Contract law- case study

Tullula Investments Ltd is a large South Australian company, which owns and operates many hotel and restaurants throughout Australia. Italian Cuisine Ltd, a food and catering business whose headquarters are in Brisbane, supplies goods commonly used by businesses such as Tullula Investments Ltd. On September 1, 2000, Italian Cuisine Ltd sent a fax to Tullula Investments Ltd, which read:

"Can offer latest 'Speedy Rice Cookers' at $100 each."

On October 1, 2000, Tullula Investments Ltd faxed a reply stating: "Will have four dozen. Need delivery by November 1, 2000." Upon receiving the fax Italian Cuisine Ltd then wrote back to Tullula Investments Ltd saying "thank you for your fax which is receiving our attention".

Subsequently and prior to November 1, 2000, Italian Cuisine Ltd packed the rice cookers and loaded them on a van for delivery to Tullula Investments Ltd, but before the van set out, Tullula Investments Ltd phoned Italian Cuisine Ltd to say that they no longer needed the rice cookers.

Discuss the legal position of Tullula Investments and Italian Cuisine in relation to the law of contract.

Here is my view.....

The main issue in this problem is whether there is an 'agreement' - offer and acceptance

However, on the first element of intention to create legal relations, it is clearly a business/commercial relationship between Tallula Investments Ltd and Italian Cuisine Ltd and therefore the presumption is that the parties intend to enter into legal relations.

The next issue to be dealt with is the 'offer'. Has Italian Cuisine made an offer to Tallula in the fax September 1, 2000 which read:

'Can offer latest speedy Rice Cookers at $100 each'

In my view this is not a genuine offer, it is more in the nature of an invitation to treat. The words 'can offer' is not a definite proposal to sell the cookers at the stated price but is simply suggesting that the Speedy Rice Cookers are available for sale.

The test in deciding between an offer and an invitation to treat was set out in Carlill v Carbolic Smoke Ball Co which held that an 'invitation to treat is a request for offers' and determined by the 'ordinary person test'. Clearly here, we have an inducement sent out by Italian Cuisine to Tallula to enter into negotiations for the purchase of the rice cookers. It is not a definite proposal, made with the intention that it becomes binding once accepted.

As the fax sent on the 1st September, 2000 by Italian Cuisine is not an offer we now need to consider the position with the Tallula fax at 1st October, 2000. This reply is not an acceptance. An acceptance is an agreement to be bound to the terms of an offer. The fax by Tallula is actually an offer to buy the cookers at $100.

Italian Cuisine's response to the Tallula Investments' fax 'receiving attention' is not an acceptance to the offer. An acceptance must be clear and unqualified to be binding. It can be argued that Italian Cuisine is actually 'silent' on the issue of acceptance an silence is not acceptance.

We must now look at the issue of the revocation and decide whether Tallula Investments is required to take delivery and pay for the cookers. Since Tallula made the offer to Italian Cuisine which was not actually accepted, they are entitled to revoke that offer. An offer can be revoked by an offeror before communication of acceptance by the offeree.

Tallula Investments therefore, do not have to take delivery or pay for the rice cookers as they are not bound by the contract of law.