Computerland dispatches the ‘Avocado’ computers but, before the computers arrive, the University telephones to say that it no longer wants them.
Let us analyse the facts before going into the arguments for our client Cwmfelin University. Computerland contacted Cwmfelin University on the 1st of September, informing them about the availability of Avocado machines at 220 Pounds each. This message is an invitation to the Cwmfelin University for the acceptance of an offer. The offer attached to the invitation proposed every Avocado machine to the Cwmfelin University at the rate of 220 Pounds.
In the understanding of contract law, an ‘invitation to offer’ is defined as follows:
“An invitation to the offer is a pre-determined proposal which is intended to generate an offer from the bidder of goods for a consideration, in order to effectuate an agreement.”
In the case of British Car Auctions v. Wright1, we can further understand the definition of ‘invitation to offer’ in the context to the situation at hand:
“There is no offer to sell, but always an offer to buy.”
The fact that Computerland invited to an offer has now been established as a precedent which shall be followed to solve all the three problems given in Task 1 of the paper.
In the first problem, we figure out that Cwmfelin University, after having accepted the offer to invitation from Computerland, offered to buy 50 Avocado machines at the price of 220 Pounds each, which shall be delivered to the University by the 15th September, at the latest. This was the offer made by Cwmfelin University to Computerland.
After having received the offer, Computerland replied in this fashion:
“”Thank you for your fax, which is receiving attention.”
An agreement requires two ingredients to be fulfilled in order to be binding on the parties to enter into a contract. These are:
b) Acceptance of an Offer
An ‘Acceptance to the Offer’ is defined as follows:
“The act of communicating the offeror, informing him on the acceptance of the offer made by him, in exactly the same way the offer was made, and abiding by the conditions laid out in the offer.:
Applying the law to the facts, we can infer from the statement made by Computerland does not amount to the acceptance of the offer which was delivered to them. The fact that the offer is still receiving attention implies that the offer is being considered either for a counter offer, for the acceptance of the offer or for the declination of the offer. There is no acceptance at this stage of time, and a decision as to what needs to be done is yet to be taken.
Therefore, understanding from the principles of law and facts, it should be assumed that there was no agreement between Computerland and Cwmfelin University. The offer was still under negotiating terms, and Computerland had not made up its mind on the acceptance of the offer.
Finally, Cwmfelin revoked the offer from Computerland, asking them not to send the computers. However, Computerland, without communicating its acceptance, did deliver the computers. It involves the performance of a contract which did not exist at the stage of actual performance.
Cwmfelin University is safe under this situation, and the act of revocation of the offer stands valid, as there was no agreement between the two parties in the first place itself.
In the second scenario to the case at hand, the facts are twisted to an extent, which explains the following story:
“The University’s reply on 4th September stated ‘Will have 50 computers, they are needed by 15th September, will pay ?10,000 for the lot’. Computerland delivers the computers with an invoice for ?11,000.”
On the counter offer by Computerland to Cwmfelin University dated 1st September, the Cwmfelin University sent them an offer, which demanded the delivery of 50 Computers by 15th September, at 200 Pounds per machine, as opposed to 220 Pounds mentioned in the invitation by Computerland.
However, inspite of Cwmfelin University’s offer of 200 Pounds per machine, Computerland delivered the computers to the University at the rate of 220 Pounds, which was the price at the time of the invitation to offer.
One of the prime rules of the acceptance of an offer is that the acceptance should correspond with the offer. The acceptance shall take place only when the offeree understands the offer in the same way as mentioned by the offeror. Hyde v. Wrench2 further elaborates this principle with the ‘mirror image rule’ as explained:
“The “mirror image rule” states that if you are to accept an offer, you must accept an offer exactly, without modifications; if you change the offer in any way, this is a counter-offer that kills the original offer.”
It is further determined from the ‘mirror image rule’ that for an acceptance to take place, it has to be accepted and communicated in the same manner as mentioned by the offeror. If there is any modification made by the offeree, then this does not amount to acceptance, but a counter offer on the part of the offeree.
Applying law to the corresponding facts, we understand that the act on the part of Computerland to deliver the computers at 220 Pounds a machine, instead of 200 Pounds as detailed in the offer, leads to the conclusion that this act of Computerland does not amount to the fulfilling or performing an agreement, but a mere counter offer, which was intended to increase the selling price of the computers.
Cwmfelin University can afford to reject the delivery of the computers, which had been sent at a higher selling price than it was supposed to be sold at. Since there was no agreement formed between the parties for the sale and purchase of the computers, Cwmfelin University should reject the delivery of the computers, which in fact did not amount to the acceptance of the offer, as it should have been accepted in the same meaning of the offer, but a mere act of counter offer exceeding its boundaries of limitations.
In the third part of the case at hand, we shall infer from the following statement on what recourse to be taken:
“Computerland do not deliver any computers to the University.”
The situation in this problem is a rather straightforward one, quite contrary to the initial two issues. Computerland, after having effectuated a communication by saying that they are looking at the offer made by Cwmfelin University, did not make a formal acceptance of the offer, but a mere reply indicating that they were deciding whether to accept the or not, and they had not yet accepted to the offer made by Cwmfelin University. Computerland kept the offer on hold, evaluating its options.
The fact that Computerland eventually did not deliver the computers to Cwmfelin University amounts to the rejection of the offer made by Cwmfelin University.
For an acceptance to happen, it must be communicated to the offeror, as mentioned in the case of Powell v Lee3. Where the acceptance is not communicated, there is no agreement.
In this case, Computerland did not reply back to the University which would have amounted to an acceptance to the offer made by the University. They merely decided to act against the offer made by the University by not acting towards it, neither by communication nor by their actions.
Cwmfelin University cannot take Computerland to the courts to demand the performance of the agreement, since there was not agreement between the two parties in the first place. The offer stands rejected and status quo should now be maintained, as it was previous to the offer made by the Cwmfelin University.
‘Payment of a lesser sum on the day in satisfaction of a greater cannot be satisfaction for the whole, because it appears to the judges that by no possibility a lesser sum can be satisfaction to the plaintiff of a greater sum.’
The rule laid down in the Pinnel Case4 established the doctrine of part performance. The rule says that where an individual owes some money, an agreement to pay less than the total amount owed, in order to cover the debt for the entire amount, is not an agreement under the eyes of contract law, and therefore is not a binding contract between the debtor and the creditor. In other words, if one person owes money to another, then an agreement to take a lesser sum to settle the debt, if it is well attested, is not an obligation on the parties affected by the agreement.
According to the facts of the Pinnel Case, Cole owed Pinnel 8 Pound 10s, which was due on 11th November. However, Cole decided to pay Pinnel 5 Pound 2s 6d on 2nd October, more than a month before the amount was due from him, for the full consideration of the amount owed by him. Cole later contended in the court of Lord Coke, that the agreement to pay the lesser amount one month prior to the date of realisation of the full amounts to a contract. Cole claimed that there was an agreement that the part-payment would discharge the full debt. Lord Coke found the judgment in favour of Pinnel, because part-payment of an original debt did not make for fresh consideration. The agreement was not a contract.
Lord Coke wrote in his judgment as the following:
“The payment of a lesser sum on the day in satisfaction of a greater cannot be satisfaction for the whole. The gift of a horse, hawk or robe might be more beneficial than the money, but where the whole sum is due, then in no way can an acceptance of part of it be satisfaction for the whole.”
Understanding from the judgment of Lord Coke, we can ascertain that an agreement to pay part of the whole amount due, even if it is paid before the money is due from the debtor, is not an agreement which qualifies to cover for the initial arrangement between the parties, which involves the payment of the entire amount on a specified date and time.
Let us suppose A owes B an amount of 10 Pounds, to be paid on 1st January 2012. B, however, happens to pay A 7 Pounds one month prior to the due date, and asks A to wave off the initial consideration, where he includes this payment as the consideration for the 10 Pounds he owed to B initially. Such kinds of agreements stand to be invalid under the law of contract, and do not have any effect on the parties, and the Creditor is not obligated to follow this agreement.
This principle was confirmed in the case of Foakes v Beer5, where Beer sued Foakes for the non payment of interest on the amount owed by Foakes to Beer, even though there was an agreement between the two parties which said that Foakes does not need to pay any interest to Beer, and Beer had thus effectively waived off interest on the part of Foakes. The question which the court had to decide was whether this agreement was binding on the parties interested to the contract.
The House of Lords decided against Foakes in this regard, and went ahead with their judgment, upholding the precedent laid down in the Pinnel Case, where it was held that an agreement which tends to act for the initial consideration between the parties, cannot, and does not, create a new obligation between the parties for the payment of the whole amount due. A new consideration cannot be created on behalf of an old one, and this has been the rule decided in the Pinnel Case and subsequently confirmed by the Foakes Case.
Under the rule established in these two cases, part payment of an original debt cannot make for fresh consideration. As held by Lord Coke, with regard to non monetary compensation, it can still be argued whether the payment of a horse, a hawk or a robe might be sufficient for the entire consideration of the original amount owed, but when there is money involved, nothing will qualify as the payment of the full amount than the payment of the entire amount indeed, and nothing less than the amount mentioned under the original consideration.
1. British Car Auctions v. Wright  3 All ER 46
2. Hyde v. Wrench (1840) 49 ER 132
3. Powell v Lee (1908) 99 LT 284
4. Pinnel’s Case (1602) 5 Co. Rep. 117a
5. Foakes v Beer (1884) 9 App Cas 605