6

I'm asking purely out of curiosity, and would be happy with answers relating to any jurisdiction(s).

As an example, Ben wants to buy a banana from Sam's shop. Bananas are priced at £0.50 each. Ben puts the banana on the counter and (a) hands Sam a £1 coin. Sam then puts the coin in the till and (b) gives Ben a 50 pence coin.

Was the contract made and completed at point (a) or (b)? Or is the time of sale not legally defined so precisely?

Presumably if it was not made until (b), then Ben might not be entitled to walk away with (or eat) the banana without waiting for change.

But if it was made at (a), then Ben might not be entitled to change his mind and get his £1 coin back if Sam was out of change and asked him to wait for five minutes.

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7

Neither

The contract is completed when each party has totally fulfilled its obligations under the contract. In this case, it is when the purchaser has consumed or otherwise dealt with the banana to their satisfaction. The vendor has ongoing obligations under the contract until this happens. For example, obligations that the banana is of merchantable quality and fit for purpose. If the purchaser peels the banana and discovers that it is "off" or eats the banana and develops food poisoning then the vendor still has obligations and can be sued under the contract.

Yes, I realize that no one is going to sue anyone over a rotten banana but let's assume that "banana" is code for 54km of motorway construction and £1 is actually £1 billion.

When is the contract formed?

This is not a trivial determination and there are literally hundreds of thousands if not millions of lawsuits that have turned on this exact question. Once the contract is formed its binding on both parties; until then, either can walk away (subject to estoppel)

The traditional analysis involves offer and acceptance.

In your banana scenario, the shop displaying "Banana's: 50p/each" (it's a fruit shop - they always have unnecessary apostrophes) is not an offer - it is an invitation to treat. An offer is made by Ben placing the banana on the counter and proffering the £1, it is accepted by Sam taking the £1. At this point, the sale is binding on both parties.

Ben has fulfilled all his obligations under the contract, Sam still has some. In addition to those discussed above, he owes Ben 50p. Strictly speaking, this is not an obligation under the contract but a debt due and payable.

Consumer protection law

The proceeding is a strict contract law interpretation - many jurisdictions have consumer protection legislation (and food safety laws for bananas) that impose additional protections and may change the contract law position.

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  • True story: A friend of mine bought a car, paid for it, left it at the dealer so they could do some additional work that was part of the contract like cleaning, some additional rust protection, and was going to pick it up next day. In the night there was a fire at the car dealer's place and the car got badly damaged. It turned out there was a valid sales contract, but the dealer hadn't yet delivered the car, so the dealer had to order a new car for him (and sell the original car, repaired, as used with severe damage repaired). Had my friend taken the car, driven off, and returned ... – gnasher729 Dec 7 '19 at 11:21
  • .. it to have that work done, then he would have had to accept that the car was his and he would have owned a brand new car with severe fire damage. (That's in Germany. Other countries might have similar or different laws). – gnasher729 Dec 7 '19 at 11:22
  • @gnasher729 no he wouldn’t. As bailee of the car, the dealer would have been responsible for the damage. Why not post your story as a question? – Dale M♦ Dec 7 '19 at 19:55
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Was the contract made and completed at point (a) or (b)? Or is the time of sale not legally defined so precisely?

In the scenario and particular ramifications you outline, identifying a precise instant where a contract ensues would be pointless and/or inconsequential. That does not mean that your question is pointless, though. The possible developments mainly have an effect on Ben's entitlement to void the contract.

Ben satisfies his obligation as soon as he pays an amount no lower than what Sam asks for the banana. From that point forward, Ben is entitled to walk away with (or eat) the banana. In the event that Ben overpaid, Sam's pending obligation to return change does not hinder Ben's entitlement to the banana.

Ben has two options if Sam fails or refuses to return change:

  1. Void/rescind the contract (i.e., Ben changes his mind), thereby getting reimbursed. Obviously his consumption or deterioration of the banana would forfeit his ability to exercise this option.

  2. Sue Sam for breach of contract, unjust enrichment, or --if Sam's deceitful intent is proved-- fraud.

Option 1 is available because, in terms of the Restatement (Second) of Contracts at § 151-153, Ben's "basic assumption on which the contract was made has a material effect on the agreed exchange of performances". Here, Ben's basic assumption is premised on the price tag "50 pence". Ben, as "the adversely affected party" in the actual (versus agreed) exchange of performances, may void the contract.

Eating the banana despite knowing that Sam was out of change puts Ben in the position of Bear[ing] the Risk of a Mistake. See Restatement at § 154. That forfeits Ben's right to void the contract, but not his entitlement to receive change.

Common practice also reinforces Ben's entitlement to change his mind. This is contemplated in Restatement at § 222 ("Usage of Trade"). Indeed, it is common and quite acceptable for a customer to desist from the purchase if the seller has no change. That is understood to inconvenience the customer because of the resulting delay. If Sam sought to force the purchase, his burden will be to prove that this instance is special and entails questions of fact in which he would prevail.

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  • Looks like good answer, thanks. Is the later part applicable specificly in New York state? You say Ben satisifies his obligation as soon as he pays, but he never exactly has an obligation, does he, since the contract doesn't exist before he pays? – bdsl Dec 4 '19 at 13:53
  • @bdsl Yes, it is applicable in NY. In fact, courts from everywhere in the US frequently point to the Restatement as the basis for their decisions in contract disputes. On the latter question, Ben's obligation would ensue if he eats the banana without first paying for it (and, of course, he risks being accused of petty theft or something alike in the meantime). In any other case, Ben's obligation ensues and is satisfied at the very instant he pays. Therefore, Ben's obligation did exist even if only for an instant. – Iñaki Viggers Dec 4 '19 at 14:33
  • I think you are wrong. Ben makes the offer of cash for the banana, the contract is not formed until Sam accepts the offer (by taking the cash from the counter). – Martin Bonner supports Monica Dec 5 '19 at 15:08
  • @MartinBonnersupportsMonica That way of identifying offeror and offeree is subjective and needlessly at odds with the tenets of Economics. Instead, Sam is the offeror from the standpoint that he makes the bananas available to customers (he offers or supplies bananas). Ben, just like any other potential customer, is the offeree. Ben's acceptance is palpable from his act of eating the banana or paying for it, whichever occurs first. – Iñaki Viggers Dec 5 '19 at 16:04
  • @IñakiViggers I noted that your links to "Restatement (Second) of Contracts" (in this and other answers), pointing to nylitigationfirm.com, no longer return the actual Restatement but just a 2-page law firm pitch. – Greendrake Apr 27 '20 at 5:07
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You would legally own the banana when you pay.

Presumably if it was not made until (b) then Ben might not be entitled to walk away with (or eat) the banana without waiting for change.

Once you pay for it, it is yours.

But if it was made at (a) the Ben might not be entitled to change his mind and get his £1 coin back if Sam was out of change and asked him to wait for five minutes.

How long you have to change your mind is a policy of the specific store not of the law in most cases. You would have to look at the store's return policy.

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  • Thanks for the answer. What jurisdictions does it apply to? Can you point to the source of this law? – bdsl Dec 3 '19 at 21:43
  • What if we assume for simplicity that the store has no stated returns policy? Is Ben then entitled to a refund if he demands it while waiting for change? – bdsl Dec 3 '19 at 21:45
  • It's more just a principle of a contract. There isn't a you own this at whatever time law bc there could be a million different scenarios it would have to cover. What a court would look at is the contract aspect of it. You paying X amount is your part of the contract and the store giving you the goods is their end. Once that happens, the goods are yours. – Putvi Dec 3 '19 at 21:45
  • As far as there being no stated return policy, you would be at the whim of the store unless the good was damaged. – Putvi Dec 3 '19 at 21:49
  • No. See Dale M's answer. – Martin Bonner supports Monica Dec 5 '19 at 15:08
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There is no contract in this example under US (state) law, it is a real time hand to hand exchange. Title passes with possession. Possession changes not when you pick it up off the shelf, but when you pay enough to be entitled to take the product under the terms set by shopkeep. In this case, when you hand over the dollar. Analysis is typical common law in US states - plenty of exceptions exist and I'm sure some variation in case law.

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