As Colin points out, this is an interesting and unusual case.  If you are teaching Contracts and are old fashioned enough to be requiring students to read, analyse and discuss cases, you won't find a more useful recent case dealing with core formation concepts or one that has simpler, yet teasingly difficult, facts.  Further, a good deal of the reasoning, while outwardly plausible, is found on closer inspection to be seriously confused and inconsistent.  For example, while Elias CJ and Blanchard J  did say that they prefer the legal analysis of Tipping J  to that of McGrath J, it can be convincingly demonstrated that there is essentially no difference between these analyses! Hardly the finest effort of NZ's fledgling highest court!  Incidentally, the case is reported in [2009] 3 NZLR 160.

David

David McLauchlan

Professor of Law

Victoria University of Wellington

________________________________

From: Colin Liew [colinliew@gmail.com]

Sent: Thursday, February 25, 2010 1:53 AM

To: ODG

Subject: NZ Supreme Court on how an offer lapses after a change of circumstances

Dear all,

I hope this has not already been posted, but listmembers may be interested in a recent case decided by the New Zealand Supreme Court regarding when and how an offer can be considered to have lapsed due to a change of circumstances post-offer but pre-acceptance: Nielsen v Dysart Timbers Ltd [2009] NZSC 43, available at http://www.nzlii.org/nz/cases/NZSC/2009/43.html.

The facts are somewhat unusual, but may be prone to recur as litigants opt to settle their disputes. In 2007, the New Zealand Court of Appeal held that Nielsen was liable to Dysart for $300,000+, and Nielsen applied for leave to appeal to the Supreme Court. Subsequently, after submissions on the leave application had been filed, Nielsen's lawyer emailed Dysart's lawyer with an offer to settle. A few hours later, the registry of the Supreme Court advised the parties that leave to appeal had been granted. Dysart's lawyer then replied, accepting the offer to settle. Nielsen argued that no contract was formed, as the offer was conditional upon the status of the leave application remaining unknown, and once leave had been granted, circumstances had so changed that the offer lapsed and was incapable of being accepted.

There was an interesting split among the members of the Supreme Court in reasoning and result: Elias CJ and Blanchard J voted to dismiss the appeal, but adopted the reasoning of Tipping and Wilson JJ who voted to allow the appeal, rather than the minority reasoning of McGrath J who also voted to dismiss.

Essentially, the majority reasoning held that an offer would lapse if there was a fundamental change of circumstances post-offer, analogous to the doctrine of frustration, but Elias CJ and Blanchard J considered that, on the facts, since Nielsen did not expressly provide for what would happen to the offer if leave were granted, he must have regarded the offer as capable of acceptance even in those circumstances, and the "fundamental change of circumstances" test was therefore not met.

By contrast, McGrath J considered that this "rule of law" approach was inappropriate, and preferred a "construction" or "implied term" approach, under which an offer was to be interpreted in much the same way a contract is interpreted, to discover whether a condition precedent should be implied into the offer on the basis of the usual tests for implied terms.

An interesting case on the extent to which contractual techniques can be applied to pre-contractual disputes, and for that reason I am not sure how far either the analogy to frustration or to implied terms can be pressed in such a situation.

Best wishes,

Colin Liew