Question

Wiremu operates a small business selling natural health products. He recently heard about one of the latest trends - an expensive new organic herbal tea called T4. While looking through a trade magazine Wiremu saw an advertisement, promoting the supply of T4 by a company called Eaze Supplies. The advertisement stated, amongst other things, “Great Offer” and “Prices start at $100 per kg”. Wiremu phoned up Eaze Supplies and spoke to Sally who was Head of Sales, and asked whether Eaze Supplies would be able to fill an order for a regular supply of T4. Wiremu told Sally he wanted the tea packed in 0.5kg packets and suggested the supply of 100 packets each week. (Nothing was specifically said about the price but Wiremu assumed the price would be based on the price stated in the advertisement, which worked out at $5000 per 100 packets.) Wiremu also told Sally that he must receive the order Monday of each week since he was expecting a high demand, had limited storage space, and Monday would be his weekly time for organizing his stock. Sally told Wiremu that she needed to do some inventory checks and would get back to him. After 3 weeks, there was no response from Sally, so Wiremu called Sally again to enquire whether Eaze Supplies could supply him with the requested T4. Sally responded by saying, “Oh yeah… silly me… it completely slipped my mind. Sure no problem. However, we are closed on Mondays so the T4 would have to be sent and delivered on Tuesdays. How does $6000 per 100 packets sound?” In response Wiremu answered, “Mmmm, geee I don’t know. That might affect my entire business scheme. But I guess it could work.” Sally then suggested to Wiremu that they both agree to do this but decide on the exact terms when Wiremu had worked out the precise details of his business plan, since he sounded a bit confused and uncertain. Wiremu agreed. Over the next few days, a friend of Wiremu gave him some inside information about an exceptionally cheap supplier of bulk speciality tea grown in Malaysia. Wiremu immediately called up the New Zealand supplier, MST Ltd, and asked if they could supply T4 for 12 months. MST Ltd accept without hesitation, offering $5000 per 100 packets. Wiremu replied, “Excellent that is exactly what I need.” Wiremu and MST Ltd agreed that 100 packets of T4 would be delivered every week on Monday for a period of 12 months. Two months later, Sally phoned Wiremu looking to conclude their agreement. Wiremu told Sally that he had changed his mind and no longer wished to order from Eaze Supplies. Sally is furious, and told Wiremu, “We had a deal! You will be hearing from my lawyer!” COMLAW 101 Page 5 of 9 Wiremu, worried about potential legal action, seeks your advice regarding whether he has entered into a legally binding contract with Eaze Supplies.

REQUIRED: Advise Wiremu. In advising Wiremu, analyse each stage in this scenario in terms of offer and acceptance, and in addition consider any issues relating to contractual intention. Limit your analysis to any possible contract between Wiremu and Eaze Supplies

Answer 1

In my opinion, Wiremu did not enter into a legally binding contract with Eaze Supplies because although there was an offer made by Sally to supply 100 tea packets of 0.5 kg every Tuesday at $6000 per 100 tea packets, there was no acceptance by Wiremu for the offer made by Sally, neither written acceptance nor telephonically. Wiremu did not give clear acceptance to Sally. Moreover though Wiremu had shown intention before but after hearing that the price of 100 tea packets is $6000, his intention was lacklusture and he did not clearly convey to Sally that he would be entering into contract with Eaze Supplies for the purchase. Hence it can be concluded that Wiremu did not enter into a legally binding contract with Eaze Supplies.