Business Contract

Business Law – contract law

Michael owns a car company in Causeway which mainly sells first hand BMW. On Monday, he places an item in the advertisement column of the Apple Daily: “Brand-new BMW735i for sale, full option, HK$1,200,000 only, interested party please call 9012XXXX Michael”.

Later that day, Alan, a car lover, phones Michael and says, “the BMW735i for sale, I’ll take it for HK$1,000,000.” Michael replies, “I cannot accept less than HK$1,100,000 but I will not sell it to anyone else before Saturday. Let me have a reply by phone by Friday if you want it.”

On Wednesday, Alan phones Michael and leaves a message on his answering machine stating “I accept your offer”. Unfortunately, Michael’s naughty son later presses a button on the machine which deletes the message before Michael listens to the recording. Later that day Michael sells the BMW735i to Candy for HK$1,200,000.

Is there any contract between Michael and Alan? Explain your answer.

(Hint: Your answer should include: Offer & Acceptance, Consideration)

        Alan thinks that there are binding contract between Michael and him. Contract is legally enforceable an agreement or promises between offeror and acceptor. Michael clearly sent the offer to Alan. Hence Alan has sent the acceptance to Michael back within the deadline. However, acceptance message was deleted before Michael read the message. Then Michael sold it to others. The agreement will be considered to be a binding contract or not.

        It seems that Alan is now asking Michael to sell the car to him according to the contract. Alan has sent the message within the offer deadline, even before the day Michael sold the car to candy. The contract between Alan and Michael is existed.

        According to the general rule, acceptance must be communicated to the offeror. There is no contract until the offeror knows that his offer has been accepted. However, there are some exceptions such as receipt rule. It...