Legal Advice and Contractual Analysis Regarding Relations with Lucy

Jonny, Business Owner Liverpool St Organic Health Company, 102 Middlesex Street London, E1 7EZ Dear Jonny,

I am writing to advise you on your legal relations with Lucy, Vicky and Adam. This letter uses case law authorities to explain your legal position with respect to the three parties. We will first explain the elements of a valid legal contract and then explain the individual positions with respect to the three parties.

As the issues raised involve elements of a binding contract, we will first explain briefly what these elements are so as to give you some understanding of the law. A valid contract involves certain essential elements of the contract which are: offer, acceptance, consideration, consensus ad idem and intention to be bound legally by the contract (Poole, 2016). An offer is made by one party (offeror) signifying to the other party (offeree) their promise to do something for the offeree and also specifies what the offeree must do in return (Poole, 2016). Offer must be accepted unconditionally and unequivocally by the offeree as a counter offer will be a rejection of the offer (Poole, 2016). There should be some consideration involved in the contract to be binding.

With regard to your legal position with Lucy, this concerns a contractual agreement between yourself and her for the settlement of debt owed by you. In cases where the debtor tries to settle the debt for less than the full amount by making a payment "in full and final settlement", and the creditor agrees to these terms, the agreement may still not be binding on the creditor because in part satisfaction of the debt, the debtor is merely doing that which he is legally obliged to do (Jones, 2019, p. 125). In other words, the debtor in such cases is not discharged from his duty to pay the remainder of the amount owed to the creditor and the creditor may still be able to enforce the debt against the creditor even after the full and final settlement. This principle has been laid down in different cases where the courts have held that the part payment of debt to the creditor in satisfaction of the entire debt is not good consideration and does not prevent the creditor from demanding the full payment of the debt in future (Pinnel's Case [1602] 5 Co. Rep. 117a, 1602). The principle is that if the debtor has agreed to do something over and above what is due to the creditor or provides a benefit to the creditor then the creditor may not be able to enforce the full payment of debt after having agreed to satisfy the debt with part payment (Foakes v Beer [1884] UKHL 1, 1884). The issue hinges on consideration and whether the part payment of debt was a consideration provided to the creditor in satisfaction of the whole debt; this could happen where the part payment of the debt in satisfaction of the whole debt is done before the due date of the debt or when in part payment, the debtor provides some goods or other material benefit to the creditor (Jones, 2019, p. 126). The principle of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5 is also applicable here as it provides that the promise to perform an existing legal duty can amount to good consideration only where there are practical benefits to the promisee and the contract involves supply of goods and services (re Selectmove Ltd [1993] EWCA Civ 8, 1993). The principle was reinforced by the Supreme Court recently that based on the facts of the case the debt may be satisfied by part payment (Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, 2018). Importantly, promissory estoppel may be used to claim that creditor cannot claim debt when they have agreed to not pursue it, but not when the debtor took advantage of some financial problems of the creditor to pay in part in lieu of the entire debt (D & C Builders v Rees [1966] 2 QB 617 , 1966). Applying these principles to the current situation, what can be seen is that although the contract is related to goods and services supplied by Lucy for which £5,000 is due, you have not satisfied this debt through payment before the due date or material benefit to Lucy. The debt was to be repaid in full by 1 March but was paid partly (£3,000) on 2nd March. Therefore, it can be argued that you have only given the consideration that was due by you and not any other benefit to Lucy so that she still has the option to claim the balance of the debt. Moreover, promissory estoppel may not be applicable because Lucy may claim that you took advantage of her financial problems to pay in part.

With relation to your legal position with Vicky, the issue is whether Vicky and you have a contract for sale of the van. The facts of the case indicate that you had made an invitation to offer through an advertisement in the back window of your van (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795, 1952), to which Vicky had responded through telephone . You had informed Vicky that you will accept £4,000 for the van but Vicky does not signify acceptance of that offer and asked you to hold the offer open for a few days to which you agreed. Even if the offer is agreed to be kept open for a certain period of time, this does not bind the person making the offer because the other party is not similarly bound by any legal obligation to accept the offer (Routledge v Grant [1828] 4 Bing 653, 1828). The principle of law is that an offer can be revoked at any time before the acceptance is signified to the offeror by the offeree even if the former has agreed to keep the offer open for a certain period of time unless the offeree has given some consideration to the offeror (Jones, 2019, p. 91). The issue in this situation is also about the time of communication of revocation of offer as Vicky has communicated acceptance to the offer on 5th March while on 6 March, you sent a text to Vicky to say that you have sold the van. Communication of acceptance is complete as against the offeror as soon as it is placed in the mailbox in case of written acceptance (Henthorn v Fraser [1892] 2 Ch 27., 1892). The offer may only be withdrawn before its acceptance (Errington v Errington Woods [1952] 1 KB 290, 1952). Letters of revocation of offer are deemed to be effective only upon delivery, whereas the acceptance is deemed to be effective on posted (Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344, 1880). In this situation, the offer was revoked after acceptance was validly made by Vicki through the letter dated 5th March. Therefore, there is a binding contract between you and Vicki after the letter signifying acceptance is posted by her on 5th March and your text of revocation of offer does not affect this contract as the contract is already in existing one day prior to the text sent by you. Therefore, you are bound by the contract to sell your car to Vicki for £4,000.

With regard to your legal position with Adam, this relates to the issue of whether there is a contract between you and Adam for sale of your Rolex. Through your email dated 7 March, you have made an offer to Adam to buy your Rolex for £1,000. The question is whether Adam’s e- mail asking you if you will accept payment by 3 instalments is a counter-offer that is rejected by you would have any effect on Adam’s phone text accepting your original offer. The law regarding acceptance is that it should match with the terms of the offer and the offeree should not introduce any fresh terms into the acceptance (Hyde v Wrench [1840] EWHC Ch J90, 1840). Therefore, an agreement subject to a condition is not binding and a counter offer does not constitute acceptance. In another case, the court found that where the offeree did not accept the original offer but purported to accept the offer by advancing an initial payment and further promised to pay the rest of the amount in instalments, no binding contract was created (Neale v Merrett [1930] WN 189, 1930). In this situation, the original offer made by you was rejected by Adam when he proposed to pay by instalments. Therefore, there is no binding contract between you and Adam.

To summarise, Lucy can demand the remainder of the debt from you because part payment of debt in this situation does not provide any additional consideration to her and does not satisfy the conditions for promissory estoppel to be applicable. There is a binding contract between you and Vicki for the sale of your van as her acceptance to the offer was posted to you before your letter of revocation of offer was received by her. There is no binding contract for the sale of your Rolex watch with Adam because he rejected your original offer by making a counter offer to pay you the sum in instalments. Yours Sincerely, Your Name

Continue your exploration of Legal Action Initiated with our related content.

Reference List

Jones, L. (2019). Introduction to Business Law . Oxford: Oxford University Press.

Poole, J. (2016). Textbook on Contract Law. Oxford: Oxford University Press.