23/07/2022
How often do you have to make a commercial contract?
The answer is, everyone does, virtually every day. Every time we go to the shop to buy groceries; every time we go to the service station to fill up with fuel; every time we have a beer at the pub; we are entering into a commercial contract, often several times per visit.
The fact is, we are all entering into commercial contracts regularly; however, these everyday transactions have become so common place, so regular in our lives, that we no longer even think about what it is that we are actually doing.
Contracts and making contracts have become such a normal part of our everyday lives that few of us even think about the process anymore and what is actually involved in the contract making process.
Entering into a contract requires a few formal requirements, whether a written contract or verbal contract. The elements are simple. There must be an offer, and acceptance of the offer, and then comes the ‘quid pro quo’ or something for something. Consideration must pass, but that consideration does not necessarily have to be money.
So, when you go to the supermarket and see a packet of chips on the shelf with a price of $3.00 under them, is that an offer? When you pick them up and go to the counter, is that acceptance of the offer?
The answer is no. You may be surprised to know that when you take the item to the checkout, it is you who are making the offer to purchase and it is up to the checkout operator to accept your offer.
Advertising the item sitting on the shelf at $3.00 is not the supermarket making an offer to you, it is defined, in legal terms, as an ‘invitation to treat’. This was clarified nearly seventy years ago in the famous British case known as ‘Boots’ (Pharmaceutical Society of GB v Boots - Court of Appeal [1953] 1 QB 40; [1953] EWCA Civ 6; [1953] 1 All ER 482, [1953] 2 WLR 427).
Technically, the checkout operator can refuse to sell you the product you have selected by rejecting your offer, or by making a counteroffer. In practice, this rarely, if ever, happens, but the retailer has every right to reject your offer, if they so choose.
So, what about something more substantial. The purchase of the family home is, in most cases, the largest transaction that most people will enter into during their lifetime. When you see your dream home listed in the window of your local real estate agency, enter into a standard form REIQ contract and pay the deposit, have you now secured the purchase of your dream home?
The answer is again, no. The Real Estate Institute of Queensland (“REIQ”) and Queensland Law Society (“QLS”) created standard form contracts for the purchase of residential property many years ago to comply with the legal requirements and simplify the process of purchasing your home. However, as with buying a packet of chips from the supermarket, the purchaser is still only making an offer to the seller. The advertisement in the agency’s window is still only regarded as an ‘invitation to treat’, not an offer.
An unscrupulous seller may decide that they have received so many offers in such a short period of time that they must have been advertising the property for too little, reject all offers and raise the price on the advertisement. They are well within their legal rights to do so, but whether this is considered ethical is up to you, the individual, to decide.
Those whose offers were rejected are entitled to the return of their deposit, in full.
There are many rules incorporated into the standard terms of the REIQ contract regarding rejection of offers, withdrawing from the contract as a seller or buyer and cooling-off periods etc. There are also very important distinctions between conditional and unconditional contracts and the consequences of entering into the wrong type can have devastating effects. Imagine having to pay 10% of the purchase price, and other legal fees and cost, without purchasing the house!
The number of people who enter into contracts for the purchase of a home, and then subsequently seek legal advice, is astonishingly high. The sensible approach is to seek legal advice first, before entering into the contract.
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