Chapter 2 - offer and acceptance PDF

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1. Offer and AcceptanceIntroContractual agreement has traditionally been analysed in terms of offer and acceptance.  One party, the offeror, makes an offer which once accepted by anothe...

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1. Offer and Acceptance Intro Contractual agreement has traditionally been analysed in terms of offer and acceptance. One party, the offeror, makes an offer which once accepted by another party, the offeree, creates a binding contract. Key concepts that you need to familiarise yourself with in relation to offer and acceptance include the distinction between an offer and an invitation to treat - you need to be able to identify specific examples of where an offer or an invitation to treat exists. Also it is important to know the difference between bilateral and unilateral contracts. The case of Carlill v Carbolic Smoke ball co. is the leading case in both these areas so it worth concentrating your efforts in obtaining a good understanding of this case. Offer In order to amount to an offer it must be shown that the offeror had the intention to be bound: Harvey v Facey [1893] bumper hall Storer v Manchester City Council Gibson V Manchester City Council Carlill v Carbolic Smoke Ball co [1893] Invitation to treat An offer needs to be distinguished from an invitation to treat. Whereas an offer will lead to a binding contract on acceptance, an invitation to treat cannot be accepted it is merely an invitation for offers. Goods on display in shops Goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods. The trader will decide whether to accept the offer: Pharmaceutical Society of Great Britain v Boots [1953] Fisher v Bell [1961] 1 QB 394 flick knife Advertisements Advertisements are also generally invitations to treat when bilateral contracts are anticipated: Partridge v Critenden (1968) Harris v Nickerson auction ad However, in some instances an advert can amount to an offer: Carlill v Carbolic Smoke Ball co [1893] 1 QB 256 Ref. Activity 2.3 (By way of background you should be aware that the broader law of consumer protection prohibits misleading advertisements. In particular, the Unfair Trading Regulations 2008/1277, Part 2, prohibits misleading advertisements aimed at consumers. The European Court of Justice has said that it would be a breach of European consumer protection law if in a shop a consumer was refused a product under the advertised terms (Trento Svilippo srl v Autorita Garante della Concorrenza e del Mercato [2014] 1 All ER (Comm) 113).

Contracts by Tender The request for tenders represents an invitation to treat and each tender submitted amounts to an offer unless the request specifies that it will accept the lowest or highest tender or specifies any other condition. If the request contains such a condition this will amount to an offer of a unilateral contract where acceptance takes place on performance of the condition: Spencer v. Harding Law Rep. 5 C. P. 561 Harvela Investments v Royal Trust of Canada [1985] referential bid The invitation to treat may contain an implied undertaking to consider all conforming tenders Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] Auctions Where an auction takes place with reserve, each bid is an offer which is then accepted by the auctioneer. Where the auction takes place without reserve, the auctioneer makes a unilateral offer which is accepted by the placing of the highest bid: Barry v Davies [2000] 8 Machines The machine represents the offer, the acceptance is inserting the money: Thornton v Shoe Lane Parking [1971] 2 WLR 585 The offer must be communicated Gibbons v Proctor Ratio: When a party has knowledge of a reward and act on behalf of an individual that meets the necessary conditions of the reward but have no knowledge of a reward, the latter individual can claim the reward being offered. Cross offers do not form contracts. Termination of offers An offer may be terminated by: 1. Death of offeror or offeree Death of offeror - a party cannot accept an offer once notified of the death of the offeror but that in certain circumstances the offer could be accepted in ignorance of death. The following cases are contradicting precedents: Bradbury v Morgan (1862) estate was liable after offeror’s death Dickinson v Dodds (1876) stated in obiter – death of eother party terminates offer The death of an offeree probably terminates the offer in that the offeree’s personal representatives could not purport to accept the offer. 2. Lapse of time

An offer will terminate after a reasonable lapse of time. What amounts to a reasonable period will depend on the circumstances. Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 shares 3. Revocation The offeror may revoke an offer at any time before acceptance takes place. Revocation must be communicated (communication through a reliable source is sufficient. Dickinson v Dodds (1876) 2 Ch. D. 463 sale of house on Friday Byrne v Tienhoven tin plates/offer and revocation and acceptance posted If the offeror is bound by a separate collateral contract to keep the offer open, then the offeror is bound to keep it open till the time period lapses Routledge v Grant six weeks to be kept open/offeror withdraws before that/house purchase offer Offord v Davies This may not apply in unilateral offers where acceptance requires full performance. Once the performance has begun revocation is not possible (To give the agreement business efficacy) Errington v Errington Woods [1952] 1 KB 290 mother-in-law and daughter-in-law Daulia v Four Millbank [1978] Ch 231 promise to sell property – deposit before a stipulated time (Luxor v Cooper was one rare occasion where revocation was allowed after performance has begun as it was perceived as an offer where a large consideration was offered for a small amount of work)

Revocation of a Unilateral offer – No binding precedent in English Law. Shuey v USA is also thought to apply in th UK - revocation may be effected by giving the same prominence to the revocation as was given to the original offer When the offeree changes his mind – No cases yet in English Law After posting a letter of acceptance, the offeree informs the offeror by telephone, before the letter arrives, that they reject the offer, should the act of posting an acceptance prevail over the information actually conveyed to the offeror? The following cases are not binding: Dunmore v Alexander [1830] Scotland no contract Wenkheim v Arndt [1873] New Zealand No revocation – third party issue may apply Tritel suggests that the ‘the issue is whether the offeror would be unjustly prejudiced by allowing the offeree to rely on the subsequent revocation’. 4. Counter offer A counter offer is where an offeree responds to an offer by making an offer on different terms. This has the effect of destroying the original offer so that it is no longer open for the offeree to accept. Hyde v Wrench (1840) 49 ER 132 sale of farm – purpoted acceptance was held to amount to an offer 5. If a condition of the offer is not fulfilled The offer terminates – the condition may be expressed or implied Financings Ltd. V Stimson car should be in undamaged condition to form valid contract

Acceptance Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance: 1. The acceptance must be communicated to the offeror. 2. The terms of the acceptance must exactly match the terms of the offer. 3. The agreement must be certain. 1. Communication The general rule is that the offeror must receive the acceptance before it is effective: Entorres v Miles Far East [1955] 2 QB 327 telex between Holland and england Silence will not generally amount to an acceptance: Felthouse v Bindley [1862] EWHC CP J35 uncle and nephew sellinh horse Silence will not constitute acceptance when to so hold would involve forcing a contract on an unwilling party. Silence can constitute acceptance when this does not involve forcing a contract upon an unwilling party. Rust v Abbey Life Insurance Co [1979] Communication to any ‘unmanned receptor’ is effective from the time at which it is reasonable to expect that machine to be checked. Therefore, if it is not reasonable to expect a computer to be checked out of usual business hours a communication sent at this time may only be regarded as communicated after the next opening of the office concerned. THE BRIMNES [1975] telex not read till next day BRINKIBON LTD V STAHAG STAHL GMBH [1983] telex – accept comm on receipt Electronic Commerce (EC Directive) Regulations (2002) do not identify at what stage acceptance is effected. However, Regulation 11(2) provides that in contracts with a consumer the order and acknowledgment of the order are deemed to be received when the addressee is able to access them. This reference to receipt in the Regulations would appear to indicate that the default rule that acceptance is effective upon receipt, rather than as with the postal rule on sending, should apply to all internet sales. Acceptance can be through conduct: Brogden v. Metropolitan Railway Co. (1877) no acceptance of coal contract Butler Machine Tool v Ex-cell-o Corporation [1979] machine sale contract terms Exceptions to the need for communication of acceptance: Offeror has waived the requirement for communication Unilateral offers The postal rule Where it is agreed that the parties will use the post as a means of communication the postal rule will apply. The postal rule states that where a letter is properly addressed and stamped the acceptance takes place when the letter is placed in the post box: Adams v Lindsell (1818) 106 ER 250 wool sale/letter delayed

This rule will prevail only in certain circumstances – when it was reasonably contemplated Household fire insurance v grant Will not prevail when the letter is incorrectly addressed by the offeree Kobertis v Transgrain shipping It is relatively easy for the parties to exclude the postal rule: Holwell Securities v Hughes [1974] 1 WLR 155 notice in writing In Thomas v BPE Solicitors [2010] EWHC 306 Blair J said obiter that the postal rule should not apply to contracts concluded through the exchange of emails 2. The terms of the acceptance must exactly match the terms of the offer. If the terms differ this will amount to a counter offer and no contract will exist: Hyde v Wrench (1840) 49 ER 132 farm sale 3. The agreement must be certain When viewed objectively (objective theory) it must be possible to determine exactly what the parties have agreed to. Compare the following two cases: Scammell & Nephew v. Ouston [1941] AC 251 HP of van Sudbrook Trading Estate v. Eggleton [1983] AC AC 444 tenant’s option to purchase property Centrovincial Estates v Merchant Investors Assurance Co tenancy rate It should be noted, however, that there is one circumstance when the courts will depart from the usual objective approach and take account of the actual subjective knowledge of the offeree. Under this approach, sometimes known as the ‘snapping up’ doctrine, an offeree is not allowed to accept an offer: 1. which he knows is mistaken as to its terms (Hartog v Collins and Shields [1939] 3 2. the offeree should know that the offeror is mistaken as to the terms he has offered perhaps because, as in Scriven bros v Hindley , the offeree induced that mistake by his own carelessness or contrary to accepted trade custom Not enough to come within this exception that the offeree was aware that the offeror had made a mistake Smith v Hughes (1871) – oats Method of Acceptance An offeror may specify a method of communication of acceptance Or it maybe inferred from the method used for communication of the offer. If any other method used is no less advantageous to the offeror it is valid acceptance. If the specified method is the only method that can be used, the offeror needs to explicitly state that it is mandatory to use that method and that method only Manchester Diocesan Council for Education v Commercial and General Investments Ltd [1969] Tinn v Hoffman...