1. Offer & Acceptance, Certainty and Intention PDF

Preview

Summary

1. Offer & Acceptance, Certainty and Intention, 1. Offer & Acceptance, Certainty and Intention...

Description

Contract Week 1: Offer & Acceptance, Certainty and Intention

1. Offer & Acceptance (a) Offers & Invitations to treat (b) Acceptance (c) Termination of an offer (d) Bargains but difficult to fit into offer and acceptance 2. Certainty of contractual terms 3. Intention to create legal relations ______________________________________________ _________ ______________________________________________________________________________________________________________ ___

_______________**_1. OFFER & ACCEPTANCE_**____________ _ _________1.1. OFFERS AND INVITATIONS TO MAKE OFFERS_______ OFFER  A statement by one party of a willingness to enter into a contract on the stated terms, provided the terms are accepted by the party to whom the offer is addressed.  There is no requirement about the form the offer is made in (oral/written/conduct)

INVITATION TO TREAT  Simply an expression of willingness to enter into negotiations which may later lead to the conclusion of a contract. 

The distinction between offers & invitations to treat is mainly one of INTENTION - Did the maker of the statement intend to be bound by an acceptance of his terms without further negotiation [offer]; or - Did he only intend his statement to be to part of the continuing negotiation process [invitation to treat]



THE INTENTION IS ASSESSED OBJECTIVELY.

GIBSON V MANCHESTER CITY COUNCIL [1979]         

D (Council) prepared a brochure explaining how a council tenant could buy his council house. Mr. Gibson completed the form in the brochure and requested to be told the purchase price. Council wrote back saying “the council may be prepared to sell the house” to him at a stated price and he should fill out another form if he wanted to make a ‘formal application’ to buy. Mr. Gibson filled out the form but left the purchase price blank because he wanted to know if the council would repair the path or if he could deduct it from the price. Council said price had been fixed to condition of property and thus, no deduction of price would be made. Mr. Gibson accepted this and told them to continue with his application. Council therefore took the house off the list of houses they were responsible for and Mr Gibson carried out maintenance of the house. Labour party then came into control and discontinued selling houses. They therefore refused to sell the house to Mr Gibson claiming that no contract for sale had been concluded.

Held by the trial judge & Court of Appeal: that a contract had been concluded. - Lord Denning said it was concluded as there was agreement on all material points.

 Held by the HoL that a contract had not been concluded - The letter stating the council ‘MAY’ be prepared to sell was not an offer as it did not commit the council to selling – simply a willingness to enter into negotiations. - Further evidence was the fact Mr. Gibson had been invited to make a ‘formal application to purchase (ie, to make an offer) not to just signal acceptance to the terms. This case shows how difficult it can be to determine when preliminary negotiations have come to an end and an actual contract has been made. Thus, the courts/judges may differ on the outcome in difficult cases like this based on their interpretation of the facts.

1

Contract Week 1: Offer & Acceptance, Certainty and Intention

We can divide how the courts decide if there is a contract into: 1. Cases where the courts have to just ascertain the intentions of the parties from the documents [such as in Gibson]; or 2. Stereotype transactions: cases where the courts have created clear rules of law to govern the transaction rather than trying to work out the intention. - It seems that in these stereotype transaction cases, contrary intention will trump the general rule [maybe this is how to explain cases like Carlill; Harvela Investments & Chapleton]

 DISPLAY OF GOODS FOR SALE General rule the courts have adopted:

THE DISPLAY OF GOODS IN A SHOP WINDOW IS AN INVITATION TO TREAT NOT AN OFFER [eg, Boots case] Three possible approaches the law could take [it has chosen the 3rd one] 1. Display of goods as an offer accepted when goods are picked up and put in the basket. - But this would mean a customer could not change his mind without breaching contract. 2. Display of goods an offer accepted when customer takes the goods to the cash desk. - But this takes away shopkeeper’s power to bargain & freedom to deal with particular customers.

- May also result in vendor being bound by contracts he can’t fulfil. Therefore, if the law took this approach, it would have to be an offer subject to “while stocks last”

3. Display of goods as an invitation to treat - But maybe this fails to protect customer interests [customer will have no civil remedy]

PHARMACEUTICAL SOCIETY OF GB V BOOTS [1953] (shows application of the general rule)   

D’s organized their shop on a self-service basis. D’s charged with breach of the Pharmacy and Poisons Act which requires that the sale of drugs must take place under the supervision of a registered pharmacist. There was no pharmacist near the shelves but a pharmacist supervised the transaction at the cash desk and was authorised to prevent a customer purchasing a drug

 Held that the sale took place at the cash desk not when the goods were taken from shelves - Thus, display of good is simply an invitation to treat so D’s won.  But, some authority can be adduced for treating a display of goods as an offer a) Chapleton v Barry [1990]: Held that the display of deck chairs for hire on a beach

was an OFFER (which was accepted by a customer taking a chair from the stack) b) Carlill v Carbolic Smoke Ball c) Lefkowitz v Great Minneapolis Surplus Stores: Supreme Ct of Minesota held an advertisement in a newspaper was an OFFER as it did not explicitly confine its offer to women.

 Despite these cases, the general rule stands. Perhaps Chapleton and other cases can

be seen as the court “reasoning backwards” [ie, the court feeling the claimant should have a remedy so they justify their decision by saying an order is an offer]

 ADVERTISEMENTS 2

Contract Week 1: Offer & Acceptance, Certainty and Intention

General rule the courts have adopted: A NEWSPAPER ADVERTISEMENT IS AN INVITATION TO TREAT NOT AN OFFER

PARTRIDGE V CRITTENDEN [1968] (shows application of the general rule)  

Appellant advertised Bramblefinch cocks and hens for sale at a stated price. He was charged with the offence of “offering for sale” wild bird contrary to the Protection of Birds Act.

 Held: the advertisement was an invitation to treat not an offer so appellant acquitted. - Lord Parker: there was “business sense” in treating such advertisements as invitations to -

treat because if they were offers, the advertiser may be contractually obliged to sell more goods than he owned. [But, note that what Ld Parker says could be countered if we just said it is implied that the offer is to be “while stocks last”]

 But, there are certain cases where an advertisement has been treated as an OFFER CARLILL V CARBOLIC SMOKE BALL CO [1893]  D’s, who were manufacturers of the Carbolic Smoke Ball, issued an advertisement in which they

offered to pay £100 to anyone who caught influenza after having used one of their smoke balls. And they deposited £1,000 in the bank to show their good faith.  Claimant caught influenza after using a smoke ball and sued for £100.

Held: the advertisement was an offer to the whole world not an invitation to treat. - Thus, there was a contract made with everyone who bought the smoke ball “on the faith of the advertisement”. Claimant therefore recovered £100.  How can Carbolic Smoke Ball be distinguished from Partridge - The offer in Carbolic Smoke Ball was never “while stocks last”. It was a reason for people buying.

 AUCTION SALES General rule the courts have adopted: - By inviting bids, the auctioneer makes an INVITATION TO TREAT not an offer - However, if the auction is “without reserve” then it is an OFFER by the auctioneer 

Offer is made by the bidder which is then accepted by the auctioneer when he strikes the hammer. Inviting bids is just an invitation to treat.

 Auctions “without reserve” price = offer

BARRY V DAVIES [2000] (auction “without reserve” is an offer)   

Plaintiff attended auction and bid £200 for two engine analysers which were “without reserve” D(auctioneer) considered the bid was too low and removed machines from sale. P sued 3rd defendant (the owner of machines) for refusal of auctioneer to sell to him.

 Held: the contract had been concluded: there was an offer by auctioneer & acceptance by P. - Ct of Appeal were affirming the decision of First Instance Judge that a collateral contract had been made between auctioneer & highest bidder.  At what point in time is the offer made by the auctioneer? a) When the advertisement of the auction without reserve is issued? b) When the goods are actually put up for sale? - This issue is not resolved but the weight of authority seems to support proposition (a).

 TEN

 It has been argued that for an auction WITH a reserve price, once that reserve price has been met/exceeded, it should then be treated as being without reserve from then on - This would mean once reserve price exceeded, auctioneer can not withdraw the law from sale as a contract as in Barry has been made.

3

Contract Week 1: Offer & Acceptance, Certainty and Intention

General rule the courts have adopted: When person invites tenders (offers) for a particular project the invitation to tender (the invitation to make an offer) is an INVITATION TO TREAT  However, in appropriate cases, the courts CAN hold that an invitation to tender is an OFFER

1. HARVELA INVESTMENTS V ROYAL TRUST OF CANADA [1986] [House of Lords] (offer)    

First D’s decided to sell their shares and invited two parties each to submit a single offer for their shares. D’s said they would accept the highest ‘offer’ received by them. Claimant tendered a fixed bid of $2,175,000 Second D tendered a ‘referential’ bid of “$2,100,000 or $101,000 in excess of any other offer … whichever is the higher”

First D’s accepted second D’s bid treating it as a bid of $2,276,000.

1. Invitation to tender treated as an offer

 Held: that the first D’s were bound to accept the claimants bid - The invitation to tender was an OFFER to sell the shares to the highest bidder (despite the fact the invitation has asked parties to submit an “offer”).

-

The bid submitted by the 2 nd D was held to be invalid because the whole purpose of the vendor’s invitation was to ascertain the max. each party was willing to pay but this purpose would be frustrated by a referential bid.

-

Thus, as 2nd D’s bid was invalid, it was the claimant who had accepted the first D’s offer.

2. BLACKPOOL & FLYDE AERO CLUB [CtofApp]

V

BLACKPOOL BOROUGH COUNCIL [1990]

(Invitation to make tenders was treated as an “offer to consider” them)       

D (local authority) invited tenders for a concession to operate pleasure flights from Blackpool airport. The form of tender stated that (1) the council is not bound to accept any of the tenders; and (2) tenders must be received by the Town Clerk by 12 noon or they would not be considered. Claimants posted their bid in the Town Hall box at 11am on the deadline day. A notice on the Town Hall box stated that the box was emptied at 12noon every day but this day it wasn’t Therefore, the Council did not consider the bid because they did not think it had reached them by 12noon. Instead, the concession was awarded to another party. Claimants brought a claim for damages for breach of contract. However, the problem they had is that it did not appear that there was any contract in the first place (as an invitation to tender is just an invitation to treat). –> In theory, C had just submitted an offer which had not been accepted.

 Held: that the defendants were contractually obliged to CONSIDER the claimant’s tender. Thus, they had to pay damages for breach of the contract to consider. - [The contract was made because D’s had made an offer to consider any tenders submitted in time and C had accepted this offer by submitting the tender]

Problems this approach in Blackpool Aero Club might cause: a) Problem is ascertaining the circumstances in which the Ct will see fit to imply

that an offer to consider all tenders submitted. o

o

It seems that the CtofApp might have implied the duty in this case because: - Invitation to tender was directed at a small number of parties. - Duty to consider was alleged to be consistent with the intention of the parties. There may also have been other important factors that the Ct did not admit: - C’s were existing holders of the concession so can expect to be considered. - D was a local authority (& thus owed a duty to taxpayers to consider bids)

b) Problem in determining the scope of the duty to consider o Stocker LJ: said an obligation to consider would not prevent the Council from rejecting all or any of the tenders as long as the decision was bona fide. o Bingham LJ: duty to consider would have been breached if: - D had accepted a tender received before the deadline had passed. - D had accepted an offer received after the deadline had passed.

Conclusion on offers to consider: -

There is no general rule that an invitation to tender automatically triggers a contractual obligation to consider bids. But in the right circumstances, the Ct may decide that it does. Even if there is an obligation to consider, there is no obligation to accept an offer.

2. Invitation to tender treated as an offer to consider

Contract ContractWeek Week 1: 1: Offer Offer & &Acceptance, Acceptance, Certainty Certainty and and Intention Intention

 TIME TABLES AND VENDING MACHINES Time Tables - Bus timetable as an offer accepted when a person pays for the ticket? - Or should the timetable just be seen as an invitation to treat? This would mean the offer is made by the customer and accepted by the driver when he issues the ticket. - Or offer made when ticket given and acceptance by paying.  Practical consequence of this is that if there is an exclusion clause on the back of the ticket (eg, train tickets). - If the first alternative is chosen, then the exclusion clause is not within the contract. But if the last alternative is chosen, the exclusion clause is part of the contract. 

Treital: there is no single rule and it depends on the particular circumstances to determine when the contract is made.

Vending machines  In Thornton v Shoe Lane Parking, Ld Denning said the machine makes the offer and it is accepted once the person drives so far into the car park that a ticket is issued.

5

Contract ContractWeek Week 1: 1: Offer Offer & &Acceptance, Acceptance, Certainty Certainty and and Intention Intention

_____________________1.2. ACCEPTANCE_____________________ ACCEPTANCE  An unqualified expression of assent to the terms proposed by the offeror

PURPORTED ACCEPTANCE  This is an acceptance which does not accept all the terms & conditions of the offer but introduces new terms.  It is a counter offer treated as a new offer capable of acceptance/rejection.  The counter offer ‘kills off’ the original offer. Therefore, the original offer can no longer be accepted by the new offeree.

A]

COMMUNICATION OF ACCEPTANCE General rule: Acceptance must be communicated to the offeror and this occurs when it is actually brought to the attention of the offeror.

ENTORES V MILES FAR EAST CORP [1955] (operation of general rule)  Denning LJ said that: - If an oral acceptance is drowned out by an overflying aircraft so the offeror can’t hear the acceptance, then the acceptance is not valid. Thus there is no contract unless the acceptor repeats his acceptance once the plane has gone. - But when an acceptance is made clearly & audibly but the offeror does not hear what was said, a contract is nevertheless completed unless offeror makes it clear he has not heard.

BRINKIBON V STAHAG STAHL [1983] (telephone & telex = when received)  Shows that for INSTANTANEOUS COMMUNICATION such as telephone and telex (fax), the acceptance takes place at the moment the acceptance is received by the offeror and at the place at which the offeror happens to be (whether he sees the fax or not)



ACCEPTANCE BY SILENCE

General rule: - Acceptance of an offer will not be implied from mere silence by the offeree. - An offeror can not impose a contractual obligation on the offeree by saying that unless he expressly rejects it, he will be held to have accepted.

6

Contract ContractWeek Week 1: 1: Offer Offer & &Acceptance, Acceptance, Certainty Certainty and and Intention Intention

FELTHOUSE V BINDLEY [1862] (Silence is not acceptance)    

Claimant wanted to buy nephew’s house and said if he heard nothing further from his nephew, he would consider that his nephew was accepting to sell the house. Nephew did not respond to the offer but decided to accept and therefore told the defendant auctioneer not to sell the house to anyone else. Nevertheless, the auctioneer sold the house to someone else and the claimant therefore tried to sue him. Auctioneer argued the claimant could not sue as the nephew had not accepted the claimant’s offer.

 Held: in favour of D that the nephew’s silence did not amount to an acceptance of the offer. Possible criticism of decision: - The uncle had waived the need for communication of the acceptance -

Nephew had manifested his acceptance by telling auctioneer not to sell to anyone else.

 Miller article: “Felthouse v Bindley Revisited” (1972)  Argues that the decision in Felthouse v Bindley was probably incorrect because the evidence showed that the nephew was a willing, not an unwilling, offeree (ie, he regarded himself as having accepted the offer).  He argues that in cases where the offeror has waived the need for communication and the offeree is a willing one, then no positive act is required (ie, silence can be an acceptance). -

Note: Felthouse v Bindley still represents the law. What Miller says can just be used as analysis/criticism.

 The rule that silence is not acceptance is not an absolute one and in exceptional circumstances, the Cts may infer silence as an acceptance.  There is an argument (this is probably not the law) that perhaps if the offeree assumes that his silence has been effective to count as an acceptance and then acts in detrimental reliance of this belief, the Ct should hold silence to be an acceptance. - the general rule is to protect the offeree after all.



EXCEPTIONS

TO

THE

RULE

REQUIRING

COMMUNICATION

OF

ACCEPTANCE



The rule that acceptance must be communicated to the offeror is not an absolute one: - Terms of the offer may show offeror does not insist on the communication of acceptance to him [eg, Carlill v Carbolic Smoke Ball] - Offeror may be prevented by his conduct from arguing acceptance was not communicated to him [eg, Entores v Miles Far East Corp] - The postal rule (this is the main exception)

Acceptances sent through the post: the postal rule General rule: - Acceptance takes place when the letter is POSTED by the offeree (rather than when it’s read/received) [Eg, ...