Question

Business Law

Question 2 15 Marks
(a) Dorper Sheep Sellers Pty Ltd was negotiating the sale of dorper sheep flock to a firm called Livestock Brokers, which intended to on-sell the flock. On 1 June Dorper Sheep Sellers sent a letter to Livestock Brokers, setting out the number of sheep flock for sale and the price per head. It asked Livestock Brokers to reply within 14 days.
Livestock Brokers sent a letter by reply dated 6 June, inquiring whether the sale could be financed on the ‘usual terms’. Dorper Sheep Sellers did not reply.
2
On 14 December, at the opening of business, Livestock Brokers sent a fax stating: ‘We accept your offer of 1 June for the sale of sheep flock’. The same day Dorper Sheep Sellers faxed back, saying: ‘You’re too late. We’re just in the process of selling the flock to another purchaser. Formalities will be completed by tomorrow’.
Advise Livestock Brokers as to the rights and liabilities of the parties in the light of the commercial interactions taken place between them.
(b) Presume in (a) above Livestock Brokers sent the fax on 14 June but because of a transmission error Dorper Sheep Sellers did not receive it. Advise Livestock Brokers in this circumstances.

Answer 1

Solution :

Facts of the case : Dorper Sheep sellers pvt ltd was negotiating a sale of dorper sheep flock to a firm named Livestock brokers. The seller here made an offer to buyer by way of letter setting out number of sheep flocks for sale and their price. The seller had made offer on 1st June, wherein, he asked the buyer to reply within 14 days. Live stock Brokers sent a letter by reply inquiring whether the sale could be financed on usual terms ? To this, no reply of Dorper Sheep sellers was received. On 14th June, Live stock Brokers sent a fax stating that they accept the offer made to them on 1st June, to this Live Stock Brokers got a reply from Dorper Sheep sellers stating that, they were too late & that the sheep flocks were in the process of sale to another party.

Issue : a) Whether the action of Dorper Sheep sellers was right ?? What were the rights and liabilities of Live Stock Brokers in such a case ?

b) If Live Stock Brokers had sent fax on 14th June but because of a transmission error, Dorper Sheep Sellers did not receive it . Then in such case what were Live Stock Broker's responsibilities ?

Explanation :

a) In the first part, offer was made and it was open for acceptance till 14th June. On 6th June, Live Stock Brokers had made a mere inquiry into terms of contract to be entered into. Mere making of an inquiry does not tantamount to rejection of an offer. Yes, though seller has a right to effectively communicate within a reasonable period (i.e. acceptance period) of time whether he cannot perform the obligation. Here , merely an inquiry was made to which no reply was received. On 14th June, hence, the offer is still open. And Live Stock Brokers acting prudently had communicated their acceptance to the offer dated 1st June. But Dorper Sheep Sellers were already in the process of selling the stock to another third party. This was not a valid act. When the acceptance was communicated and received within a reasonable time, here in this case 14th June, it amounts to entering into a agreement where both the parties are under an obligation to perform action on their respective parts. Hence, when Live Stock Brokers had sent an acceptance, it amounts to a binding agreement. Hence, in this case the problem can be sort out either with mutual understanding or else Live Stock Brokers has got a right to claim damages for the non performance.

b) In the second part, Live stock had communicated acceptance by way of fax, but due to some transmission error, Dorper Sheep sellers did not receive it. To turn an offer into agreement it is a prima facie condition that the acceptance is communicated and received by the party making an offer. Here, the communication was made but not received. Hence, in such case, Dorper Sheep sellers wont be responsible as there would be no binding agreement on their part to perform a duty. Hence, Live Stock Brokers have no rights and liabilities to claim any damages in this case (Second Part).