Question:
Tim runs a bicycle repair business in south London. He needs to find temporary premises for his business while his current workshop is being renovated. On 1 February 2021, Tim sees an online advert, which happens to have been placed by his cousin Usman, stating: ‘prime Peckham shop for rent for 6 months, £1,000 per month’.
Tim immediately calls up Usman and says he’ll take the shop. Usman says he’d be delighted if Tim rented the shop from him but that, as rental rates are increasing rapidly, he may need to charge a higher rent.
On February 14th, Usman posts a letter to Tim, saying: ‘I’ve had a think about it and I’ll let you have the shop for £1,000 a month. You’re family after all!’ The letter also encloses a detailed floorplan and information about the shop’s utilities. However, Tim never receives this letter.
On February 21st, Usman phones Tim. Tim says that he had started looking for other premises when he heard nothing back from Usman. Usman replies, ‘I’d still love you to rent the shop and you can move in at the start of next month, but I’m afraid I’ll need you to pay £1,200 a month.’ Keen to avoid a dispute with his cousin and to ensure his bike business is not disrupted, Tim agrees. Over the next few days Usman clears out some old furniture he has been storing in the shop and takes it to the local tip.
On 1 March, Tim moves into the shop and tells Usman he has made his first month’s rental payment by electronic transfer. When Usman checks his bank account, he sees Tim has transferred only £1,000.
Discuss. (Ignore any issue of duress here.)
Answer:
The case of Usman and Tim raises multiple legal questions throughout the apparently disjointed communication between the pair. This essay will tackle said legal issues chronologically, though not in isolation from one another.
It should firstly be clearly established that the initial advert, “prime Peckham shop for rent for 6 months, £1,000 per month” is merely an invitation to treat. With the exception of adverts that form a unilateral contract, which this one does not as there is no way to establish acceptance by performance (Carlill v Carbolic Smoke Ball Company (1893)), adverts are considered to be invitations to treat (Partridge v Crittenden (1968)).
The first offer comes from Tim, as per Pharmaceutical Society v Boots (1953) when a party responds to an invitation to treat it is that party that is making the offer. Tim makes such an offer when he calls Usman offering to take the shop on the terms listed on the advert, Usman replies by saying that “he’d be delighted if Tim rented the shop from him but that, as rental rates are increasing rapidly, he may need to charge a higher rent”. This cannot be construed as acceptance, if one were to apply the objective test (Smith v Hughes (1871)) one could almost certainly conclude that any reasonable person would recognise that the tentative nature of “if Tim rented” and “may need to charge a higher rent” render this more a negotiation where Usman is ‘testing the water’ to see if Tim would be willing to pay a higher rent than an acceptance of Tim’s offer. Additionally, this cannot be construed as a counter-offer by Usman, Gibson v Manchester CC (1979) makes it clear that the same tentativeness that meant Usman’s reply cannot be an acceptance cannot be an offer.
Usman’s first offer comes when he writes to Tim to say: “I’ve had a think about it and I’ll let you have the shop for £1,000 a month. You’re family after all!”, enclosing a “detailed floorplan and information about the shop’s utilities”. There is the certainty of language required for an offer (Briggs v Boyd Gibbins (1971)) and the inclusion of finer details shows Usman’s “seriousness” (Carlill v Carbolic Smoke Ball Company (1893)), even more firmly establishing this as an offer. This effectively acts as a counter offer to Tim’s previous offer as it fails the mirror image rule (Butler Machine Tool v Ex-Cell-O (1977)): This offer makes no mention of the six-month lease period included in the invitation to treat and implicit in Tim’s response to the invitation. Usman then posts said offer, though Tim never receives it. The postal acceptance rule is not applicable to an offer and therefore, as the offer is lost, it has never been communicated and is therefore effectively voided.
As Usman did not receive a reply he enquired whether Tim would still like to rent the shop, specifically telling him “I’d still love you to rent the shop and you can move in at the start of next month, but I’m afraid I’ll need you to pay £1,200 a month”. This is the first communicated offer from Usman, it once again carries the required certainty of language (Briggs v Boyd Gibbins (1971)), “you can move in”, and carries updated terms, “£1,200 a month”. Usman has implicitly revoked any previous offers (there has yet to be an acceptance and therefore his revocation is quite legal (Payne v Cave (1789))). Tim accepts this offer. An agreement has therefore been formed, both parties clearly understand that an agreement has been formed as Usman begins to move out and Tim does pay an amount of rent, even if not the correct amount. The application of the objective test here would conclude that a reasonable person would regard the actions of Tim and Usman as showing they understood an agreement had been reached.
Although an agreement has, at this point, been reached in order for the agreement to be regarded as a contract in law there must also be consideration and an intent to create legal relations.
In respect of consideration three elements must be considered. Firstly, good consideration requires that there be an exchange, even if not an economically commensurate exchange (Chappel & Co v Nestle (1960)). Here, there is a clear exchange of rented space in return for £1,200 a month. Secondly, the consideration must be requested (Combe v Combe (1951)), in this case Usman clearly requests the £1,200, therefore succeeding this criteria. Finally, the consideration must be of benefit to the promisor or detriment to the promisee, Usman receives an obvious benefit in the form of £1,200 a month. Consequently, there is good consideration in this agreement.
As to whether there was intent to create legal relations, although Balfour v Balfour (1919) establishes that in domestic relationships there is a presumption that there is no intent to create legal relations there is a serious question as to whether the relationship between cousins can be considered ‘domestic’. Moreover, however is the fact that in business dealings there is a presumption that there is intent to create legal relations (Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd (1989)), it seems there are considerable grounds to consider this a business dealing, given that Usman is renting commercial property- “shop for rent”- and that Tim is purchasing for his bike business.
As there is offer, acceptance, consideration, and intent to create legal relations the agreement amounts to a contract.
The final legal issue to consider is Tim’s failure to pay the full £1,200. Tim cannot use the defence of promissory estoppel to claim it would be inequitable for Usman to charge him the additional £200, as this requires there to be a promise upon which the promisee relied. Tim never received the offer for him to rent the shop for £1000; there is no promise of £1000 on which he could rely. Therefore Tim is in breach of contract.
Grade: 68
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