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Difficulty: HardLaw of Contract: Definition, Essential Elements, and Types

Kalu offers to sell a commercial delivery van to Tunde for ₦4,500,000₦4,500,000. Tunde replies offering to buy the van for ₦4,000,000₦4,000,000, which Kalu rejects. Tunde then informs Kalu that he accepts the original price of ₦4,500,000₦4,500,000 and tenders the cash, but Kalu refuses to transfer the van. Which of the following best describes the legal position of the parties?

  1. No contract is formed because the buyer's counter-offer legally terminated the seller's original offer.Answer
  2. B
    A valid contract is formed because the seller failed to formally revoke the original offer before the cash was tendered.
  3. C
    A voidable contract exists which the buyer can enforce since full payment was offered within a reasonable timeframe.
  4. D
    An implied contract exists because the seller's initial proposal created an irrevocable legal obligation to sell.

Answer

No contract is formed because the buyer's counter-offer legally terminated the seller's original offer.
Under the law of contract, an acceptance must be unconditional and match all terms of the offer. When the buyer proposed a lower price of ₦4,000,000₦4,000,000, this constituted a counter-offer. A counter-offer operates as a complete legal rejection of the original offer, permanently extinguishing it. Consequently, when the buyer later attempted to accept the original price of ₦4,500,000₦4,500,000, there was no longer an open offer to accept, and no binding contract came into existence.

Step-by-Step Solution

1
Analyze the initial communication
Kalu made a valid offer to sell the delivery van for ₦4,500,000₦4,500,000.
An offer must be a definite proposal made with the intention to contract on specific terms.
2
Evaluate the buyer's response of ₦4,000,000₦4,000,000
Tunde's response constitutes a counter-offer rather than an acceptance.
An acceptance must be unqualified and mirror the exact terms of the offer. Modifying the price creates a counter-offer.
3
Determine the legal effect of a counter-offer
The counter-offer rejects and permanently extinguishes the original offer of ₦4,500,000₦4,500,000.
Under the law of contract (as established in cases such as Hyde v. Wrench), a counter-offer destroys the original offer.
4
Assess the subsequent attempt to accept the original price
Tunde's statement to pay ₦4,500,000₦4,500,000 acts as a new offer to Kalu, which Kalu is free to accept or reject.
Once an offer is destroyed by a counter-offer, it cannot be revived by the offeree.

Key Concept

Counter-offer and Termination of Offer
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Topics

Law of Contract: Definition, Essential Elements, and Types

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