Chapter 2

Question 1

The courts have, traditionally, ascertained that parties have, in fact, reached agreement, by analysing the dealings between the parties, in terms of offer and acceptance. What two questions are asked in court?

Answer 1

The question asked is whether there has been a definite offer by one party (the “offeror”) and an unqualified acceptance by the other (the “offeree”).

Question 2

The majority of offers are negotiated on a “promise for a promise” basis. Explain this with the example of selling a house.

Answer 2

An offer to sell a house involves a promise by the offeror to sell, in return for the offeree’s promise to pay. This is called a bilateral offer.

Question 3

To whom is an offer made in case of a unilateral offer?

Answer 3

A unilateral offer, on the other hand, is made to the world at large, or at least to anyone who comes forward and performs the conditions.

Question 4

What are the elements to constitute a valid offer?

Answer 4

1) Made in writing, by words or by conduct
2) Complete
3) Operable
4) Made with the intention that they should be binding on anyone that accepts them

Question 5

What is an invitation to treat?

Answer 5

One party, demonstrating a willingness to negotiate, merely invites offers, which the other party is then free to accept or reject, or a “statement of intention”. Essentially, it is an invitation, extended by one party to the other, to enter into negotiations, or to make an offer himself.

Question 6

What is the difference between an offer and an invitation to treat?
Why is this difference important?

Answer 6

In contract law, the distinction between an “offer” and an “invitation to treat” is important in determining the legal consequences of communication in the context of making a contract.

An “offer” is a definite expression of willingness to enter into a contract on specific terms, creating a power of acceptance in the offeree (the person to whom the offer is made). Once the offer is accepted, a binding contract is formed.

On the other hand, an “invitation to treat” is an invitation for others to make offers or to engage in negotiations. It is not an offer itself but an invitation to enter into negotiations or make offers that can be accepted or rejected.

The determination of whether a communication is an offer or an invitation to treat depends on the intention of the person making the communication, as revealed by their words, actions, and the surrounding circumstances. Courts consider various factors to determine the intention, including the language used, the context, and the parties’ conduct.

Question 7

When a company publishes a prospectus offering shares to potential investors, is it an offer or an invitation to treat?

Answer 7

When a company publishes a prospectus offering shares to potential investors, it is generally considered an invitation to treat rather than a binding offer. The company is inviting potential investors to make offers to purchase shares, and the company’s directors then have the discretion to accept or reject those offers.

Question 8

How will requests and replies to requests for information will generally be interpreted?

Answer 8

As invitations to treat.

Question 9

In Harvey v Facey [1893] AC 552, the buyer telegraphed, “Will you sell us B. H. P? Telegraph lowest cash price.” The seller replied, “Lowest price for B. H. P. £900,” to which the buyers telegraphed, “We agree to buy B. H. P. for £900 asked by you. Please send us your title-deed in order that we may get early possession.” However, no reply was received. What did the court find?

Answer 9

It was held that there was no contract as the final telegram was an offer to buy, the acceptance to which must be expressed. It was not an acceptance of an offer to sell.

Question 10

Gibson v Manchester CC [1979] 1 WLR 294 involved a council house tenant who wished to buy his house under a “right to buy” policy. The council wrote to the tenant informing him that it might be willing to sell the property and the tenant replied, confirming that he wished to buy. The council’s leadership changed hands, however, and the right to buy option was withdrawn. The tenant claimed against the council for breach of contract. What did the House of Lords find?

Answer 10

The House of Lords held that the council never made an offer to sell; there could be no valid acceptance, since the parties were, effectively, in negotiations.

Question 11

In Storer v Manchester CC [1974] 3 All ER 824, however, the council sent a council house tenant an application form to buy his council house. It promised that, when the form was completed by the tenant, it would sign and complete the sale. He followed the council’s instructions and returned the completed application form. The council, subsequently, refused to sign and complete the sale, as promised. What did the court find?

Answer 11

It was held that a contract had been formed, since the council’s letter constituted a firm intention to continue with the sale once the tenant had returned the application form. The council was, therefore, bound to complete the sale.

Question 12

What are the three cases that need to be known regarding invitation to treat vs. offer?

Answer 12

1) Harvey v Facey [1893] AC 552
2) Gibson v Manchester CC [1979] 1 WLR 294
3) Storer v Manchester CC [1974] 3 All ER 824

Question 13

The distinction between offers and invitations to treat, i.e. the exact point at which an invitation to treat is converted into an offer, is often hard to draw, as it depends upon the intention of the person making the statement. What may give valuable clues as to parties’ intentions?

Answer 13

Surrounding circumstances and the normal pattern of dealing (e.g. what is usual in a particular trade or industry).
However, in some cases, the distinction has been settled - at least presumptively - by authority or by statute.

Question 14

There are principles applied by the courts in ascertaining whether there has been an offer capable of acceptance. In what areas do these principles exist?

Answer 14

1) Window and self-service display of goods in shops
2) Advertisements
3) Ticket cases
4) Auction sales
5) Tenders
6) Subject to contract

Question 15

The display of goods in shops, on shelves, or in the window, with a price tag attached, are they offers or invitations to treat?

Answer 15

They can constitute either an offer or an invitation to treat. If it is an offer, the customer can accept it simply by indicating his desire to buy the item and the shopkeeper must then sell it to him at the stated price. By contrast, the customer seeking to buy the item will make the offer, which the shopkeeper can then accept or refuse as he wishes - if it is an invitation to treat.

Question 16

In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 All ER 456, the question the Court of Appeal had to consider was whether the display of certain drugs on open shelves in a self-service store, which required the supervision of a registered pharmacist at the point of sale, constituted an offer to sell or an invitation to treat. What was the point of view of the Pharmaceutical Society? How did the Court of Appeal decide?

Answer 16

The Pharmaceutical Society argued that such a display constituted an offer to sell, which the customer accepted by placing the selected items into the shopping basket provided. However, the Court of Appeal held that the items on display were invitations to treat. The customer made an offer to buy, rather than the chemist making an offer to sell, by the customer tendering the items for payment at the sales counter. Accordingly, there was effective supervision of the drugs at the point of sale.

Question 17

In regard to Window and self-service display of goods in shops, what two cases must be known?

Answer 17

1) Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 All ER 456
2) Fisher v Bell [1961] 1 QB 394 (display of flick knives in a shop window, same result as first case, this case was discussed in the introduction to UK law)

Question 18

What case must be known in regard to advertisements? What is the statement made?

Answer 18

In Partridge v Crittenden [1968] 1 WLR 1204 (a case similar in its facts to Fisher v Bell, but concerning the sale of bramble finches, rather than flick knives), Lord Parker CJ stated that:
“…when one is dealing with advertisements and circulars, unless they…come from manufacturers, there is business sense in their being construed as invitations to treat, and not offers for sale…”
Newspaper advertisements of bilateral transactions are (unless they come from manufacturers) generally considered to be attempts to induce offers from recipients, rather than offers themselves.

Question 19

How do advertisements differ from window and self-service display of goods in shops?

Answer 19

They don’t, both are generally regarded as invitations to treat, with the exception for advertisements when the manufacturer advertises goods (Partridge v Crittenden [1968] 1 WLR 1204)

Question 20

Is a posting an advertisement on a website (e-commerce) an offer or invitation to treat?

Answer 20

Invitation to treat as it lacks the necessary elements that would make it an offer.

Question 21

if a computer firm which mistakenly advertises on its website that it is selling PCs for £20, instead of £200, would it be an offer?

Answer 21

No, it’s an invitation to treat, so it could refuse to sell goods at the advertised price.

Question 22

In which case could an advertisement be deemed an offer?

Answer 22

Where descriptive words are used to intend to bind a prospective buyer and all the applicable terms are definitive, an advertisement is likely to be deemed an offer instead of an invitation to treat.

Let’s say a car dealership places an advertisement in a newspaper with the following statement: “Brand new luxury car for sale. Price: $50,000. First come, first served.”

In this case, the descriptive words used, such as “for sale,” “price,” and “first come, first served,” indicate a clear intention to be bound by the terms stated. The advertisement provides all the necessary details, including the specific car model and the price.

If a prospective buyer sees this advertisement and goes to the dealership, they would expect to be able to purchase the car for $50,000 as stated in the advertisement. In this situation, the advertisement would likely be treated as an offer rather than a mere invitation to treat.

If the dealership refuses to sell the car at the advertised price to a qualified buyer who arrives first, it may be considered a breach of contract. The prospective buyer’s acceptance of the offer is simply their act of showing up at the dealership ready to purchase the car at the advertised price.

Question 23

Are unilateral offers for a reward of lost property generally regarded as invitation to treat or offers?

Answer 23

By contrast, a unilateral offer of a reward for lost property or for information leading to the capture or conviction of a criminal will, generally, be treated as an offer and the first person to return, e.g., the lost pet, will be able to claim the money. Provided the advertisement is not mere sales promotion or “puff”, not intended to create legal relations, then, even if the offeree has not supplied any consideration and has not communicated his acceptance of the offer, the advertisement will be deemed sufficiently clear to constitute an offer (Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 CA).

Question 24

Which case must be known in regard to unilateral offers?

Answer 24

Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 CA - unilateral offers of a reward for lost property constitute an offer, not an invitation to treat

Question 25

In which cases can with certainty be said that a ticket constitutes a contract? What constitutes the offer and acceptance?

Answer 25

Cinema, raffle (Gewinnspiel) and cloakroom tickets Offer: The request for a ticket Acceptance: The issue of that ticket

Question 26

There is an unethical practice of companies excluding liability with tickets. There have been two cases where courts decided against this practice. Which?

Answer 26

Chapelton v Barry Urban District Council [1940] 1 KB 532 - Deck chairs were offered for hire by a local council, on the ticket it excluded the council from any liability. The Court of Appeal held that the ticket amounted to no more than a receipt. Any terms printed on the back of the ticket claiming to exclude liability were of a non-contractual nature, since a customer would not expect to find such terms contained there. Thornton v Shoe Lane Parking Ltd. [1971] 1 All ER 686, the Court of Appeal deemed that provisions exempting a company from liability on a ticket issued by a machine at an automatic barrier at the entrance to one of its car parks were communicated too late to be effective. The contract was completed only when the claimant drove up to the sensor that activated the automatic barrier. This was prior to the ticket being issued.

Question 27

In auction sales, we differentiate two different cases. Which? What are the relevant cases?

Answer 27

1) An auctioneer's call for bids is regarded as an invitation to treat, a mere request for offers - offers which the auctioneer can accept (with the fall of the hammer) or reject as he chooses (Payne v Cave (1789) 3 TR 148 and s. 57 Sale of Goods Act 1979). Likewise, the bidder is entitled to withdraw his offer, at any time, before the auctioneer has signified acceptance with the fall of the hammer. 2) In an auction which is advertised as being held "without reserve" (a "reserve price" is the price which bidders must reach for the auctioneer to be obliged to accept the highest bid), the auctioneer is obliged to accept the highest bid. In Barry v Heathcote Ball & Co [2001] 1 All ER 944; [2000] 1 WLR 1962, an auctioneer refused to accept a bid of £200 for two machines worth £14,000 on the open market, even though the auction was without reserve. The Court of Appeal, relying on the decision in Warlow v Harrison (1859) 1 E & E 309; 29 LJ QB 14, decided that, if the auctioneer had specified that the auction was "without reserve", a legal commitment arose which bound the auctioneer.

Question 28

Where goods are advertised for sale by tender, is the statement an offer or an invitation to treat?

Answer 28

An invitation to treat. i.e. a request by the owner of the goods for offers to purchase them.

Question 29

An invitation to tender can give rise to a binding obligation on the part of the inviter to consider tenders submitted, in accordance with the tender conditions. So, where the claimant delivered a tender and placed it in the letterbox of the defendant council, in accordance with the latter's instructions, one hour before the time limit for submitting the tender, did the council have a duty to consider the claimant's tender? If so, by failing to do so, was the submitter of the offer entitle to damages for breach?

Answer 29

Yes, the council had a duty to consider the claimant's tender. By failing to do so, the club was entitled to damages for breach of an implied unilateral contract (Blackpool and Fylde Aero Club Ltd v Blackpool BC [1990] 3 All ER 25).

Question 30

Why is "subject to contract" formula used in contract negotiations?

Answer 30

The words "subject to contract" are used by parties who are negotiating as to the terms of a contract involving the sale of land, to indicate that documents passing from one to the other are not intended to be offers capable of acceptance, so as to form a binding contract. No contract will, thus, come into existence, until a formal contract has been drawn up and approved by the parties. This allows either party to withdraw from the agreement at any time, and for any reason, even if he has incurred considerable expense in negotiations, without facing an action for breach of contract. The phrase "subject to contract" is commonly used in the context of negotiations for contracts involving the sale of land, but it can also be used in other types of contractual negotiations. While its usage is most prevalent in property transactions, it can be employed in various commercial negotiations as well.

Question 31

Why does the "subject to contract" formula not work in Switzerland?

Answer 31

Other legal systems impose a duty to negotiate, in good faith, in order to overcome this loophole, English law does not recognise such a duty. In Switzerland, this is called "Pflicht zur Verhandlung nach Treu und Glauben".

Question 32

Is the "subject to contract" formula absolute?

Answer 32

If there is clear evidence of a contrary intention, a court may be prepared to find that a contract has been concluded, despite the use of this formula. It should be noted that courts will generally not imply a duty of good faith into the performance of a contract as well.

Question 33

In the case when two parties make identical cross-offers, but each party has no knowing of the other's offer, will there be a contract?

Answer 33

No. The establishment of a contract fails as one or both parties must seek to confirm that they are in agreement; without such extra communication and consequent guarantee of certainty, no acceptance and thus no contract can be implied.

Question 34

If a new term is added, or the terms of offer are altered, does this represent a new offer?

Answer 34

Yes, this amounts to a counter-offer that ends the original offer and is in effect a new offer (Hyde v Wrench [1840] 49 ER 132).

Question 35

Is a mere request for extra information a counter-offer?

Answer 35

No (Stevenson v Mclean [1880] 5 QBD 346).

Question 36

How can offers be terminated?

Answer 36

1) Revocation by Offeror 2) Rejection / Counter-Offer by Offeree 3) Lapse of Time 4) Failure of a Condition Precedent 5) Death 6) Failure of a Terminating Condition

Question 37

The offer may be revoked by the offeror, at any time, until it is accepted (Payne v Cave (1789) 3 TR 148). This applies even when the offeror has stated that the offer will remain open for a certain period. In which case can such an offer remain open?

Answer 37

The offeree can establish the existence of a separate and distinct contract to keep the offer open (i.e. that he had bought the option to purchase by a separate agreement). This means that the offeree must show that there is an additional agreement or arrangement in place that specifically binds the offeror to keep the offer open for a certain period of time. This separate contract would need to be independent of the original offer itself. In some cases, parties may enter into a separate agreement, commonly known as an *option contract*, where the offeree pays a consideration or provides some form of value in exchange for the offeror's commitment to keep the offer open for a specified duration. This option contract essentially gives the offeree the right to accept the original offer within the agreed-upon timeframe. Without such a separate and distinct contract to keep the offer open, the general rule is that an offer can be revoked by the offeror at any time until it is accepted. The offeree does not have a legal right to demand that the offer remains open unless there is a valid and enforceable option contract or another legally binding agreement in place.

Question 38

Is an offer to settle, under Part 36 of the Civil Procedure Rules, is an offer to enter into a contract? Can it be withdrawn by the offerer anytime?

Answer 38

Yes, it may be withdrawn at any time prior to acceptance.

Question 39

Communication of revocation of offer - what form does it need to have?

Answer 39

No, the revocation need not be communicated directly to the offeree; it is sufficient that it can be shown that he was aware of the revocation prior to his acceptance (e.g. through a mutual and reliable third party as in Dickinson v Dodds (1876) 2 Ch D 463, where the offeror's decision to sell his house to someone else was communicated to the offeree by a mutual - and reliable - third party).

Question 40

Which case is often taught in the context of termination of unilateral offers?

Answer 40

Errington v Errington & Woods [1952] 1 KB 290. A father bought a house for his son and daughter-in-law to live in. He paid one-third of the purchase price in cash and borrowed the remainder from a building society, on mortgage. He told the children that, if they paid the mortgage instalments, he would convey the house to them when the payments were complete. They duly paid the instalments. The father purported to revoke his offer to convey the house before the whole mortgage had been repaid.

Question 41

In Errington v Errington & Woods [1952] 1 KB 290, how did the House of Lords decide?

Answer 41

The House of Lords did not protect the father's attempt to revoke his offer. The court held that there was an implied term in the offer made by the father that it would be *irrevocable* once the son and daughter-in-law started performing their part of the agreement by making the mortgage payments. The court found that the father's promise to convey the house to the children when the mortgage was paid off created a contract, and once the children began performing their obligations by making the mortgage payments, they had started to fulfill their part of the agreement. The House of Lords determined that it would be unjust for the father to revoke his offer and refuse to convey the house to the children after they had already started performing their obligations. The court protected the children's equitable interest in the property and enforced the implied term that the offer would be irrevocable once performance had commenced. It follows, then, that once the offeree has commenced performance of the act that constitutes acceptance, the offer can no longer be revoked.

Question 42

In Errington v Errington & Woods [1952] 1 KB 290, which principle was demonstrated?

Answer 42

This case illustrates the principle of promissory estoppel, which prevents a promisor from going back on their promise if the promisee has relied on that promise to their detriment. In this case, the court held that the father's promise had created a binding agreement, and the children had relied on that promise by making the mortgage payments, thereby entitling them to the protection of the court.

Question 43

How is the principle of promissory estoppel called in Latin?

Answer 43

venire contra factum proprium : Widersprüchliches Verhalten

Question 44

In Swiss law, venire contra factum proprium would be illegal due to what?

Answer 44

Verstoss gegen Treu und Glauben und folglich rechtsmissbräuchlich

Question 45

Why is Errington v Errington & Woods [1952] 1 KB 290 taught in the context of unilateral offers?

Answer 45

The case of Errington v Errington & Woods [1952] 1 KB 290 is often taught in the context of unilateral contracts or unilateral agreements. In a unilateral contract, one party makes a promise or offer to another party, and the acceptance of that offer is indicated by the offeree's *performance* of a specified act or condition. In this case, the father made a promise to convey the house to his son and daughter-in-law upon the completion of the mortgage payments. The performance of paying the mortgage instalments was the acceptance of the offer and indicated their intention to fulfill the conditions of the agreement. The court's decision in Errington v Errington & Woods established the principle that in unilateral contracts, once the offeree has commenced performance or taken action in reliance on the offer, the offeror cannot revoke or withdraw the offer. This is because the offeree's performance creates a binding contract and establishes their rights under the agreement. The case highlights the importance of considering the concept of unilateral contracts and the effect of acceptance through performance, as well as the principle of promissory estoppel in protecting the rights of the party who has relied on the promise to their detriment.

Question 46

In Errington v Errington & Woods [1952] 1 KB 290, if the son and his wife had not paid all instalments to the father yet and the father had revoked his offer, would it still constitute a breach of contract?

Answer 46

If the father had revoked the offer while the son was still paying all the instalments in Errington v Errington & Woods [1952] 1 KB 290, it could have potentially resulted in a different outcome. Until that act has been completely performed, the offer will not have been accepted so as to form a binding contract (i.e. the swimmer cannot claim the reward, unless he completes the crossing, in the above example).

Question 47

Besides rejecting an offer, how can an offeree also terminate the offer?

Answer 47

By making a counter-offer.

Question 48

Is requesting further information considered making a counter-offer?

Answer 48

No.

Question 49

Therefore, where A offers to sell iron at £2 per tonne and B then enquires whether A would agree to a contract by which delivery would be spread over two months, if A does not reply and B then accepts the offer as originally made within the time limit fixed by A in his offer, did B make a counter-offer in this case?

Answer 49

No, it was a mere request for more information and did not terminate A's offer (Stevenson v McLean (1880) 5 QBD 346).

Question 50

So, if in response to an offer to sell goods, the prospective purchaser stated in his reply that the goods must be suitable for the purpose for which he was purchasing them, would this constitute a counter-offer?

Answer 50

No, such a "new" term would be implied into the contract for sale by s. 14 Sale of Goods Act 1979. In the context described, if a term is implied by law into the contract, it would not be considered a counter-offer. The Sale of Goods Act 1979 in the UK, specifically Section 14, provides for the implied term that goods sold must be of satisfactory quality and fit for their intended purpose. If, in response to an offer to sell goods, the prospective purchaser states that the goods must be suitable for the intended purpose, such a term would already be implied into the contract by virtue of the Sale of Goods Act. Therefore, it would not be considered a counter-offer, but rather an acknowledgment or clarification of the existing implied term. The purpose of implied terms in contracts is to provide certain standard protections and obligations that are deemed necessary or reasonable in certain types of transactions, such as the sale of goods.

Question 51

Does a request for more information create a contract? How does it differ from a counter-offer?

Answer 51

In general, a counter-offer is a response to an offer that introduces new or different terms. It acts as a rejection of the original offer and creates a new offer. When a counter-offer is made, the original offeror becomes the offeree, and the original offeree becomes the offeror. Contrastingly, an acceptance, coupled with a request for information, is a form of acceptance where the offeree accepts the terms of the offer but seeks additional information or clarification before fully committing to the contract. This type of acceptance indicates a willingness to proceed with the contract subject to the requested information being provided. It's important to note that the distinction between a counter-offer and an acceptance with a request for information is significant because a counter-offer terminates the original offer, while an acceptance with a request for information keeps the original offer open for acceptance or rejection once the requested information is provided.

Question 52

When does an offer expire?

Answer 52

Where an offer is stated to be open, for a specific length of time, it will automatically terminate, once that time limit expires. In the absence of any express time limit, an offer is normally open for a reasonable time. What constitutes "reasonable" will depend largely on what is usual and to be expected, in respect of the subject matter of the proposed contract.

Question 53

Regarding expiry of offers, what case must be known?

Answer 53

Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 EX 109

Question 54

Expiry of offer: Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 EX 109 - What was the case?

Answer 54

In the case of Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 EX 109, the defendant made an offer to purchase shares from the claimants. However, the claimants did not respond or accept the offer for a period of five months. The defendant argued that the offer had lapsed due to the extended delay in acceptance. The court held that an offer can lapse if it is not accepted within a reasonable time. In this case, the court considered a five-month delay to be unreasonable, and therefore, the defendant was entitled to refuse to buy the shares. The court emphasized the importance of prompt acceptance to ensure the validity of an offer. This case illustrates the principle that an offer must be accepted within a reasonable time frame. If an offer is not accepted within that period, the offer can be considered lapsed or no longer available for acceptance. It highlights the significance of timely responses in contractual negotiations.

Question 55

What happens if a condition of the offer fails?

Answer 55

There can be no offer.

Question 56

Failure of a Condition Precedent, what case must be known?

Answer 56

Financings Ltd v Stimson [1962] 1 WLR 1184

Question 57

What does Financings Ltd v Stimson [1962] 1 WLR 1184 say?

Answer 57

In Financings Ltd v Stimson [1962] 1 WLR 1184, the offer to purchase was conditional upon the car to be sold being in the same condition as when the offer was made. The buyer could not accept the offer after the car had ceased to be in that condition, therefore no contract had been formed.

Question 58

What happens if an offeree or offerer dies?

Answer 58

While the death of the offeree terminates the contract in all cases, some writers consider that the offeror's death only terminates the offer, where the offeree knows of the death, or where the potential contract has some kind of a personal element (such as an employment contract, writing a book or singing at a concert).

Question 59

What happens if a terminating condition is not met? Can such an offer be accepted? Give examples for terminating conditions

Answer 59

An offer may be made subject to an express or implied condition precedent. Examples include that the offer must be accepted within a stated time; that the goods forming the subject of the sale are in substantially the same condition as at the date of the offer; or that an applicant for life insurance is in the same state of health as he was when he made his application. If any of those conditions are not satisfied, the offer will not be capable of acceptance.

Question 60

What form can an acceptance have? Are there any requirements?

Answer 60

Express words (spoken or written) or action. Acceptance must cover all terms of the offer. Acceptance must be communicated before there is a concluded contract.

Question 61

What is the form of acceptance for unilateral offers? How does it compare to bilateral offers?

Answer 61

In the case of unilateral offers (i.e. the offer of a promise in return for the performance of some act by the offeree), the offeree's performance of that act is the acceptance of the offer. In the case of a bilateral offer, acceptance normally takes the form of spoken or written words.

Question 62

The curious case of Carlill v Carbolic Smoke Ball Co Ltd. [1893] 1 QB 256

Answer 62

In the case of Carlill v Carbolic Smoke Ball Co Ltd. [1893] 1 QB 256, Mrs. Carlill purchased and used a product called the "Carbolic Smoke Ball" based on an advertisement by the Carbolic Smoke Ball Company. The advertisement claimed that using their product as directed would provide a reward of £100 to anyone who contracted influenza after using the smoke ball. Mrs. Carlill contracted influenza despite using the smoke ball as instructed and subsequently sought the promised reward. However, the company refused to honor the reward, arguing that the advertisement was mere puffery and not intended to create a legally binding contract. The court disagreed with the company's argument and held that the advertisement constituted an offer, made to the world at large, which could be accepted by anyone who fulfilled the specified conditions. Mrs. Carlill had performed the required acts mentioned in the advertisement, and her use of the smoke ball was considered acceptance of the offer. The court found in favor of Mrs. Carlill, stating that there was a binding contract between her and the Carbolic Smoke Ball Company. The case is significant in contract law as it established the concept of unilateral contracts, where a promise is made to the public or a group of people, and acceptance is through performance of the requested act.

Question 63

When both offer and acceptance have been made by conduct, what may courts rely on?

Answer 63

1) Apply the standard of reasonableness (e.g. in determining a price) 2) Look at previous dealings between the parties 3) Consider draft agreement as source

Question 64

"So that the law may not incur the reproach of being the destroyer of bargains" - What is the meaning?

Answer 64

The phrase "so that the law may not incur the reproach of being the destroyer of bargains" is often associated with the judgment in the case of Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2. Lord Wright, one of the judges in the House of Lords, used this phrase to explain the importance of interpreting contracts in a way that upholds their commercial purpose and the reasonable expectations of the parties involved. The statement emphasizes that the law should strive to support and enforce agreements rather than frustrate them. It highlights the need for a balanced approach in contract law, where the courts aim to give effect to the intentions of the parties while also maintaining the integrity and fairness of contractual relationships.

Question 65

Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2 - Why was it an important case?

Answer 65

In the case of Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2, the House of Lords dealt with the interpretation of a contract and the concept of "reasonable steps" in relation to the performance of a contract. The case involved a contract for the sale of timber between Hillas & Co Ltd (the buyers) and Arcos Ltd (the sellers). The contract contained a clause that allowed the sellers to extend the time for delivery if they were prevented from fulfilling the contract due to certain specified circumstances, including the inability to secure shipping space. The sellers invoked this clause to extend the delivery date. However, the buyers argued that the clause did not apply in this situation and that the sellers had breached the contract by failing to deliver the timber. The buyers claimed damages for the breach of contract. The House of Lords considered the interpretation of the contract and held that the clause allowing the sellers to extend the time for delivery was not applicable to the circumstances at hand. The court emphasized that when interpreting a contract, the intention of the parties should be ascertained by examining the language used in the contract, the surrounding circumstances, and the reasonable expectations of the parties. The House of Lords concluded that the sellers had breached the contract by failing to deliver the timber within the agreed-upon time. The case established the principle that contractual provisions should be interpreted in a way that gives effect to the reasonable expectations of the parties, rather than a strict literal interpretation. Hillas & Co Ltd v Arcos Ltd is an important case in contract law, highlighting the significance of interpreting contracts in a manner that reflects the intentions of the parties and the commercial purpose of the agreement.

Question 66

In the case of Brogden v Metropolitan Railways (1877) 2 App Cas 666, A railway company drew up terms of a draft agreement for Brogden to supply coal to the railway company. Before signing it and returning it to the railway company, Brogden inserted the name of an arbitrator who would decide upon differences which might arise. The railway company's manager simply put the signed agreement into a drawer and Brogden supplied the coal, on the terms specified in the agreement. After a year and a half, a dispute arose between the parties. Brogden argued that there was no contract, because the railway company had never accepted his offer, as contained in the signed agreement. How did the House of Lords decide?

Answer 66

The House of Lords confirmed that acceptance can be implied by conduct. The House of Lords decided that the railway company had placed orders on the basis of the agreement, with Lord Blackburn stating that: 2.7.2 "...[I]f the parties have, by their conduct, said, that they act upon the draft which has been approved of by Mr Brogden, and which if not quite approved of by the railway company, has been exceedingly near it, if they indicate by their conduct that they accept it, the contract is binding..."

Question 67

What two cases must be known in regard to accepting a contract by conduct?

Answer 67

1) Carlill v Carbolic Smoke Ball Co Ltd. [1893] 1 QB 256 2) Brogden v Metropolitan Railways (1877) 2 App Cas 66

Question 68

What is inertia selling?

Answer 68

Unsolicited goods sent to consumers

Question 69

How did the Consumer Contracts (information, Cancellation and Additional Charges) Regulations 2013 mitigate inertia selling?

Answer 69

Unsolicited goods are treated as unconditional gifts

Question 70

Can silence indicate acceptance of a contract? Explain with Felthouse v Bindley (1862) 142 ER 1037

Answer 70

Facts of Felthouse v Bindley The complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. Issues in Felthouse v Bindley Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show that the horse was his property, in order to prove there was a valid contract. Mr Bindley argued there was no valid contract for the horse, since the nephew had not communicated his acceptance of the complainant’s offer. The issue in this case was whether silence or a failure to reject an offer amount to acceptance. Decision / Outcome of Felthouse v Bindley It was held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.

Question 71

In Ammons v. Wilson & Co. (1936), the Mississippi Supreme Court departed from the practice that silence does not constitute acceptance. Explain what made the difference (note that this a US case!)

Answer 71

In Ammons v. Wilson & Co. (1936), a wholesale grocer sued a company for breach of contract, alleging that the company implicitly agreed to his order for 942 cases of shortening (a type of fat) by not responding for twelve days. The grocer had previously placed several orders with the company, all of which were accepted and shipped within a week. However, this time the company rejected the order after twelve days, citing a price increase in shortening. The grocer sued to enforce the contract, arguing that the company's silence implied acceptance. The Mississippi Supreme Court concluded that Wilson's silence and inaction for twelve days following receipt of the order constituted acceptance of Ammons' offer to purchase, forming a binding contract. The court found that based on the course of dealing between the parties and the prior acceptance of Ammons' orders by Wilson within seven days, there was an implied acceptance in this case as well. Therefore, Ammons was entitled to enforce the contract and seek damages for the breach by Wilson.

Question 72

Two cases that must be known in regard to acceptance by silence

Answer 72

1) Felthouse v Bindley (1862) 142 ER 1037 2) Ammons v. Wilson & Co. (1936) Mississippi Supreme Court

Question 73

What is the postal rule and why does it matter in contract law?

Answer 73

The so-called "postal rule" has been firmly established since Adams v Lindsell (1818) 1 B & Ald 681. In Adams v Lindsell. It was held that acceptance was valid from the moment of posting, not merely from when the letter was received by the defendant.

Question 74

The postal rule was established in Adams v Lindsell (1818) 1 B & Ald 681. What did the case cover?

Answer 74

The so-called "postal rule" has been firmly established since Adams v Lindsell (1818) 1 B & Ald 681. In Adams v Lindsell, the defendant posted an offer to sell wool to the claimant, and asked for any reply to be by post. The letter containing the offer was misdirected and arrived later than expected. The claimant replied immediately by post, as requested, stating that he wished to accept the offer, only to be informed by the defendant that the wool had already been sold to another party. It was held that acceptance was valid from the moment of posting, not merely from when the letter was received by the defendant.

Question 75

What is the general rule as to acceptance?

Answer 75

The general rule as to acceptance is that no contract comes into existence unless and until the offeree's acceptance is communicated to the offeror.

Question 76

if the offeree decides to accept an offer and writes a letter of acceptance, which he then forgets to post, will there be a contract?

Answer 76

There will be no effective acceptance of the offer. The offeror must actually hear the words of acceptance in order to conclude the contract.

Question 77

Is the postal rule applicable to instantaneous communication, such as fax or email communication?

Answer 77

No.

Question 78

Entores Ltd v Miles Far Eastern Corporation [1955] 2 All ER 493 dealt with acceptance of telex (or telefax). What did it say?

Answer 78

A contact may be effective when the email of acceptance is received in the offeree/recipient inbox rather than when it is actually read. So, an offer sent by telex (or fax) to the offeree's agent in Amsterdam, who then sent an acceptance by telex, was deemed to have been accepted only when the telex message was printed out on the offeror's terminal in London.

Question 79

An offer sent by telex (or fax) to the offeree's agent in Amsterdam, who then sent an acceptance by telex, was deemed to have been accepted only when the telex message was printed out on the offeror's terminal in London (Entores Ltd v Miles Far Eastern Corporation [1955] 2 All ER 493). Why was this important for litigation?

Answer 79

As the contract was accepted in London, UK law was applicable.

Question 80

When is the general rule for acceptance not applicable?

Answer 80

* Where a faster means of acceptance, such as that used by the other party would be more reasonable. See Quenerduaine v Cole (1883) 32 WR 185, where the offer was sent by telegram, but the offeree sent their acceptance by post. It was held that an offer made by instant means implied that an equally quick acceptance was necessary. * Where the offeror expressly or impliedly waives the requirement that acceptance be communicated, e.g. in the case of many unilateral offers (such as Carlill, above); it is also possible that inaction on the part of the offeree to a bilateral contract may justifiably entitle the offeror to infer that his offer has been accepted. * Where the offeror is estopped from denying that the acceptance was communicated, such as where the acceptance was, in fact, faxed during office hours by the offeree, but was simply not read by anyone there after it had been received on the offeror's machine. * Where the acceptance is communicated to the offeror's agent, who has authority to receive that acceptance on behalf of his principal. * Where the "postal rule" applies, in which case, the acceptance will be effective before it is, in fact, received by the offeror, viz. the time when the offeree posts the telegram/letter of acceptance, even if it is subsequently lost in the post (provided it was properly posted, e.g. not wrongly addressed).

Question 81

How can the application of the postal rule be eliminated?

Answer 81

The offerer can stipulate that the offer has to be communicated to him.

Question 82

Defendants had granted claimants a six-month option to purchase property, to be exercised "by notice in writing", and the letter giving notice of the exercise of the option was lost in the post. How did the court rule? (Holwell Securities Ltd v Hughes [1974] 1 WLR 155).

Answer 82

It was held that the notice of acceptance needed to be actually received by the seller. The parties, here, clearly did not intend that the posting of a letter should constitute the exercise of the option. It overrode the postal rule.

Question 83

Van Tienhoven & Co posted a letter from their office in Cardiff to Byrne & Co in New York City, offering 1000 boxes of tinplates for sale on 1 October. Byrne and Co got the letter on 11 October. They telegraphed acceptance on the same day. But on 8 October Van Tienhoven had sent another letter withdrawing their offer, because tinplate prices had just risen 25%. They refused to go through with the sale (Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344). How did the court rule?

Answer 83

A letter of revocation of an offer is only effective once it has reached the offeree, provided the offer has not yet been accepted by the offeree.

Question 84

Acceptances sent by electronic means will probably be treated in the same way as telephone or telex acceptance. The seller's acceptance will, thus, only be effective when actually received by the customer. What if the customer is located in a different jurisdiction?

Answer 84

The same rules apply.

Question 85

As stated above, acceptances sent by electronic means will probably be treated in the same way as telephone or telex acceptance. The seller's acceptance will, thus, only be effective when actually received by the customer, even if the latter is based in a different country and jurisdiction from those of the seller. What should e-traders do to avoid difficulties?

Answer 85

To avoid such difficulties, e-traders should confirm customer orders by e-mail and request e-mail confirmation by customers, thus ensuring that the contract is concluded at the seller's place of business.

Question 86

Vague agreements and inchoate (or incomplete) agreements arise where the parties have not expressed themselves with sufficient clarity on the matter of an essential term. What happens in such cases?

Answer 86

In such cases the contract is unenforceable, because the lack of precision regarding terms in the contract allows either party to avoid its obligations should it so choose.

Question 87

Vague agreements and inchoate (or incomplete) agreements arise where the parties have not expressed themselves with sufficient clarity on the matter of an essential term. In such cases the contract is unenforceable, because the lack of precision regarding terms in the contract allows either party to avoid its obligations should it so choose. What can courts do in such cases?

Answer 87

The court can perfect the contract by referring to either trade practice or course of dealing between the parties. Sometimes this may not be possible. If the court is unable to ascertain the true construction of the contract based on these sources, it will generally be reluctant to complete the contract for the parties. In such cases, the contract, being inchoate, will not be enforceable.

Question 88

In Scammell and Nephew Ltd v Ouston [1941] AC 251; [1941] 1 All ER 1, the parties had agreed to the supply of a truck on "hire purchase terms". What did the court find regarding the wording?

Answer 88

The absence of ancillary evidence of the details of the hire purchase agreement meant that it was too vague to be enforceable. As Viscount Maugham remarked (at 255): "... [i]n order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty... [Otherwise] consensus ad idem would be a matter of mere conjecture. The legal question is whether any vagueness can be ascertained and any gaps filled by the court without further agreement between the parties. The scope of the court's jurisdiction in this exercise is difficult to pin down. Indeed, Macneil describes the attempt to find 'coherent principles' in the uncertainty cases as 'a fool's errand'..."