Question 1 (Contract Law)

Dr. Doe (Doe) is a well-respected scientist who has just won the Nobel Prize in medicine for his work in developing a highly effective drug to prevent the common cold. He has recently been engaged in extensive negotiations with Francis Stein (Stein), the president of the Giant Drug Company (Giant), a pharmaceutical company that is interested in marketing the new drug.

On 1 May, Doe signed and sent Stein the following letter:

I will accept a position as vice-president in charge of research for a period of four years at a salary of $500,000 per year.

(signed) Doe

On 3 May, Stein received Doe's letter and called Doe and stated:

"Your salary request is too high. Will you reduce it to $300,000?"

In the phone conversation, Doe replied:

"Your response is insulting! I am far too good a scientist to work for so little! That's as low as I can go."

Outraged by Doe's rude answer, Stein immediately sent the following letter to Doe:

I resent your statement. I am no longer interested in hiring you.

(signed) Stein

Later in the day, Stein changed his mind, and decided to agree to Doe's demands. Stein then sent a properly addressed, stamped express mail letter to Doe stating:

"Accept your terms, although I wish you would reconsider a lower salary." (signed) Stein

On 4 May, Doe's secretary received Stein's express mail letter of acceptance and placed it on his desk. Stein's first letter had not yet arrived. Before reading his mail on 4 May, Doe secured a very lucrative contract as research director with MARK Drugs, a competitor of Giant. Doe immediately called Stein and stated:

"I just agreed to work for MARK Drugs."

Stein replied: "You can't, I already accepted your offer."

Stein consults you, asking if he has a valid contract with Doe and if so, whether Stein can force Doe to work for Giant.

Required: Answer the following two questions. In each case, give reasons for your answers, and support your reasons with case law.

a)Analyse and discuss why there is or is not a validcontract.

(15marks)

b)Then assume that there is a valid contract, and fully analyse and discuss the remedies that might be available underthat contract.(5marks)

(Total: 20marks)