4. Arnold intends to sell his bicycle for $100 to Betty. He sends the following

Question

4. Arnold intends to sell his bicycle for $100 to Betty. He sends the following letter to Betty:

Dear Betty,
You mentioned that you were interested in purchasing my blue bicycle.
It is the best ride you will ever have.
It is safe, and has a solid carbon-fibre frame.
I want $100 cash paid at the point of pickup. If you can reply by letter, that would be great.

Thanks,
Arnold

Betty receives this letter and replies by post the same day stating that she accepts. Before Betty's letter reaches Arnold, he calls her up and says that he does not want to sell the bike after all.

(a) Is there a contract between Betty and Arnold? Explain how the Postal Acceptance Rule impacts on this transaction.

The following additional information is required for Questions 4(b) and 4(c):

Amold changes his mind, and Betty arrives at Arnold's house with $100. She thanks Arnold, pays the money, and rides away. The bicycle is a terribly bumpy ride, and when she gets home she realises that the frame was not in fact a solid carbon-fibre frame, but was in fact made from low-grade steel.

(b) What is the legal significance of Arnold's statement that the bike was "best ride you will ever have"?

Discuss whether Betty can claim damages from Arnold for this.

(c)   What is the legal significance of Arnold's statement that the bike was made of carbon fibre? Discuss what legal options Betty has against Arnold.

The following additional information is required for Questions 4(d), 4(e), and 4(f):

Betty had purchased the bicycle to undertake a lucrative contract to deliver important packages for a large multi-national company. She was to eam $10,000 from this contract. She did not mention this contract to Arnold when purchasing his bicycle. Unfortunately, the bicycle snaps in half after four minutes and Betty falls off. Betty loses her contract and incurs $1,000 in medical expenses.

(d)   Discuss whether Betty can claim the $1 from Arnold.

Is it significant that Betty did not mention this lucrative contract to Arnold?

(e)   Can Betty claim in contract law for Arnold to pay her medical expenses?

(f)   If the letter from Arnold to Betty included the phrase "I will not be held liable for any personal injury caused by this bicycle", would Arnold reduce his liability for paying the $1,000? Will this statement reduce liability for paying the $10,000?

Explanation / Answer

a) Yes, a contract is formed when Betty posts the communication to Arnold. As per the posting rule, the acceptance is complete as the letter is posted. In general acceptance of offer takes place when communicated, however, communication can get delayed by post, so as an exception to the general rule offer is deemed accepted when an acceptance is posted.

b) There is no legal significance of the statement. The statement made by Arnold is too broad and subjective. What is best for Arnold may not be best for Betty. Arnold can justify that he made the statement as he considers this as the best ride available.

c) Arnold hid a material fact that bike was made of low-grade steel. He misrepresented the quality of the bike and committed a fraud by selling the bike to Betty on a false note. Betty can rescind the contract and make it voidable. She can recover the money she gave to Arnold.

d) Since Arnold had made a misrepresentation, he would be liable to pay the economic losses caused to Betty due to the snapping of the bike. The economic loss (consequential loss) has been a "proximate cause", caused directly due to the low quality of the bike.

Note - Solved 4 parts as per Chegg Expert Q&A guidelines.

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