Question

Peter wants to sell one of his cars that has a diesel motor to his nephew Brett. Brett is eager to purchase the car but Brett does not realise that one of his uncle’s cars is diesel.

Peter writes a letter to Brett as follows:

         “Dear Brett,

I know that you are interested in buying one of my cars. I would like to give it to you but I know that you won’t accept charity. Therefore I will offer it to you for $500 (I reckon it is worth about $2,000). If I don’t hear from you by this Friday I take it that you are happy to buy it for $500. I will then drop off the car to your place on the weekend.”

Regards,

         Peter”

Brett does not see the letter and there is no further communication between Peter and Brett.

On Saturday, Peter delivers the diesel motor car to Brett’s home. Brett arrives home to discover the letter and the car from his uncle. Brett realises the car is diesel and he does not really want the car. However, Brett decides the car is still useful and starts driving the car to and from university. After three weeks driving the car Brett decides that he will return the car. He has not yet paid Peter any money. Peter thinks Brett is ungrateful and demands full payment.

Brett wants to return the motor car to his uncle. Peter is angry with his nephew and he demands payment for the car. Peter says he will lodge a small claim and sue Brett for the money. Brett states “we are family and you can’t sue me.”

Explain whether the uncle/nephew relationship has any effect on whether or not there is a binding agreement.   6 marks)

  

On the same telephone call Brett also says to Peter that “There is no contract because I never agreed to anything. Peter says “It’s a bit late to return the car now. You’ve been driving it around”.

Has Brett accepted an offer from Peter to purchase the motor car?

On the same telephone call Peter says that “I was being nice to you and offering you the car at ‘mates rates’.

Could $500 be valid ‘consideration’ for a contract to sell the diesel motor car? Explain why/why not?      

  

Brett tells Peter on the same telephone call “Even if you can convince the judge that there was an agreement, I can get out of it because I didn’t know you had a diesel car and I never wanted a diesel car. I thought all your cars were petrol”. Is it correct that Brett can avoid contractual obligations on the basis of his mistaken belief? Why/why not?

Answer 1

1. Uncle/nephew relationship does not have any effect on whether or not whether there is a binding agreement. There should be an intention on the part of both parties to form a contractual relationship.

2. Yes, there is implied acceptance of the offer. First, the deadline for acceptance was Friday. But Brett received the letter only on Saturday. He should have immediately returned the car, saying that he did not know about the offer, and he did not want a diesel car. Instead he decides to keep the car for a few days and use it, which amounts to an implied acceptance of the offer.

3. Consideration for a contract is valid as long as it is of some value. It need not be adequate. Therefore $ 500 is valid consideration from that point of view. But it was not mutually ageed upon.

4. The court is not going to buy the story that Brett had to wait for three weeks before realising that the car was diesel. Therefore, it is unlikely that Brett can avoid his contractual liabilities.