Requirements for the Formation of Contract

Read the scenario below and answer questions (i) and (ii).

Case Scenario

Six months ago Caleb opened a garden centre. Since the opening Caleb has watched his
demographic and observed that most of his customers have children under the age of ten.
Caleb decides to build a children’s adventure playground in the grounds of the garden centre
to target members of the demographic who currently shop at other garden centres.

Caleb meets his friend Ezra who runs a playground equipment manufacturing business. Caleb
asked Ezra if he had any ex-demonstration adventure playground equipment that he would
sell and, if so, for how much. Ezra replied, “probably £10,000”. The next day Caleb sent Ezra
an email explaining that he would purchase the equipment for £9,000 and would be round in
two weeks’ time with a big lorry to collect the playground equipment. Ezra does not respond to
Caleb’s email.

The following week Caleb bumps into Sean who is in the process of closing down his
adventure playground. Sean states that the equipment is to be scrapped and that Caleb can
have it for free if he wants it. Caleb is delighted and agrees. Caleb collects the playground
equipment that night.

The next day Caleb goes out for the night with his friends. He drinks ten pints of lager and
three large shots of vodka. At the end of the night he bumps into Sean again. Caleb explains
to Sean that he is delighted with the playground equipment and offers to pay Sean £5,000.
Sean agrees.

Questions

(i) Ezra is disappointed when Caleb does not show up to collect the playground
equipment as promised. Can Ezra enforce the contract with Caleb? You must support
your answer with relevant case law. (1.1, 1.2, 2.1)

(ii) Sean goes to see Caleb and demands the £5,000 Caleb promised him for payment of
the goods. With reference to capacity and consideration explain whether Sean can
enforce the contract with Caleb. You must support your answer with relevant case law.
(1.1, 1.2, 2.1).

Answers

(i) Enforceability of the Contract between Ezra and Caleb

Ezra cannot enforce the contract with Caleb because the promise to buy the equipment at £9,000 was offer. Initially, Caleb tried to start a contract by asking if Ezra can sell the equipment and by how much. Ezra hinted that he would “probably sell for £10,000”. By the term “probably”, it meant that this was an invitation to treat because it meant that the price can be bargained. When Caleb says that he would go and pick the equipment at £9,000, he expects that Ezra would accept or reject the offer, and probably state another price. This offer was a counter-offer to the initial offer by Ezra of £10,000. The offer of £9,000 made by Caleb was not accepted and could not be enforced. This can be seen in the case of Felthouse v Bindley whereby a man offered to buy the horse of his nephew suggesting that if he did not get feedback from the nephew he would consider the horse to be his own. In the court, it was ruled that acceptance cannot be given by silence. Therefore, Silence of Ezra cannot be considered as an acceptance.

(ii) Enforceability of the Contract between Sean and Caleb

Sean cannot enforce the contract with Caleb for two reasons: rules on consideration and capacity. First, consideration is something given to fulfill a contract. Without it, there is no contact. This can be seen through the case of Feinberg v. Pfeiffer Co. whereby Feinberg was offered $200 per month for life after retirement for her faithful service for Pfeiffer Company (Lawnix, 2013). Feinberg retired a year later and contributed to receive the pension until a new manager came in and reduced the payment to $100. When Feinberg refused, the payment was terminated completely on the basis that the payment was just mere gratuities. The court ruled that there was no consideration because the payments were only made as gratuities for past work. There was no contract between Sean and Caleb on the £5,000 because the initial contract involved giving the equipment for free, and offering £5,000 was a new offer which the courts can only consider as a gratuitous promise and not a consideration.

In regards to capacity, a contract can only be enforced when both parties have a mental capacity to make rational decisions. Caleb made the offer of £5,000 when he was drunk. Under the law of contract, mental incapacity includes drunkenness or being affected by drugs so that one cannot be able to make rational decisions. Therefore, the contract cannot be enforced because it was made when Caleb did not have the mental capacity to make rational decisions.