Question 1

Robon Plc who manufactures oil rigs, wrote to BXD Ltd, an oil company, offering to construct
an oil rig for $ 1,000,000.The offer was made on a form containing Robon's standard terms of
business. One of the terms contained in the document was that the initially agreed contract price
might be varied according to the cost and availability of materials.
BXD, replied, in a letter containing their standard terms of business, stating that they wished to
order the rig. These terms did not include a price variation clause but contained a statement that
the order was not valid unless confirmed by return of post. Robon duly confirmed by a letter
dated May 1 which was delayed in the post as it bore the wrong address and did not arrive until
May 14.
Meanwhile, on May 12, BXD posted a letter to Robon cancelling the order which arrived on
May 13. Robon ignored this letter and pressed on with the construction of the rig. It was
completed one year later at a price of $ 2,000,000. BXD refuse to take delivery.
Advice BXD Ltd.

Contract definition
A contract may be defined as an agreement between two or more parties that is intended to be
legally binding. The first requisite of any contract is an agreement (consisting of an offer and
acceptance). At least two parties are required; one of them, the offeror, makes an offer which the
other, the offeree, accepts (lawteacher.net). Concerning the acceptance, the mode or
communication of acceptance can be broken down into various parts based on the circumstances.
An acceptance can be made or communicated through conduct, silence, private courier, internet
transaction, post and amongst others.
Offer made by Robon
Robon Plc, the manufacturer of oil rigs, had written to BXD Ltd with the proposition of
constructing of an oil rig for $1000000 at his standard terms of the business asserting that the
original agreed contract price might vary along with the cost and availability of the materials.
BXD Ltd therefore, replied in a letter that they wanted to order the rig exclusive of the term price
variation cause, containing a statement that the order was invalid unless confirmed by return of
post. Similarly as in the case of Ramsgate Victoria Hotel v Montefiore (1866) where Court
denied a contract for lapse of time to accept an offer between them (e-lawresources.co.uk).
Acceptance
Robon Plc confirmed a letter dated May 1 but this letter was tardy and did not reach BXD Ltd
until May 14 as it contained the wrong address. In the meantime, that is, on May 12 BXD posted
a letter to Robon Plc for cancelling the order which arrived on May 13. Robon Plc did not pay
any attention to this letter and continued on with the construction which was completed 1 year
later at a price of $2000000. Thus, BXD Ltd refuses to take delivery. This is similar to the case of
Harvey v Facey (1893) where the Privy Council held that there was no contract concluded
between the parties. Facey had not directly answered the first question as to whether they would
sell and the lowest price stated was merely responding to a request for information not an offer.
There was thus no evidence of an intention that the telegram sent by Facey was to be an offer (elawresources.co.uk). Moreover, the case of Gibson v Manchester City Council (1979) where the
House of Lords stated that the Council had not made an offer but rather the purchased price in
the letter was an invitation to treat (lawschoolcasebriefs.net).
3

Counteroffer by BXD Ltd

It was a conditional acceptance on the part of BXD Ltd where, when a person to whom an offer
has been made tells the offeror that they are willing to agree to the offer provided that some
changes are made in its terms. Hence, this type of acceptance functions as a counteroffer. Thus
BXD Ltd is not bound by any contract and it is impossible for an offeror (Robon Plc) to impose
an obligation on the offeree (BXD Ltd) to accept the offer. For instance, in the case of Rose &
Frank Co v JR Crompton & Bros Ltd (1925), the honourable pledge clause rebutted the
presumption which normally exists in commercial agreements that the parties intend to be legally
bound by their agreements. The agreement therefore had no legal affect and was not enforceable
by the courts (e-lawresources.co.uk). Similarly, in the case of Hyde v Wrench (1840), it was seeb
that there was no contract. Where a counter offer is made this destroys the original offer so that it
is no longer open to the offeree to accept (e-lawresources.co.uk).
Basically, the postal rule can be defined as a rule of contract of law that makes an exception to
the general rule and the principle stated was that, a contract is formed as soon as the letter of
acceptance is posted, rather than when they are communicated. The rule is designed to remove
uncertainty from the contract formation process. It provides the offeree with confidence that an
acceptance once posted will be effective, even if the postal system delays delivery of the
acceptance beyond the offer date. The postal rule was established around the 19 th century, and
this can be seen in the case of Adam v Lindsell (1818), where the defendant wrote to the
claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter
was delayed in the post. On receiving the letter the claimant posted a letter of acceptance the
same day. However, due to the delay the defendant's had assumed the claimant was not interested
in the wool and sold it on to a third party. The claimant sued for breach of contract (elawresources.co.uk).
Similarly, as in the case on Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (1979), the
offer to sell the machine on terms provided by Butler was destroyed by the counter offer made by
Ex-Cell-O. Therefore the price variation clause was not part of the contract. The contract was
concluded on Ex-Cell-O's terms since Butler signed the acknowledgement slip accepting those
terms. Where there is a battle of the forms whereby each party submits their own terms the last
4

shot rule applies whereby a contract is concluded on the terms submitted by the party who is the
last to communicate those terms before performance of the contract commences(elawresources.co.uk).
Cancellation of offer
In the case of Robon Plc v BXD Ltd, although the postal rule only applies to acceptance, the
letter sent by Robon Plc was not addressed correctly, hence there is no such right on this point. If
the offer was categorically accepted, there would have been an obligatory contract; instead BXD
Ltd had made an offer of his own, and thereby discarded the offer earlier made by Robon Plc.
Afterwards, Robon Plc would not be capable of reviving the proposal by tendering an acceptance
of it; and, therefore, there existed no obligation of any sort between the parties. Just as in the case
of Grainger & Sons v Gough (1896), where the court agreed with the wine merchant, that the
advertisement of goods in the price list was merely an invitation to treat rather than an offer
(learn-law.wikispaces.com). Moreover, in the case of Partridge v Crittenden (1968), where the
defendant placed an advert in a classified section of a magazine offering some bramble finches
for sale and his conviction was quashed as the advert was an invitation to treat not an offer (elawresources.co.uk).
Normally, whichever communication is received by the offeror first controls. Hence, BXD Ltd
can reveal that he had sent a cancellation letter to Robon Plc which arrived on May 13, but,
Robon Plc had purposely ignored that letter. As such, BXD Ltd is not bound by any contract
and therefore has the full right to decline to take the delivery at a price of $ 2,000,000 from
Robon Plc and terminate the offer as a counter-off or consider it void, as it is a contract that
never came into existence.