, Adam cannot impose acceptance of the house merely because John did not reject the offer.

Bill’s Subject to Contract

In Bill’s case, he agreed to pay the price of $2 million dollars but “subject