Nestle Case Study

Question 1
Identification of Issue:
The issue determines:
1. Whether that is a valid contract between Joanne and Andy.
2. Whether Andy must sell the car to Joanne.
3. Whether Andy can revoke the contract between him and Joanne.
Explanation of Law
General rule, consideration of a contract need not be adequate. Under the doctrine of freedom of contract, the parties are free to bargain. Based on Illustraion F of Section 26 of the Contracts Act 1950, A agrees to sell a horse worth $1000 for RM10. A’s consent to the agreement is freely given. The agreement is a contract is notwithstanding with the inadequacy of consideration.
In the case Thomas v. Thomas [1842] QB 851, after John Thomas death, the executors of his estate entered into an agreement with P that P can occupy the house by paying£1 per year. However after P live in the house for some time, D refused to convey the house and claimed that there was no consideration for his promise. It was held that P pay £1 per year is consideration and need not to be adequate.
In the case Chappel& Co Ltd v Nestle Co Ltd [1960] AC 87, to promote the sales of their chocolate bar, Nestle offered a record for one shilling and sixpence plus three wrappers from sixpenny bars of chocolate. Chappell & Co brought the proceedings for infringement of copyright and Nestle offered to pay a statutory royalty based on the one shilling and sixpence. They did not include the value of wrappers. It was held that the wrappers formed part of the consideration because the one shilling and sixpence alone was not enough to obtain a record. Thus, Nestle had to pay a royalty based on three shillings.
General rule, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is ma...

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...lete when Andy make it and comes to the knowledge of Joanne. Based on Section 5 of Contracts Act 1950 and the case Byrne v Tienhoven, Andy cannot revoke his proposal to Joanne because Joanne already phoned him and accept his proposal before his revocation. Hence, Andy must sell the car to Joanne. However, when regarding to the postal rule, acceptance only can be made with the same forms of communication. Andy use letter to propose to Joanne, but Joanne telephoned Andy to accept. In the case Entores Ltd v Miles Far East Corporation, it is held that postal rule does not apply to instantaneous way of communication. Hence, the acceptance by Joanne cannot be a binding contract between Andy and her. Andy can revoke his proposal at any time.
Conclusion
There is a contract between Joanne and Andy.
Andy does not have to sell his car to Joanne
Andy can revoke his proposal.