Resolving legal disputes at a car dealership

Prestige Car Sales Ltd is an independent car dealership with a large showroom located close to
Snowham Airport. The company specialises in buying and selling high value vintage cars but they are
agile and versatile, and will deal with other car models if it is profitable. They sell vehicles to both the
general public and to other businesses and car dealerships. Unfortunately, they have experienced
several legal challenges recently and the Prestige sales manager is in urgent need of some intelligent
and well informed legal advice - based on the tenets of contract law, previous cases and precedents.
Personal opinions alone are not sufficient.

Question 1 The six Mini Coopers

Prestige took delivery of six good quality, low mileage, right hand drive classic Mini Cooper cars
which had been imported recently from Japan. The sales manager decided to advertise them in the
local newspaper and inserted an advert in the local newspaper which read:

For Sale. Classic Mini Coopers 1300cc all in excellent condition with low mileage. Traditional colour
scheme. MOT and 12 month guarantee. Drive away a fabulous classic car for just £4,999.

The six cars sold quickly and the sales manager was pleased with the profits. However, the following
day a customer came into the showroom wanting one of the cars for his daughter’s 18 th birthday
present. He was holding a copy of the advert in his hand.
When the sales manager explained that all six cars were now sold the man became agitated.
‘Look,’ he said, ’I am a solicitor and I know the law.’
He held up the advert.
‘You have made an offer to sell me a Mini Cooper for £4,999 and I am formally accepting your offer.
You now need to provide me with the car exactly as described because I am willing and ready to pay
the price required. If you do not do this, I will take you to court and the court will definitely force you
to. Plus you will have to pay all my legal expenses.’

What would be the most likely outcome of a court case concerning the Mini Coopers?

A Prestige could argue that the solicitor was not in fact definitely accepting their offer as he
had not viewed or inspected any of the cars. He was merely pretending to accept the offer.
B The court will find that the advertisement was merely an invitation to treat – not a genuine
offer, and so no enforceable contract was ever formed.
C The solicitor was entitled to accept the offer from Prestige but as all the cars had now been
sold, he would be entitled to compensation.
D The solicitor will not be able to prove that a valid contract was formed but the court would
oblige Prestige to pay all his legal expenses.
E As all the cars have now been sold the question of a valid contract is irrelevant.
F Prestige will be able to prove that the solicitor’s case is frivolous and they will be entitled to
sue him for damages.
Question 2 The vintage Bentley

A foreign embassy in London wanted to buy a vintage Bentley for their ambassador and discovered
that Prestige Car Sales had the ideal model for sale. The embassy manager visited the showroom on
a Thursday and viewed it. The car was in excellent mechanical and cosmetic condition.

The Prestige sales manager offered to sell the Bentley to the Embassy for the sum of £50,000, an
offer which they put clearly in writing in a short letter written on the spot. He also promised verbally
to keep their offer open until the following Monday. The embassy manager said they were definitely
interested and took the letter back to London to discuss it with his colleagues.

However, on the Saturday morning, Prestige received - and accepted - a written offer from a third
party willing to purchase the Bentley for £62,500. The Prestige manager emailed the embassy
manager on Saturday afternoon to inform them that the Bentley was no longer for sale.

On hearing the news, the embassy manager came back to the Prestige premises early on Monday
morning holding a copy of the letter and demanding to accept the original written offer and buy the
Bentley for £50,000. The car was still in the showroom. Prestige refused.

The embassy then initiated legal action seeking specific performance of the contract. In other
words, asking the court to force Prestige to sell them the Bentley as agreed previously in writing for
£50,000.

What is the most likely outcome of the case concerning the Bentley?

A The embassy will fail because they did not accept the offer to sell to them within a
reasonable period. Having failed to hear from them, the offer from Prestige became null and
void.
B The embassy will succeed because Prestige are not entitled to negotiate with any third party
until the contract option with the embassy was resolved – one way or another.
C The embassy will fail in their action because Prestige were entitled to withdraw the offer on
Saturday because it had not been accepted at that point. They were not legally obliged to
keep the offer open until Monday because they had received no consideration for this.
D The embassy will succeed because Prestige had promised to keep the offer open until
Monday. The embassy were therefore perfectly entitled to accept the offer on Monday and
demand to buy the car for the sum of £50,000.
E As Prestige emailed the embassy before Monday, this nullified their promise to keep the
option to buy open.
F As the embassy failed to communicate anything in writing, no enforceable contract was ever
created.
Question 3 The white Rolls-Royce

Prestige took delivery of a vintage Rolls-Royce in a white colour scheme which they knew would be
ideal for weddings and similar occasions. It was in excellent condition and thought to be worth more
than £30,000.

The Prestige sales manager decided to dispose of this vehicle by auction and instructed the local
auctioneers to sell the car without reserve. He thought that would be an eye-catching tactic and
attract the interest of multiple buyers who would then compete intensively to buy the car – driving
the sale price up to the maximum possible.

But in the event, there was only one person present at the auction who was actually interested in
the unusual car (Mr Gruber). He was the owner of a business that rented out limousines for various
events.

At the auction Mr Gruber had submitted a bid of £100 for the car. But the auctioneer (who was a
personal friend of the Prestige sales manager) refused to sell the car for that price. The auctioneer
refused to accept such a low offer. Mr Gruber was incensed, left the auction without the car and
started legal proceedings against the auctioneers claiming damages of £29,900.

What is the applicable legal principle that would apply in the auction for the white Rolls-Royce?

A In an auction every single bid is regarded as an offer to buy which the auctioneer is always
entitled to refuse to accept.
B An auction is regarded as an ‘invitation to treat’ and a contract is only formed after the
auction has finished when an offer and acceptance for the item is made.
C The auctioneer was entitled to refuse the bid because the bid was so much lower than the
realistic market value of the item.
D An auctioneer is empowered to make a personal bid for any item and if this is higher than
any other bid, a valid contract will be formed and the auctioneer will be entitled to buy the
item.
E Because no reserve price was declared, the auctioneer was deemed to be making a
unilateral offer which was accepted by the highest bidder (Mr Gruber) meaning that a
contract was formed and damages (or enforcement) would be applicable.
F The auctioneer was entitled to set a realistic reserve price for any item if the owner did not
choose to do that. And if a bid did not exceed that reserve it could be rejected.
Question 4 The Ford Fiestas

A local car hire company went into administration and Prestige took the opportunity to buy ten Ford
Fiestas, which were all in excellent condition with low mileage. They were ideal for the hire car
business.

On 1 September, the Prestige sales manager sent an email to the manager of Kennhire, another local
car hire company, which read: ‘We are delighted to offer all our customers a selection of late model,
low mileage Ford Fiestas at an incredible price of just £5999 each. These will be supplied fully valeted
and serviced together with a 12 month MOT and guarantee.’

On 6 September, the Kennhire manager inspected the cars, went back to his office and emailed a
short response to Prestige stating:
‘Let us have 6 of the Fiestas. Delivery by October 1 st latest. Thanks.’

Upon receiving the email the Prestige sales manager then wrote a short business letter back to
Kennhire saying:
‘Thank you for your email of 6 September which is now receiving our attention’.

On 1 October, Prestige had the six Fiestas cleaned, serviced and all ready for delivery to Kennhire
that same day, but just before they set out, Kennhire telephoned Prestige to say that they no longer
wanted the cars.

When the sales manager at Prestige heard the news, he was incensed and immediately telephoned
the Kennhire owner. This led very rapidly to a serious argument involving plenty of bad language.
Communications were soon broken off, Prestige initiated legal action and a court case followed.

What is the most likely outcome of the court case involving the Ford Fiestas?

A Kennhire will be obliged to accept the vehicles as specified – and pay Prestige the full price
agreed.
B As delivery of the vehicles never took place, Kennhire are entitled to change their minds
because no money has changed hands.
C Kennhire can refuse delivery because Prestige had not delivered the vehicles before 1
October as implied in their email of 6 September.
D A valid contract was never formed between the two companies so Prestige will be unable to
force Kennhire to take delivery and pay for the vehicles.
E Kennhire can refuse to take delivery because they are entitled to inspect the vehicles and
can reject them as being unsuitable
F Kennhire will not be obliged to accept or pay for the vehicles but will have to compensate
Prestige for all the time and money expended on the arrangements.

Question 5 The Aston Martin

Prestige took delivery of a classic Aston Martin DB7, and the Prestige sales manager realised that it
was exactly the car that Barry Brown, a local businessman, had been looking for.

The sales manager wrote a letter dated Monday 1 September to Barry at his business address,
describing the car with photos and offering to sell it to him £25,000. He requested specifically that
he reply immediately ‘by return of post’. This was sent by first class post the same day.

The letter which contained this offer was wrongly addressed by the sales manager and it was not
delivered to Barry’s office until eight a.m. on Friday 5 September. However, when Barry opened the
letter he realised immediately that the classic car was a bargain at £25,000.

He wrote back to Prestige the very same day (Friday 5 September) accepting the offer, subject to a
technical inspection of the car. He mailed it back to Prestige at their correct address by first class
and posted it the same day (Friday).

At 9.30 a.m. on the following Monday morning (8 September), Barry telephoned the sales manager
to make an arrangement to come round and complete the transaction.
‘Sorry mate,’ said the sales manager. ‘I did not hear back from you in time. I met this bloke in the
pub on Friday night who came round on Saturday morning and gave us £20,000 in cash for the
Aston. He drove it away up north somewhere.’
‘But I agreed to buy it from you on Friday,’ said Barry.
‘No you didn’t,’ replied the sales manager. ‘Your letter has only been delivered to my office this
morning. And I was expecting a reply from you by last Wednesday latest.’
‘That delay was only because you put the wrong address on the original letter!’
‘Tough luck,’ said the manager. ‘The car is now sold and that is the end of it.’
Barry refused to back down and initiated legal action against Prestige.

What is the most likely legal outcome regarding the Aston Martin?

A As the delivery of letters sent by post can be unreliable, valid contracts cannot be formed
solely through this mechanism.
B The court will decide that there is no point at all in pursuing the matter because the car in
question is no longer available
C Barry should have contacted the Prestige manager immediately he received the letter. As he
failed to do so, there was no acceptance and no contract.
D According to the postal rule, a valid contract was formed on Friday and Barry is entitled to
seek enforcement or compensation.
E No contract was ever formed, but because of negligence (the wrong address) an element of
compensation will be payable to Barry Brown.
F As Prestige decided to communicate by letter, they were obliged to wait until a written
response had been received before being able to sell the vehicle to another buyer.