Problem question (Extract from the Annual Exam 2017/2018)

Paul sees a “special offer” on the back of the Irish Times from Pierre, a tour operator advertising a three day trip to Paris (departing four weeks later) including flights, accommodation and a guided tour of the Louvre Museum for Euro 500. Although it is 11.30pm on a Sunday night, Paul phones up the number provided in the advertisement and is connected to Pierre’s automatic answering service. He hears a recording of Pierre asking the caller to leave a message and he indicates his desire to “accept your offer” and giving his name and credit card details. Two weeks later, Paul phones Pierre to ask when he should expect to receive travel details. Pierre explains that due to a problem with his answering machine, all messages were deleted before he could hear them and that due to strong demand the price for the trip has been increased to Euro 700. Paul complains that he already has a deal and that he assumed when he did not receive any immediate reply to his phone call that this was the case.

Advise Paul as to whether a legally binding contract exists between himself and Pierre.

The process of entering into a legally binding contract may appear straightforward but you must ensure the basics of contract formation are satisfied. If they are not there may be trouble ahead.

How do you form a contract?

Five key elements must be in place before you can have a legally binding contract.

Offer and acceptance

The first two elements can be taken together. A contract is formed when one party has made an offer that another party has accepted.

Acceptance will be the final and unqualified agreement to an offer, acceptance of the exact terms of the offer with no variation.

If an offeree purports to accept an offer but on varied terms, no contract will be formed at that point. That’s because the offeree will have made a counter-offer, which, if accepted, will form the terms of the contract.