Clay advertised his car for sale for RM20,000 in a local newspaper. Chloe saw the advertisement and telephoned Clay offering him RM15,000 for the car. Clay eventually offered to sell the car for RM18,000. To this Chloe said that she would need to drive the car before she could agree to such price. They agreed to meet at Clay's house at a particular time during the weekend, for a test drive.

(a) On the next day, Clay sold the car to Yogy for RM19,000. Discuss. 

(b) What is counter-offer? Explain the nature and the effect of counter-offer. 

(c) Dawn received an unsolicited book by post with a note which said that "...unless the book was returned within 14 days, it would be assumed that the recipient had bought the book for RM70." Advise Dawn.

Answer:

A) In this case there was an invitation to offer in newspaper by Clay, sach invitation to offer was converted into an offer by Chloe by offering 15000 for car. Clay rejecting the proposal made an counter offer for sale of car by Clay to Chloe for 18000 and such offer was valid till that perticular day, when they agreed to meet for test drive. As per section 6 of contract act 1950 there is the requirement of delivery of notice to the offeree for revocation of offer. But here Clay sold the car to another party, without delivery of notice for revocation of the original offer made to Chloe. So original offer stands, and Chloe can sue Clay for damages for breach of the same.

B) a counter offer is a rejection of the original offer and making a new offer. This new offer is a counter offer. A person who makes a counter offer and subsequently change the his mind and wishes to accept the original offer cannot do so as the first offer lapses and he cannot treat it as still open.

In case of Hyde v. Wrench (1840)

It was held that the counter offer acts as a rejection of the original offer and original offer lapses immediately.

3) As per contract law, an offer should not contain a term the non compliance of which would amount to acceptance. So the conditions written on the note "...unless the book was returned within 14 days, it would be assumed that the recipient had bought the book for RM70." Are not binding on Dawn.

So Dawn has 2 options

1. to keep the book in custody and demand lawfull expenses from the owner of the book for keeping the book in custody.

2. He may return the book by post in this case Dawn will have right to to claim the expenses incurred by him on postage.