ASSIGNMENT QUESTION

Ace buys a 1964 Cadillac Coupe de Ville at a private auction for the bargain price of $25,000. Bud, the owner of the car, agrees to have it air freighted from Queensland in approximately four weeks' time. Ace sends Bud a cheque for $2,500 as a deposit.

Ace has bought the car only as an investment, since he has no particular interest in vintage vehicles. He wants to sell the car to make a quick profit. He advertises the Cadillac for sale on 1 March in a specialist vintage car community newsletter. The asking price for the car is $35,000, with delivery in four weeks. He receives the following responses:

1. On 1 March, Ace receives a phone call from Chuck. After a short conversation, Chuck offers to buy the Cadillac for $33,000. Ace explains to him that there has been a 'lot of interest' in the car and that he will respond to the offer as soon as possible. He asks Chuck to give him a few days to think about it. Chuck agrees to wait for Ace's confirmation of the sale until 5pm on 7 March. Ace is confident he will be able to sell to Chuck, but he anticipates better offers.

2. On 3 March, Ace receives an email from Dib who offers $32,500 for the Cadillac. Dib explains in the email that he is a serious collector of vintage cars but that he wants to be 'personally notified' in writing by Ace of any acceptance on or before midnight on 7 March.

3. On 4 March, Ace receives a phone call from Ed, who agrees to buy the vintage car for $35,000. However, Ed is worried that Ace may somehow talk his way out of the deal because the car is not yet in his possession. Ed insists that 'a written contract must be signed' by both of them. Ace tells Ed he agrees to proceed on that basis. Privately, he thinks this is the best course of action, just in case the deal with Chuck does not eventuate for some reason. He tells Ed that his solicitor 'will put the agreement in writing' and send it to Ed for his signature.

Despite the arrangement with Ed, Ace decides that it would be better to sell the car to Chuck in order to avoid delay. He rings Chuck on the morning of 6 March and tells him he will accept his offer. Chuck says that because so many days had passed he had assumed Ace was not interested in proceeding. Chuck informs Ace he has bought a vintage Oldsmobile instead and that he will not be proceeding with purchase of the Cadillac.

Ace is very disappointed and decides the best course of action is to respond in writing to Dib. He posts a letter on the afternoon of 6 March addressed to Dib accepting his offer. However, he changes his mind within a few hours. Deciding it would be better to proceed with the written contract with Ed, he immediately rings Dib and leaves a phone message telling him to ignore the letter he sent earlier in the day, and that he has decided to keep the car. Several hours later, Dib listens to the message but decides to ignore it. When Ace's letter arrives, he immediately sends a letter in reply thanking him and attaching a cheque for $2,000 'by way of deposit'.

On the following day, Bud rings Ace and says that the air freight and insurance costs have turned out to be much higher than he anticipated because of changes to Queensland goods regulations. He says he will pull out of the deal unless Ace agrees to add $2,500 to the purchase price. Ace argues with Bud, but then agrees to pay the additional amount in order to be able to proceed with the written contract with Ed.

When the Cadillac arrives, Ace sends a cheque to Bud for the balance of the purchase price as originally agreed, but without the extra $2,500. Bud rings him and abuses him for breaking their agreement. He threatens to take legal action to recover the $2,500.

When Dib's letter and cheque arrive, Ace sends him an email insisting he had already rejected the offer. He returns the cheque by mail on the same day. Dib sends him an email threatening legal action.

The next day, Ace is getting ready to go to his solicitor's office to discuss the written contract with Ed and the email from Dib. As he is about to leave home, he receives a text message from Ed who informs him he won't be proceeding with the purchase because he has decided to become a monk and give up all worldly goods. When Ace rings him to complain, Ed says: "We never signed any contract, so that's it. Goodbye and peace be with you."

INSTRUCTIONS

In respect of each of the four transactions between Ace and (respectively) Bud, Chuck, Dib and Ed, write a response that addresses the following:

a) The legal issue (or issues) in the transaction.

b) The legal principles you will use to resolve each issue.

c) The application of those legal principles to the facts of each issue.

d) The concluding advice you would give Ace in respect of each issue.

Direct your comments to whether each issue could bind Ace to the other party to the transaction under the law of Contracts. There is no need to provide an overall answer to the situation in which Ace may find himself.

Refer only to material covered in the Contract Formation part of the course. There is no need to consider any material in the Contents of Contracts (or any other) part of the course.