Murray & Co Entered into a Contract with Annabel Constructions Ltd - Essay Example

The acceptance of an invitation to offer does not create an agreement. The acceptance of this invitation means that the addressee makes an offer that, when accepted by the address or, becomes an agreement (Adams, 2012).

Acceptance of an offer must be communicated to the offeror and must be absolute. A qualified acceptance is not a valid acceptance. Both parties must agree to the same thing in the same sense i.e. there must be consensus ad idem. A qualified acceptance is a counteroffer that immediately terminates the original offer. However, when the counteroffer is accepted by the original offeror, an agreement is created. The agreement should have consideration for both parties. There must be a benefit and a detriment to both parties. There are a few exceptions to this rule like in agreements involving gifts. Generally, consideration is an essential element of a valid agreement. An agreement becomes a contract when it is legally enforceable by law. This is why it is extremely important that the parties involved have an intention to create legal relations. Otherwise, the agreement would just be a social one and would be unable to be enforced through courts if there is a breach by any party (Adams, 2012).

Murray & Co. entered into a contract with Annabel Constructions Ltd. They were required to supply and fit double-glazed windows. They were desperate to get the contract which is why they were under-quoted and ended up having major financial difficulties during the fulfillment of their duties. Further, there were no penalty clauses in their contract which is why Murray & Co. decided to exit the contract and communicated their inability to deliver the windows to Annabel Constructions Ltd. This decision really put Annabel Ltd. in a spot as they depended on Murray & Co. to honour a contract of their own which did have a penalty clause. Looking to minimize their costs, Annabel Smith, the CEO of Annabel Constructions Ltd, offered an additional amount of £20000 to Murray & Co. to fulfil their promise as agreed. Murray & Co. managed to perform their duty but Annabel refused to pay the extra £20000.

As discussed above, consideration is a very essential element of a legally binding contract. Consideration also has to be valid in that it has to have its counterpart. In Stilk v Myrick, it was held that where a promise of additional payment is made for carrying out a pre-existing duty, the consideration is not valid. It is because the consideration for the duty has already been provided by the previous contract. Under this case, Murray & Co. are not entitled to claim the extra £20000 because they have only completed the duty the consideration for which was provided by their original contract with Annabel.

However, the solution provided by Stilk is very old and it was modified by Williams v Roffey Bros & Nicholls (Contractors) Ltd (Abbott & Pendlebury, 2013). In this case, the courts held that where "factual benefits" are given from one to another party, there is a valid consideration. The given scenario is very similar to this case. In this case, the defendants, being building contractors, had entered into an agreement with a housing association to refurbish a block of 27 flats. The contract had a clause for liquidated damages if it was not completed on time. The contract demanded some carpentry work for which the defendants engaged the claimant for an agreed price of £20,000. The claimant realized after 6 months of commencing the work that the price was too low and the work could not have been done at this price. He communicated this fact to the defendants who agreed to pay an additional £575 per flat. However, he only received £500 which was insufficient for him to complete the work.

The defendants hired another carpenter to complete the contract and refused to pay the claimant the further sums promised. They maintained that the claimant had not provided any consideration for the additional benefit. It was held that the claimant was providing a benefit to the defendants by helping them in avoiding the penalty clause. Similarly, in the given case, Murray & Co. has performed a pre-existing duty but they are also helping Annabel Constructions Ltd. in avoiding a penalty amounting to £100 per day of delay to all the buyers who experienced a delay in getting possession of their apartment.

This means that Annabel’s defense on the grounds that Murray & Co. have performed a pre-existing duty, and they have not provided any consideration for the additional £20000 would be rejected by the courts. The courts would honour the arrangement under which Murray & Co. promised to deliver on time for an additional £20000. In return, Annabel receives the factual benefit of avoiding the penalty under a separate contract which may have been up to £100000 if the work was not completed on time. Hence, Murray & Co. are entitled to the additional £20000 as promised by Annabel Constructions Ltd.