Offer & Acceptance

Question 1

What is an offer?

Answer 1

• An offer is the announcement of a person’s willingness to enter a contract either expressly or impliedly. The proposition is put by the offeror to the offeree and the offeror is willing to be bound by the terms of the proposition if the offeree accepts. It can be made orally, in writing, or by conduct.
• An offer must not be vague-it must be clear, precise, and capable of acceptance as it stands.
• An offer can be accepted or rejected. It is possible to withdraw an offer at any time before it is accepted.

Question 2

Harvey v Facey
(Offer CL)

Answer 2

It was held that the seller’s reply was merely a statement of price, not an offer open to acceptance.

Question 3

What is an invitation to treat?

Answer 3

• An invitation to treat is an attempt to stimulate the other’s interest to make an offer without any intention to be bound. It indicates a willingness to consider offers made by others or invitations to enter into negotiations.
• An offer is binding while an invitation to treat is not

Question 4

Gibson v Manchester City Council
(Invitation to treat CL)

Answer 4

• Council wrote to Mr. Gibson that it may be prepared to sell the house to him for £2180. Mr. Gibson said that the path was in a bad condition, but the Council refused to change the price.
• Mr. Gibson asked the Council to carry on with the purchase, but the Council said he could not buy it. It was held that the letter giving the purchase price was merely a negotiation to enter into a contract, and can only amount to an invitation to treat, not an offer.

Question 5

Common law has developed guidelines for commonly occurring situations where we should always consider whether there is intention to be bound. What are these situations?

Answer 5

• Advertisements
• Display of goods for sale
• Mere statement of price
• Auction sales

Question 6

Advertisements

Answer 6

• Advertisements for unilateral contracts like that in Carlill v Carbolic Smoke Ball Co., are usually offers as it can be accepted without any need for further negotiations as one party pays another to perform an action.
• Advertisements for bilateral contracts are usually invitations to treat, as it may lead to further bargaining and that stocks could run out. This is because both parties have obligations.

Question 7

Advertisements
(CL)

Answer 7

• Ads for a unilateral contract
  Carlill v The Carbolic Smoke Ball Co.
• Ads for a bilateral contract
  Partridge v Crittenden: A person was charged for offering for sale a wild bird under the Protection of Birds Act 1954, but his conviction was quashed because the advertisement was not an offer, but an invitation to treat.
• The cases contradict each other
• The main distinction is the type of contract as one was an offer(unilateral) and the other was an invitation to treat (bilateral)

Question 8

Display of goods for sale(with price tag)

Answer 8

Display of goods is usually an invitation to treat because they are there to invite members of the public to offer to buy the goods. The shopkeeper has the right to refuse to sell the goods

Question 9

Display of goods for sale
(CL)

Answer 9

Fisher v Bell: A flick-knife in the shop window was only an invitation to treat.

Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd.: the court held that shelf display was like an advertisement for a bilateral contract, and, an invitation to treat. The offer was made by the customer when the medicines were presented at the cash desk and was only accepted by the shop at the cash desk, which was supervised by a pharmacist. Boots was charged with an offence due to the self-service

Question 10

Mere statement of price

Answer 10

An invitation to treat as the seller has only indicated the price. does not make it an offer regardless of the buyer finding it acceptable

Question 11

Auction sales

Answer 11

under s.57(2) Sale of Goods Act 1979, the general rule is that the auctioneer’s request for bids is an invitation to treat, and each bid is an offer. An advertisement of an auction is a mere declaration of intention.

Question 12

Auction sales
(CL)

Answer 12

Warlow v Harrison:
It was held that in an auction ‘without reserve’, the advertisement becomes an offer to the public, that in the auction, they will sell to the highest bidder. The offer is accepted when someone bids, and that acceptance completes the contract.
An auctioneer who puts a reserve price breaches this contract.

Question 13

Communication of offers

Answer 13

• Once confirmed that the proposition is an offer and not an invitation to treat, we must establish that it has been communicated to the offeree.
• If offeree is unaware of the offer they will be unable to accept/reject it. e.g. If I lose my watch and put out a $50 reward for it and someone sees the ad and returns it, they’re entitled to the $50 but if sum1 found my watch and returned it without knowing about the reward they will not be entitled to the $50 even if they subsequently hear of it.

Question 14

Certainty

Answer 14

The terms of the contract must be certain. If there’s any doubt as to the terms on which the parties are contracting, the offer would not be valid. It would be unfair on the offeree if they didn’t know what they were accepting, and the contract would be impossible to perform

Question 15

Foley v Classique Coaches Ltd.
(Certainty CL)

Answer 15

• Exception when parties have already started performing their contracts
• A contract cannot be repudiated if the parties have already begun to perform their contract

Question 16

Counter-offer

Answer 16

• If the offeree accepts the offer but changes the terms, it becomes a counter-offer and will amount to a rejection.
• It terminates the original offer (only adding new terms doesn’t amount to a counter-offer but is acceptance)
• Even if the main terms are accepted there can still be a counter-offer and therefore rejection if some of the ancillary (additional) terms of the agreement are not agreed upon.

Question 17

Hyde v Wrench
(Counter-offer CL)

Answer 17

The defendant offered to sell his farm for £1000, and the claimant responded by offering to buy it at £950 (counter-offer). When the claimant tried to accept the previous offer, it was held that this offer had been terminated by the counter-offer.

Question 17

Requests for Information

Answer 17

A request for further information or a mere inquiry about some part of the contract will not amount to a counter-offer and does not destroy the offer.

Question 18

Stevenson v Mclean

Answer 18

The defendant offered to sell iron at a cash-on-delivery price. It was held that the claimants’ reply to ask if they could buy on credit was a request for information and not a counter offer therefore the offer is still open for acceptance.

Question 19

Termination of an offer

Answer 19

An offer may cease to exist under certain circumstances.
* Revocation
* Acceptance of the offer by the offeree
* Rejection/Counter-offer
* Lapse of time
* Failure of a condition precedent
* Death of one of the parties

Question 20

Revocation (withdrawal of an offer)

Answer 20

• It can take place anytime before acceptance (Routledge v Grant -held that the defendant could withdraw the offer as at the time of revocation no acceptance had taken place)
• The revocation must be communicated to the offeree- must expressly be communicated to the other side either by specific words or conduct that shows a clear intention to revoke (Byrne v Van Tienhoven- revocation was ineffective as it happened after the acceptance of the defendants offer took place)
• Communication can be made by a reliable third party- need not be done by the offeror personally and third parties/agents often make the communication. For coomuication to be valid, the third party must be a reliable source and one on whom both parties can rely (Dickinson v Dodds- the court held that revocation was valid as the third party wasa reliable mutual friend who told claimant that the defendant had withdrawn the offer and sold elsewhere)
• A unilateral offer cannot be withdrawn while the offeree is performing- The courts suggest that the power to revoke may sometimes be lost by the offeror if the oferee has embarked on their fulfillment of the condition ~part-performance prevents revocation esp in context of paying commision for the sale of a property~(Errington v Errington and Woods- The father offered the son and daughter-in-law that the house would be signed over once the mortgage was paid off by them. After the father died, the courts held that it was too late to withdraw the offer, as they had already begun to pay the mortgage.)

Question 21

Acceptance of the offer by the offeree

Answer 21

If the offer is accepted unconditionally, a contract has been formed and the offer ends.

Question 22

Rejection of the offer by offeree/Counter-offer

Answer 22

The offer can be refused outright and no contract will be formed, or it can be rejected by a counter-offer, when negotiations may still continue.
The counter-offer must be genuine and not just a request for information

Question 23

Lapse of time

Answer 23

• It may not be possible to accept an offer due to a lapse of time. This can occur when there is an express time limit on the duration of the offer so it can’t be accepted after the expiration of that limit.
• It can also expire where there is an implied term that it only exists for a reasonable period of time
  (Ramsgate Victoria Hotel Co. Ltd v Montefiore-the court held that five months was not a reasonable length of time for acceptance of an offer to buy shares, due to its fluctuating prices.)

Question 24

Failure of a condition precedent

Answer 24

• An offer that is subject to conditions, whether express or implied, cannot be accepted if the condition fails. An offer to buy goods implies that they will be in the same state of condition from offer to acceptance.
• An offer will lapse if certain preconditions are not met.
• Financings Ltd v Stimson- the defendant decided to buy a car on hire-purchase terms. Not knowing the car had been damaged, the claimant signed the ‘agreement’. The court held that the ‘agreement’ was an offer by the defendant which was subject to the implied condition that the car remained in the same state. As the condition had been broken, the offer was no longer open.

Question 25

Death of one of the parties

Answer 25

• The death of either of the parties in respect of an offer may end the offer. The death of the offeree causes the offer to cease automatically. If the offeror dies it is less clear, if the offeree knows of the death of the offeror then the offer will have lapsed and can’t be accepted. If the offeree doesn’t know of the offeror’s death, a valid acceptance may be binding on the deceased executors.
• If there is any personal element in the offer, it automatically lapses on the death of the offeror.

Question 26

What is Acceptance?

Answer 26

• Acceptance is the positive and unqualified confirmation of all the terms of the offer. It is critically important to the enforcement of the contract because rights and obligations usually come into force at the time of the contract.
• There are 4 essential points to consider when dealing with acceptance:
  1. Does it correspond exactly with the rules of acceptance
  2. Is it an acceptance or a counter-offer?
  3. Is it an acceptance rather than a request for further information?
  4. Has it been communicated correctly?

Question 27

Rules of acceptance

Answer 27

‘Mirror-image rule’- the acceptance must correspond exactly and in every detail to the offer made. If it does not, there is no contract

Question 28

There must be communication of the acceptance

Answer 28

• There must be communication of acceptance. Only a genuine offeree can communicate acceptance of the offer, and communication by any other person will not be acceptance unless they are an authorised agent of the offeree.
• Acceptance is said to be communicated when it is actually brought to the attention of the offeror.
• Unless the offeror has indicated a particular method of acceptance as being the only way an acceptance will be valid, there are no specififc rules on how acceptance should be communicated. It can be in writing, verbal, or by conduct. It can also be in:
  1. Silence
  2. Acceptance by post
  3. Instantaneous forms of communication
  4. Emails

Question 29

Silence
(communication of acceptance)

Answer 29

• An offeror is unable to impose liability on an offeree by stating that silence shall be deemed to be consent. However, there may be situations where the offeror waives the need for the offeree to communicate their decision.
  Felthouse v Bindley- The nephew did not reply to the uncle’s offer letter but did tell the auctioneer to keep the horse out of sale. It was held that there was no contract, as the nephew’s attempt to keep the horse out of sale did not necessarily imply that he intended to accept the uncle’s offer.

Question 30

Acceptance by post
(communication of acceptance)

Answer 30

• Postal rule- is that acceptance by post is effected as soon as the letter is validly posted, It is one significant exception to the general rule regarding communication of acceptance.
• The letter must be properly stamped and addressed.
• The rule will only apply where postal acceptance is specified by the offeror, or where postal communication is reasonable in the circumstances. Nevertheless, the offeror can exclude the postal rule by stating in the offer that postal acceptance will only be effective upon receipt.
• Providing the postal rule meets the above criteria and has not been excluded by the offeror, it does apply even if the letter is never received rather than just delayed
  *(Household Fire Insurance v Grant- The postal rule applies even if the letter is never recieved rather than just delayed)

Question 31

Instantaneous forms of communication

Answer 31

• Due to modern technology, communication is virtually instantaneous these days. However, there are clear implications as to the time and place at which the contract comes into existence as shown in the following case:
• Entores Ltd v Miles Far East Corporation- Because of the method of communication, the contract was actually made in England where the telex was received, not when it was transmitted in Holland.

Question 32

Emails

Answer 32

• Thomas and Another v BPE Solicitors- The High Court said that the postal rule was inapplicable to email communications reasoning that, it’s not straightforward as to whether email acceptance is effective when it arrives, or at the time where the offeror could reasonably have been expected to do it.
  The court agreed with Lord Wilberforce in the Brinkibon case, where he said that, ‘no universal rule can cover all such cases’

Question 33

Battle of the forms

Answer 33

• This takes place where both parties have a standard form contract . Conflict and confusion can arise around the exact terms upon which the contract is based when there are two forms of contract in existence.
• ‘Last shot’- The approach that the courts use to deal with the battle of the forms. This doctrine views communications about conditions in a contract that conflict in nature as constituting counter offers. (Butler Machine Tools Co.Ltd v Ex-Cell-O Corporation Ltd-The last-shot approach can be used to determine which party’s standard terms prevail.)
• Contracts that are practised using the ‘battle of the forms’ can result in instances where contracting parties dispute the content of the contract even after commitemenr has been displayed by both parties (Percy Trentham Ltd v Archital Luxger Ltd- Regardless of whether an offer has been matched by an acceptance, the dcontract can come into existence when performance of the work begins.) .