Offer And Acceptance= Agreement

As always the notes follow the outline of the mindmap I’ve made. The only difference is that the PDF image of the mindap shows ALL the levels in the mindap (reflected in the notes)  unlike the image below, which I included to provide a simple outline of the main points.

Full PDF version:Offer and Acceptance2

Offer and Acceptance

Introduction

4 ingredients must be present for a contract to be binding.

In order to form a contract there are four elements that have to be present in order for the contract to actually be binding:

  1. An Offer
  2. An Acceptance
  3. An intention to create legal relations
  4. And a consideration.

The offer and the acceptance form the agreement and the intention to create legal relations and the consideration define whether it’s a binding contract in court. If any of these elements are missing then it cannot be a valid contract.

OFFER AND ACCEPTANCE 

Offer and Acceptance form the Agreement. This is ascertained objectively as given in Smith v Hughes. The courts look to see if whether a reasonable man looking at the contract would say that there was a contract formed. the reasonable man would believe that he was assenting to the terms proposed by the other party and that the other party upon that belief enters into the contract with him.- the man thus conducting himself would be bound as if he had intended to agree to the other party’s terms.

OFFER= a willingness to contract on specified terms made with the intention that it will be binding as soon as it is accepted.

  • Unilateral Offers= a promise for an act- offeror is bound as soon as the specific act is performed

o   Acceptance in a unilateral contract

  • the rule that acceptance must be communicated is waived
  • 1. Daulia v Four Millbank Nominees= the offer can be accepted by fully performing the stipulated act or forbearance= IF contracts- IF you do this you will get that
  • 2. Carlill v Carbolic Smoke Ball= no need to communicate acceptance to the offeror
  • 3. the offer can be withdrawn before it is accepted: the offer being accepted by some performance.

o   Revocation

  • Errington v Errington- see above. tricky issue however because the courts have to define what performance is required under unilateral contract to make it valid
  • Luxor (Eastbourne) v Cooper- c had to introduce someone who would actually buy the cinemas. if they didnt it was possible for the D to not go through with deal.
  • Bilateral Offer= a promise for a promise- parties are immediately bound

INVITATION TO TREAT= preliminary statement express a willingness to receive offers

  1. ADVERTISEMENTS
  • Partridge & Crittenden= an advert is an invitation to treat
  • Carlill v Carbolic Smoke Ball= offer in the advert was ITT. Unilateral offer waived the need for communication of the acceptance
  • Williams v Carwradine= intention to be bound as soon as the information is given

 

  1. SELF-SERVICE/WINDOW DISPLAYS
  • Pharmaceutical Society of GB v Boots Cash Chemists= displays of goods on the shelf= ITT. Offer to purchase is made at the cash desk and so shopkeeper is free to reject or accept this
  • Fisher v Bell=shop display was ITT

 

  1. AUCTIONS
  • the lot itself and the auctioneer’s call for bids is an ITT
  • British Car Auctions v Wright= the car hadn’t been offered for sale, there had only been an ITT (bid)
  • Sale of Goods Act 1979 s57(2)= A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.
  • in an auction without reserve however= an offer to sell to the highest bidder which is accepted by the submission of the highest bid

 

  1. INVITATIONS TO TENDER
  • person making the invitation isn’t bound to accept any responses (offers) to the tender=  Spencer v Harding

 

  • However if offeror states they will accept the highest or lowest offer, then tender will be considered as either an offer or invitation to submit offers with the undertaking to accept the most favourable, concluding the contract at the time the best offer is communicated= Harvela Investments v Royal Trust of Canada
  • Parties issuing these invitations to tender are bound to consider (though not necessarily to accept) a tender properly submitted before the deadline= Blackpool and Fylde Aero Club v Blackpool Borough Council

Acceptance of tenders

  • An invitation to tender is usually an ITT, the submission of tender is usually an offer. However the acceptance of a tender doesn’t always result in a binding contract.
  • Binding:

o   Where the tender is submitted for specific 2. where a specific quantity if goods are to be supplied over a specified period of time

  • Not Binding:

o   indefinite subject matter such as ‘quantities as you may order’ or ‘as and when required’ thenacceptance of that tender doesn’t result in binding contract at the time.

o   acceptance occurs when an order is placed = Percival v London County Council Asylum.

Once an order is placed then the party who submitted the tender is bound- Great northern Railway v Witham.

 

  1. MERE STATEMENTS OF PRICE

o   Where a party merely states the minimum price at which they would be willing to sell= ITT= Harvey v Facey- there had been no offer, Facey’s statement merely a statement of price.

o   Gibson v Manchester City Council= council wrote saying that it ‘may be prepared to sell’. Tenant completed application form but court this was an offer to buy in response to the council’s initial letter which was an ITT

o   Storer v Manchester City Council= court held that the form had specific character that made it an offer rather than ITT, which tenant had accepted by signing and returning it. The form of words used can render it sufficiently precise to be an offer capable of acceptance

 

COMMUNICATION OF OFFERS GENERAL RULES:

o   in order to be valid, offer must be communicated to the offeree, no party can be bound by an offer of which they were unaware= Taylor v Laird

o   true for both unilateral and bilateral offers, offeree must have clear knowledge of the existence of the offer for it to be valid= Inland Revenue Commissioners v Fry

o   Carlill v Carbolic Smoke Ball= unilateral offers can be are made to the world at large and may be accepted by performing the conditions by anyone who had notice of the offer.

 

TERMINATION OF OFFERS= means the recession, annulling or withdrawal of an offer.

 

  1. REVOCATION

o   Generally the revocation may be made any time prior to acceptance of an offer and it must be communicated to the offeree.

o   Bryne v Van Tienhoven- the offer of 1 October hadn’t been withdrawn at the time it was accepted and therefore the contract was formed on acceptance on 11 Oct- despite the lack of agreement between the parties. Offeror sent revocation on 8 Oct but Offeree only received it on 20 Oct.

o   Hyde v Wrench- possible for an Offeree to reject the offer and terminate it. Counter offer= has the effect of rejecting the offer. The rejection must be communicated.

o   Payne v Cave- in an auction acceptance happens when the auctioneer slams the hammer and a offer can be revoked/withdrawn anytime prior to this point.

o   Qualifications: Routledge v Grant- the issue was if there is a set deadline by which acceptance must be made then are you going to be held to that deadline or can you withdraw? Held- No you’re not held to the deadline, can withdraw at any time up until that period, except where there is a collateral contract e.g Harvela, Blackpool Airplane.

o   revocation made by a third party is valid if:

  1. The 3rd party is a reliable source of info
  2. is one both parties can rely- Dickinson v Dodds

o   Unilateral offers- accepted by anyone who performs the act stipulate din the contract. In order to revoke, offeror must take reasonable steps to notify those persons who might be likely to accept = Shuey v United States (persuasive precedent)

o   If the offeree has started performance of the act specified then it Can’t revoked even if performance is incomplete.

o   Errington v Errington & Woods= Father bought house with mortgage for son and wife to live in, promised to transfer title as soon as they paid of mortgage. He died, relatives tried to claim title. Court held that contract was unilateral since it involved the act of paying of mortgage for a promise (transfer of title once all payments had been made). Once performance commenced father’s promise couldn’t be revoked. as long as they continued with the payments until paid off the father’s promise would be binding. Denning noted that promise wouldn’t be binding if it was left incomplete and unperformed

o   Principle accepted in Daulia v Four Millbank = offeror can require specific performance otherwise he’s not bound. offeror can’t prevent the condition being satisfied this arises as soon as offeree starts performance. Once offeree starts performance is too late to revoke

 

  1. LAPSE OF TIME

o   Offeror may state a specific time or date, if nothing is specified then a reasonable time must pass.

1. Ramsgate Victoria Hotel v Montefiore= held that an offer would lapse after a ‘reasonable time’. What is reasonable depends on the offer and the subject matter of the contract. in cases where the value of the subject matter could fluctuate rapidly e.g shares, or its perishable then the offer would terminate after a short time.

2. Quenerduaine v Cole= this applies to telegrams and similar expedient means of communication such as telex

3. Korbetis v Transgrain Shipping– communication of the acceptance must be done within a reasonable time otherwise the offer will lapse

 

  1. FAILURE TO COMPLY WITH A CONDITION PRECEDENT

o   an offer may also terminate if the parties had agree to meet certain conditions and then failed to do so.

 

  1. DEATH OF ONE OF THE PARTIES

o   Death of offeror: their personal representatives may still be bound if=

1. The contract doesn’t involve personal services of the deceased

2. The offeree is ignorant of the offeror’s death= Bradbury and Morgan

o   Death of Offeree: the offer lapses and the offeree’s personal representatives will be unable to accept on behalf of the deceased= Reynolds v Atherton

 

ACCEPTANCE= a final and unqualified expression of assent to the terms of an offer.

 

1. ACCEPTANCE MUST CORRESPOND WITH THE TERMS OF THE OFFER

o   This is the mirror image rule: an acceptance must mirror the terms of the offer. The problem comes from the fact that the offeree sometimes isn’t accepting but making a counter offer. This is known as the traditional approach as well

  1. COUNTER OFFERS

o   are offers that introduce new terms or attempts to vary the terms proposed in the original offer. A counter offer destroys the original offer and the roles of offeror and offeree become reversed and the original party can either, accept, or reject the new terms or make a counter offer

o   Hyde v Wrench= counter offer impliedly rejected the original offer, which had now been destroyed, it was no longer open for Hyde to want to go back and accept it.

  1. MERE REQUESTS FOR INFORMATION

o   if a response is made to the offer which doesn’t attempt to vary the terms of the offer. it isn’t a counter offer since it doesn’t reject the terms f the offer. Therefore, it’s still open to acceptance by offeree

o   Stevenson, Jaques & Co v Mclean= a mere request for information is treated differently to a counter offer. in this case it was only a mere inquiry which should’ve been answered and not treated as a rejection of the offer.

 

  1. STANDARD FORM CONTRACTS

o   Problems arise when one or both parties try and rely on pre-prepared contract forms in relation to the general rule that the acceptance must correspond exactly with the offer. The situation which arises where on ot both parties attempt to rely on their standard terms is often referred to as The Battle of the Forms

o   acceptance is usually inferred by conduct and contract is usually concluded on the terms of the last counter offer, this applies to the contract as a whole= Zambia Steel v James Clark

o   the courts mays decide there’s no valid agreement and halt performance of the contract, they are reluctant to do so once performance has started=  British Steel Corporation v Cleveland Bridge and Engineering

o   Butler Machine Tool Co v Ex-Cell-O= radical and unlikely to be followed departure from the strict offer/counter offer analysis was offered by Denning. He suggested:

  1. T&Cs of both parties should be construed together, if they can be reconciled together to give harmonious result
  2. if differences are irreconcilable then conflicting terms may have to be scrapped and replaced by reasonable implication
  • He argued look at the document which comes in last (last shot rule) and look at the content of the documents and whether the main issues have been agreed to. However the ratio was that you should always use the traditional approach to assess whether or not an agreement has been made.I don’t agree with this because that’s not what the parties have contracted for!!! Also threatens the doctrine of freedom of contract considerably as courts are being given power to dictate on what contracts should/shouldn’t be!!
  • Tekdata v Amphenol = using Denning as precedent the judge at first instance ignored the traditional approach. CoA said no we should stick to traditional approach. Unless its clear from the history of the parties and their conduct that this isnt the case. It must be common intention to both parties.

ACCEPTANCE SUBJECT TO CONTRACT=

  • RTS Flexible Systems v Molkerei Alois= this case developed the reasonable business man test- what would the reasonably honest business person have concluded looking at these facts? what makes commercial sense overall
  • Immingham Storage v Clear Plc= the words subject to contract were never used but thats what they mean. CoA= unless the express words subject to contract are used then whether or not there is an agreement must be assessed according to the traditional approach.

 

2. ACCEPTANCE MUST BE GIVEN IN RESPONSE TO THE OFFER

  • Gibbons v Proctor- policeman allowed to claim reward even though he didn’t know about it
  • Upton RDC v Powell– established that acceptance must be in response to an offer
  • Williams v Carwardine- she knew of the reward but supplied info on moral grounds. fact that she knew was enough to accept the reward, reasons for accepting were irrelevant

3. THE ACCEPTANCE MUST BE MADE IN THE APPROPRIATE METHOD

  1. stipulated forms of acceptance
  • generally speaking acceptance can take any form as long as it’s communicated to the offeree except in the case of a unilateral offer.
  • where the offer stipulates  a particular method of acceptance if the offeree uses a different method then there may be no contract, especially if offeror stipulates  clearly that it’s the only method of acceptance that will be sufficient= Eliason v Henshaw.
  • Tinn v Hoffman: if the offeree uses an equally expeditious method of acceptance then that should be sufficient
  • Manchester Diocesan Council= an acceptance which meets the offeror’s objective in prescribing a method of acceptance (albeit not the one prescribed) will remain valid.
  • Quenerduaine v Cole- if offer doesn’t specify the required speed of acceptance can be deduced from the means by which the offer was sent.

 

4.THE ACCEPTANCE MUST BE COMMUNICATED TO THE OFFEROR.

  1. COMMUNICATION OF ACCEPTANCE

General rule: an acceptance has no effect until it is communicated to the offeror. Entores v Miles Far East Corporation– Denning gave an analogy of a plane flying overhead.

 

a)     ACCEPTANCE BY CONDUCT

  • acceptance may be inferred from conduct without it being expressly communicated. the conduct however must be referable to the offer and be identifiable as acceptance of the offer terms. the problem is that the case doesnt make it clear on when there is conduct. Brogden v Metropolitan Railway
  • Day Morris v Voyce- conduct will only amount to acceptance only if it’s clear the offeree intended to accept the offer. That they did the act solely with the intention to accept the offer. in this case Mrs V had to pay Day Morris the commission as she allowed them to market the property and made them believe there was a contract.

 

b)     SILENCE DOESN’T AMOUNT TO ACCEPTANCE

  • Silence can never constitute acceptance.
  • Felthouse v Brindley= held there was no contract since nephew never communicated intention to accept or done anything to bind himself.- HOWEVER FELTHOUSE IS WRONG AND SHOULDN’T BE AUTHORITY apparently.
  • The Leonidas: it’s axiomatic that acceptance of an offer cannot be inferred from silence save in the most exceptional circumstances.

 

c)      POSTAL RULE

  • This is an exception to the general rule. It only applies to Acceptance NOT REVOCATIONS as well. The general postal rule is that acceptance takes by post takes effect upon posting rather than delivery.
  • Adams v Lindsell= court held the contract was made at the time the letter was posted.

For the rule to apply:

  1. Acceptance by post must have been requested by offeror, or it must be a  normal, reasonable or anticipated means of acceptance- Henthorn v Fraser
  2. letter must be properly stamped and addressed= Re London & Northern Bank ex parte Jones
  3. Letter must be posted– so i.e in the control of the Post Office= Brinkibon v Stahag Stahl. In Re London the letter of acceptance had been handed to a postman authorized to make deliveries only not collect so letter was held to not have been posted.
  4. the rule must not have been expressly excluded in the offer= Holwell Securities v Hughes- required notice in writing to actually reach the offeror so c’s couldn’t rely on postal rule
  5. use of the rule must not create manifest inconvenience or absurdity– Holwell Securities.

The rule also applies:

  1. if the letter of acceptance is received after notice of revocation has been sent= Henthorn v Fraser
  2. if the letter of acceptance is never received by the offeror. Household Fire Insurance v Grant. Also case gives that if the offeror states that the acceptance is to arrive then that is enough to circumvent rule.

 

Revocation

  1. Byrne v Van Tiehoven- postal rule doesn’t apply, i.e. offer isn’t revoked as soon as the letter is posted. the only thing that matters is that the offeree GETS the letter
  2. The Brimmes- a revocation by letter only takes effect when it arrives, provided that it arrives during office hours.
  3. Dickinson v Dodds- to whom does the revocation need to be made?- it doesn’t matter who tells you the offer is withdrawn as long as that information is communicated to you.

 

  1. INSTANTANEOUS COMMUNICATION OF ACCEPTANCE
  • Since its development the postal rule has become irrelevant in some situations due to advances in communications technology. The general rule here is that acceptance takes place when and where the acceptance is received.= Entores v Miles Far east Corp. problem arises when answering machines are used, a message may not be played back for some time etc.
  • Brinkibon v Stahag Stahl– an acceptance was sent by telex out of office hours. held since it was sent out of office hours it shouldn’t be considered to be instantaneous and therefore acceptance would only be effective when the office reopened.
  • Lord Wilberforce= no universal rule can cover all cases. they must be resolved by reference to the intention of the parties, sound business practice and in some cases by a judgement where the risk should lie.
  • Henkel v Pape- the d wasn’t responsible for the mistake of the telegraph clerk, and therefore plaintiffs were not entitled to recover the price of more than three rifles. History- previously d had stated he would like to buy as many as 50 rifles. telegraph clerk wrote send THE rifles instead of send THREE rifles.

 

PROBLEMS WITH MODERN FORMS OF COMMUNICATION

  1. email and Internet- when is a contract concluded?
  2. The Eastern Navigator- no reason why email should be regarded as essentially different from communication by post, fax or telex
  3. Chwee Kin Keong v Digilandmall.com advert on website is ITT. acceptance comes when buyer accepts the offer from company but it’s only formed when the sellers take payment.

 

 

 

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4 Comments

  1. Anne Mai
    May 9, 2015 / 8:29 am

    This is absolutely amazing. Thank you so much for making it available! Is there any chance I can link with you somewhere on linked in or something? I’m so glad I found your blog! My exams are in 3 days and I’m stressing out.

    • May 9, 2015 / 12:26 pm

      Hey I am glad I could help! feel free to message me on twitter @RaiineC if you need anymore help

  2. Anne Mai
    May 9, 2015 / 8:31 am

    P.s I was wondering why there’s nothing for tort?

    • May 9, 2015 / 12:27 pm

      At the moment Im revising for my own exams so I’ve been unable to keep the blog updated but this summer I will bring everything up to date!

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