Business Law Memorandum of Law Parties Alpha-

Business Law

MEMORANDUM OF LAW

PARTIES

Alpha- Alpha is a company that makes photocopier machines. Alpha sends a quote to Beta offering a sale.

Betabond- Betabond is a company who needs to purchase a photocopier machines. When Betabond receives a quote from Alpha they respond with a purchase order.

FACT PATTERN

Alpha sent Betabond a quote offering to sell a photocopier machine for $150,000 to be delivered in 2 months.

Alpha's quote included a statement that the quote was subject to certain terms and conditions.

Furthermore the certain terms and conditions were said to:

'prevail over any terms, and conditions in the buyer's order."

Conditions in the Alpha quote included:

A price variation clause- the price of the machine would what ever price was in force on the date of delivery (not on the date of contract).

Cancellation Clause- customer could not cancel for late delivery.

On July 27, 2011 Betabond placed an order for the photocopier machine.

In its order Betabond included certain terms and conditions.

These certain terms and conditions were materially different from those in Alpha's quotation.

Betabond's terms and conditions included:

No price variance.

The right to cancel the order for late delivery.

And a tear-off acknowledgment off order- which stated

"We accept your order on the terms and conditions thereon"

On July 31, 2011 Alpha completed and signed the acknowledgment of order and returned it with a letter stating that Betabond's order was being accepted on the terms and conditions contained in Alpha's quote from July 24.

Is there an enforceable contract between the parties.

If yes, what are its terms?

ISSUES

In order to determine whether an enforceable contract exists there are several issues:

1) Whether Alpha's quote actually constituted an offer.

2) Whether Betabond's order constituted Acceptance or a Rejection with a Counter-offer.

3) Whether by signing the tear-off acknowledgement, Alpha Pty Ltd. accepted Betabond's counteroffer.

**Note that there is no need to discuss consideration because this business contract has executory consideration. Any contract between Alpha and Betabond will include an exchange of promises between Alpha and Betabond. Alpha promises to deliver the photocopier machine, and Betabond would promise to pay upon receipt of the photocopier. Carlill v. Carbolic Somke Ball Co [1893] 1QB 256.

RULES

Offer

In order to constitute a clear offer the offer must indicate the intent to be legally bound, contain clear and precise terms, and be capable of being accepted without any need for supplementation or alteration.

Acceptance OR Rejection & Counter-Offer

A counter-offer acts as a rejection of the original offer. Hyde v. Wrench (1840) 3 Beav 334.

Tear-Off Acknowledgment

1) When a Buyer responds to a quote with an order containing materially different terms and conditions this does not constitute acceptance. The order is considered to be a rejection and a counter-offer at the same time.

2) If a Seller signs a Buyer's order which:

a. Contains materially different terms and conditions than the Seller's quote; and

b. Completes the tear-off acknowledgement portion of the buyer's order; than

i. This means the seller has accepted the counter-offer from the buyer.

1. This is so even though the seller included a letter referring back to the terms and conditions found in the original quote.

3) A contract comes into being when there is an clear offer and a clear acceptance.

Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation (England) Ltd.

APPLICATION & ANALYSIS

Issue I: DoesAlpha's quote actually constitute an offer?

Whether Alpha's quote to Betabond on July 24th constitutes an offer depends on whether the quote indicated intent to be legally bound, precise terms, and was capable of being accepted or rejected by Betabond with no alterations.

A reasonable person who read the quote would have concluded that Alpha intended to be legally bound to deliver machinery to Betabond should they so choose to order. More importantly, courts usually presume that in business contracts the parties intend to be legally bound unless it can be shown otherwise. We conclude that Alpha's original quote constitute a legitimate offer capable of being revoked, accepted, or denied.

Issue II: Does Betabond's order constitute an acceptance or a rejection with a counter-offer?

The legal standard is that an acceptance which materially changes or adds to the original offer cannot be considered an acceptance. It has to be considered a rejection. It is also considered a counter offer. In this case Betabond disregarded Alpha's original quote and sent along an order with materially different terms. Additionally, Betabond included language in their counter-offer which clearly indicated that this counter-offer included the final say on the contract negotiations. As such, we can conclude that Betabond's order was in fact a counter-offer with new terms and conditions. It was a counter offer with explicit terms capable of being accepted or rejected.

Issue III: By signing the tear-off acknowledgement, did Alpha Pty Ltd. accept Betabond's counteroffer?

In the English contract case Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation, two companies were faced with nearly an identical problem. Butler Machine was a company that built and offer for sale a series of machine tools. They offered to sell machine tools to Ex-Cell and wrote them a letter. The letter by Butler Machine was similar to the quote sent by Alpha. Both letters included a price variation clause. Ex-Cell responded to the letter saying they would accept and order the machine tools but they included their own terms and a tear-off acknowledgment slip. This tear-off acknowledgment slip was similar to the one Betabond included in its order to Alpha. Butler sued Ex-Cell, when Ex-Cell failed to pay a price higher than the price in Butler's original quote. Ex-Cell replied that their order said no price variation was possible, and Butler argued they included a letter saying they were accepting the order based on their 1st quote. The majority in Butler, concluded that the appropriate analysis was to figure out where there was a clear offer and a clear acceptance. They found that a rejection and a clear counter offer occurred in the purchasing companies order with materially different terms. And they found a clear acceptance when the selling company responded by signing the purchasing companies order and the tear-off acknowledgment slip. Since the offer and acceptance were based on the purchasing company's order, than the terms of the contract were determined by Ex-Cell.