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Ben Rich owns and runs a successful café and catering business, Café La Mint, in the heart of Perth CBD. He is tired of working long hours and decides to sell Café La Mint. Ben contacts Harper and Associates Real Estate Agents (Harper and Associates) to arrange the sale of the business.
Harper and Associates places an advertisement in the local newspaper advertising Café La Mint for sale. The advertisement reads:
Café La Mint
Café La Mint, located in the heart of Perth CBD (situated off Hay Street), is available for sale. This rare business opportunity will not be on the market for long!
All furniture, equipment and current stock inclusive of the business sale.
Sales are approximately $650,000 per annum (excluding GST) and owner-operator profits are approximately $100,000 per annum (calculated based on the average earnings from the past five years).
All reasonable offers above $300,000 will be considered. For more information or to make an offer, please contact Bill harper on 0424 544 236 or firstname.lastname@example.org.
Fiona Merchant, a close family friend of Ben, notices the advertisement in the newspaper and telephones Ben directly. Fiona, knowing how much Ben wants to leave the hospitality industry, offers to purchase Café La Mint for $250,000. As Fiona's offer is $50,000 below the minimum asking price, Ben is hesitant to accept the offer. Fiona tells Ben to think about her offer and to get back to her at the end of the week, but no later than the coming Friday at 5pm.
Without consulting Harper and Associates about the offer, Ben decides to accept Fiona's offer. On Wednesday morning, Ben emails Fiona telling her that he is willing to sell Café La Mint to her for $250,000.
On Wednesday afternoon, John Harper from Harper and Associates contacts Ben and informs him that an anonymous investor has provided a written offer to purchase Café La Mint for $350,000. Ben tells john to accept the offer on his behalf.
Ben immediately calls Fiona and tells her to ignore the email he had sent her earlier that day. Fiona is very angry and believes that they have formed a legally binding contract.
Have Ben and Fiona formed a legally enforceable contract? Fully justify your answers, and use case authority in support.
- Ben Rich v Fiona Merchant
- Is there a valid contract?
- Offer and Invitation to Offer
- Acceptance to offeror
- Acceptance of offer by email
- Revocation of Offer – Lapse of time
- Revocation of Acceptance
Rules and Application
The Contract Law of Australia is the relevant law that is applicable in the given situations. There is no specific statute that deals with the Contract Law and is based on common law. Thus, it is with the help of precedents that the present problem is analyzed.
The main issue that arose is whether there is a valid contract that exists between Ben Rich and Fiona Merchant for the sale of Café La Mint. If there exists a contract amid them, then Harper and Associates (the agent of Ben to sell Café La Mint) cannot establish a valid contract with the anonymous buyer.
Thus, it is very important to first understand the concept of offer and acceptance.
An offer is a statement, either oral or written, made by an offeror to an offeree wherein he expresses his desire to undertake any act or omission by an offeree with the hope of approval. In(Carlill v Carbolic Smoke Ball Co , 1893), an offer is said to establish even when made to an individual, to group or to the world at large. (Gillies, 2004)
Termination of an offer
An offer is terminated when the time span which is provided for acceptance of the offer has lapsed. In (Manchester Diocesan Council, 1970), it was held that if the offeree does not accept the offer within the stipulated time provided by the offeror, then the offer comes to an end. (Moles & Sangha, 1998)
Invitation to Treat
But, when there is no offer made by an offeror; rather, the person invites offers from the people with the hope of acceptance, then it is an invitation. An invitation can be made through advertisement, tender, auction, etc. In(Fisher v Bell, 1961), an advertisement is said to be an invitation to treat wherein the advertiser acts like an offeree and can accept the offer received from the persons who are interested after reading the advertisement. (Latimer, 2012)