Revocation of Unilateral Contract
Contract law underpins society.[1] In the absence of contracts, it would not be possible for our society to function in the manner in which t does today. It primarily happens because, in countries such as Australia, most of the goods and services are created and distributed via markets. These markets have contracts at their hearts. Seeing through the window of a business, it is evident that every transaction made has a promise in its background. For instance, purchasing raw materials, making lease premises, hiring equipment, selling goods and services, and using banking and related services, all include contracts at one point or another.
Under Australian law, the contract represents a legal relationship between two parties freely entered into an agreement. It concerns the legal enforcement of such promises. Over the past thirty years in Australia, the nature of contracting has greatly changed. Primarily, a contract is legally binding among the parties willfully entering into the agreement. By ‘legally binding’, it means that the law compels the promisor, i.e., the person making the promise, to perform that promise to the promisee, i.e., the person to whom this promise was made. If the former fails to perform the contract towards the latter, then he must compensate him in one way or another such as in the form of damages, for non-performance.
Promises are a common feature of our everyday lives. For instance, political parties make promises regarding elections and customers and suppliers make promises concerning acquisition and supply of goods and services. However, it is worth mentioning here that not all of these promises are legally binding. Thus, the law does not enforce all of these promises on the promisors. Therefore, only some of the agreements are legally enforceable. For a contract to give rise to a contract, there must be a consideration. It is the price of the promise that the promisor must pay to the promisee concerning the promise. It works on the principle of a bargain. It is also worth mentioning here that the consideration does not need to substantial enough to hold the promise. For example, if A promises B to give him a particular car if B pays him the amount of $10,000. It is inherent in the nature of the promise — it is the defining characteristic of an agreement giving rise to a contract.
As pointed out earlier, some of these agreements are binding in nature despite being not contractual in nature. For this reason, any agreement not having the bargaining element can still give rise to legal rights and obligations. However, some conditions must be met in this situation, i.e., the promisee must have relied upon the promise. The reliance on the promise must have been made in the circumstances in which allowing the promisor to resile with impunity would be unjust.[2] This principle has been established in Australia after the Court decided the case titled Waltons Stores (Interstate) Ltd v Maher.[3]According to the decision of the Court, the principle gives rise to the effect that, in order to prevent unconscionable conduct on behalf of the party seeking to resile from the promise, equitable estoppel yields a remedy.
In the presented situation, Outback Burgers advertised in newspapers and on the radio about an advertising campaign in which the customers would have an opportunity to win a gold car if they would collect fifty coupons. The coupons had been stuck to the wrapper of their famous burger brand named Double Wombat Burger. The collected coupons were then to be presented to the head office to win the grand prize which comprised of Toyota Land Cruiser. Furthermore, it was mentioned in the advertisement that the offer was valid for a limited time. By doing so, the company made a unilateral offer. It is the type of contract in which the offerer offers something in return for performing a specific act.
A unilateral contract is completely different from a bilateral contract which is the most commonly found agreement among the parties. Under the Australian law, a unilateral contract is a legal agreement among the parties freely entering it. However, the offer is not made to a particular person(s) by the promisor. As a matter of fact, the promise is made to a group of people or to the public at large. Therefore, it is more of a one-sided agreement. A common example consists of the statement that the offer can be accepted through performance. Other examples include a reward or a contest. The promotion advertisement of Outback Burgers comprises a unilateral contract that had been offered to the public at large, i.e., any person could have performed it in the form of a collection of fifty coupons.
The acceptance of unilateral contract works in a different manner in comparison to that of bilateral contracts due to the mere fact that it is more of a one-sided agreement. Acceptance of a contract is the magical moment at which a contract comes into being. It is of common knowledge that the offer and acceptance must be of exact nature, i.e., an offer cannot be accepted through another offer. The acceptance must be a mirror image of the offer. In R v Clarke (1927),[4] Clarke’s demand for the reward of providing information that resulted in the arrest of the persons responsible for the murder of a policeman was resisted. It happened due to the fact that Clarke did not provide the information with the motive of receiving the reward. In fact, he provided the information to protect him from the conviction of the murder. He must have acted with the intention of entering into the contract. Therefore, for the situation under discussion, any person collecting the fifty coupons and presenting them at the head office would have accepted the offer, and the promise would have given rise to a legally enforceable contract.
From this discussion, it is clear that under a unilateral contract, the promisor waives his right of communication of acceptance of the offer. As a matter of fact, the acceptance is performed. As soon as the offer is performed, a contract comes into being. For instance, if a person returns a lost dog, the offer of reward on the return of the pet is accepted. Such a contract is legally enforceable. For this reason, the offer under a unilateral contract comprises of an outward intent, i.e., the promisor has the intention of making the offer. It is measured via objectively via outward manifestation, which means that to an ordinary person, it must appear as an offer.[5] Moreover, such offers possess the element of finality, which means that the offer is final in its regard and does not require any further communication bar acceptance.[6] In simpler words, the performance of the unilateral contract constitutes an immediately binding contract.
It is said, the only critical point in the formation and performance of a unilateral contract is the fact that the offer appears as an offer to a reasonable person, and the acceptance of the same would entail a binding contract. In the given situation under discussion, two persons have successfully accepted the offer by the performance of the same. One of them is named Gordon George. He waited outside the shop the next day for it to open so he can order fifty burgers and redeem the coupons. Therefore, he had the intention to accept the offer by collecting fifty required coupons. He received one scratch card for these fifty coupons. However, he had to be taken to the hospital as he collapsed after having a marathon eating session. During his stay at the hospital, he overheard the nurses talking about the cancellation of the promotion advertisement at Outback Burgers. He scratched his card and luckily won a gold car. Despite being known of the cancellation, he returned to the head office after discharge from the hospital and claimed for the prize of a gold car. He believed that since he had not received any official confirmation of the cancellation, he did not know about it.
The other person in this scenario is named as Sam Speculator. He collected the required number of fifty coupons from the dustbins in search of discarded wrappers to which the coupons were still attached. Thus, he had an intention to respond to the unilateral offer in a mirror image situation. He was able to collect a hundred coupons in this way. He then went to the head office. He received two scratch cards for the hundred coupons and was lucky enough to scratch two gold cars from the cards. While he was waiting in the waiting room as was assisted by the receptionist, he got to know about the cancellation of the promotional advertisement. He returned to the head office reception and claimed his prize despite the fact that he had received official communication of the cancellation of the promotion advertisement.
Revocation of unilateral contracts can be a tricky matter due to its timing. According to the contract law in Australia, a unilateral offer can be revoked if it has been communicated to a group of people or the public at large but has not been completed. Moreover, communication of the revocation of a unilateral offer is not required to be done via the official route. For this obvious reason, Gordon George lost his chances to claim his prize of a gold car. According to the classical approach, at the time of his arrival at the head office, the offer had already been revoked. Since he did not reach before revocation of the offer, he could not complete the contract, i.e., he could not perform the unilateral contract in order to legally enforce it on the company.
However, with the passage of time, changes have been made in the formation and termination of contracts due to the elements of unjust enrichment, misrepresentation, misleading conduct, and the law of estoppel.[7]Therefore, the offer of a unilateral contract cannot be revoked if the performance of the same has already been started. Such changes in the law provide a window of chance to Gordon George who had already bought and eaten fifty burgers at the shop in the quest of having the coupons which he redeemed for the scratch card out of which he won a gold car.
On the other hand of discussion, the case of Sam Speculator has been a lucky one. Not only he was able to collect a hundred coupons from the trash bins but was lucky enough to scratch two gold cars out of the cards. Moreover, he reached the head office in time. He had presented the cards and was sitting in the waiting room as was assisted by the receptionist when the offer was revoked and the notice was displayed on the wall. For this reason, Sam Speculator was able to perform the specific act, i.e., he performed the unilateral offer before revocation of the same. Therefore, the company’s contract with him had been completed before the company displayed the official notice of the revocation.
Advice to Outback Burgers
Outback Burgers displayed a promotional advertisement to its customers to collect fifty coupons and redeem a scratch coupon against it. The customers had the chance to win a gold car from these scratch cards. Two customers Gordon George and Sam Speculator reacted to the offer. They performed the offer in two different ways. One bought the burgers and collected the coupons whereas the other searched the trash bins to collect the same. However, the offer was revoked. Both of the customers were already performing the offer when the same was revoked. According to the Australian law of contract, a unilateral offer cannot be revoked once the performance has been started.[8]Seeing the situation from this perspective, the company can only be advised to give gold cars to both of the customers.
However, the element of communication of revocation of offer plays a critical role in the situation under discussion. As per the law of contract in the country, the communication must not necessarily be made to the customers via official means.[9] It means that Gordon George received the news in the hospital through the nurses, and thus, the revocation of the offer was communicated to him. Therefore, at the time, he went to the head office he already knew that the offer had been revoked. Moreover, he also witnessed angry people protesting against the revocation in front of the office but ignored them. For this reason, he knew about the revocation before completion of the contract. Therefore, the company is not obliged to give him the gold car. On the other hand, Sam Speculator did not know about the revocation before completion of the contract. Therefore, the company is obliged to give him two gold cars.
[1] Commonwealth of Australia v Verwayen (1990) 170 CLR 394
[2] Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
[3] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
[4] R v Clarke (1927) 40 CLR 227
[5] Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
[6] Gibson v Manchester City Council [1979] UKHL 6
[7] Paterson, J., 2009. The Australian Unfair Contract Terms Law: The Rise of Substantive Unfairness as a Ground for Review of Standard Form Consumer Contracts. Melb. UL Rev., 33, p.934.
[8] McKendrick, E. and Liu, Q., 2015. Contract Law: Australian Edition. Macmillan International Higher Education.
[9] Carter, J. and Peden, E., 2003. Good faith in Australian contract law.