Question

Discuss whether a legally enforceable contract has been formed in each of the following circumstances. You should refer to relevant case law where applicable. Address only contract law issues.

Leroy wants a new website developed for his business which he operates as a sole trader. He approaches three different website developers for quotes. Leroy has provided each developer a brief to assist them to quote for the work. At Leroy’s request all quotes are mailed to Leroy’s postal address. Developer A provides a quote that does not cover some of the work that Leroy specified in the brief. Leroy sends an email back to Developer A to request an additional quote for the remaining work. Developers B and C both provide acceptable quotes with Developer B’s quote being the lower priced quote. Leroy writes to accept the quote of Developer B and posts the letter. Before Developer B receives the letter, Developer C offers to lower its quoted price. Leroy rings Developer B cancelling his letter of acceptance. He then sends an email to Developer C to accept their quote.

Answer 1

Contract Law states that a contract is legally binding when one party communicates the offer and another party accepts in absolutely with no qualification. A proposal can be revoked

-by the communication of notice of revocation by the proposer to the other party;

-by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

-by the failure of the acceptor to fulfil a condition precedent to acceptance; or

-by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

A quote is not a promise by a party to deliver goods or services and also not a promise by a party to pay for goods or services. So, a price quote is be legally binding.

In the given case, Leroy had communicated his acceptance to Developer B however Developer B did not receive his acceptance and Leroy cancelled his letter of acceptance. In legal sense, Developer B never received any acceptance from Leroy as per the contract law.

In case of Payne v Cave (1789), the defendant made the highest bid for the plaintiff’s goods at an auction sale, but he withdrew his bid before the fall of the auctioneer’s hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer.

In Herela V Royal Trust (1985)

Royal Trust invited offers by sealed tender for shares in a company and undertook to accept the highest offer. Harvela bid $2,175,000 and Sir Leonard Outerbridge bid $2,100,000 or $100,000 in excess of any other offer. Royal Trust accepted Sir Leonard’s offer. The trial judge gave judgment for Harvela. In the House of Lords, Lord Templeman stated: “To constitute a fixed bidding sale all that was necessary was that the vendors should invite confidential offers and should undertake to accept the highest offer. Such was the form of the invitation. It follows that the invitation upon its true construction created a fixed bidding sale and that Sir Leonard was not entitled to submit and the vendors were not entitled to accept a referential bid.”

Hence, in given scenario, there is no contract between leroy and Developer B.