Contract Law Tutorial 2 PDF

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CONTRACT LAW: Tutorial 2 – Offer and Acceptance Questions for discussion 1. Define "acceptance" of an offer. Must the acceptance be in writing? Can it be by conduct? If so, what sort of conduct is necessary to accept an offer? See Brogden v Metropolitan Rly Co. - An offer does not take place unless it is actually communicated to the offeree and it is not possible for the offeree to accept it unless they have knowledge of the offer (so knows what the terms and conditions are) – therefore, the communication of an offer is important as only then can an offer be accepted. -> Acceptance is what turns an offer, which has the initial intention to be bound, into an agreement: to determine whether an acceptance has taken place is 1) the offeree’s unequivocal expression of intention (by conduct of assent) made in response to the offer (this acceptance must also match the terms exactly). - The matching acceptance must be communicated to the offeror to make it effective. - Acceptance does not necessarily have to be communicated by writing: acceptance can also be in the form of conduct. When acceptance by conduct does occur, the performance that occurs has to be precisely what is specified in the contract’s terms. -> In Brogden v Metropolitan Rly Co, the appellant had supplied coal to the respondent company for a certain period of time, and hence the parties decided to enter in a more formal long term agreement: after the negotiations, the draft contract was created by the respondent and sent to the appellant. - The latter signed the draft contract and marked it as approved, sending it back to the respondent: technically, this constituted a counteroffer, however the respondent just filed the draft away. He had therefore not effectively communicated his acceptance to the additions made and the parties commenced the actions under the agreement. - Following a dispute, it was questioned whether a long term contract had been stipulated: it was decided that this had occurred as the respondent had followed through with the performance (so the coal had been ordered and delivered in the terms of the agreement): therefore, acceptance by conduct was on the appellants counteroffer (the “later shot” is kept in mind when assessing whether the contract has taken effective place, and what the terms of this are). 2. Must acceptance be communicated to the offeror? In what circumstances does it not need to be communicated? Why does it not need to be communicated in these circumstances? In these circumstances, when does the acceptance become effective? Acceptance (which is what turns a specific offer made with the intention to be bound into an agreement) must be communicated to the offeror in order to be effective. - Following the general principles, the create an acceptance, an offeree must make an unequivocal expression of intention (either verbally or by conduct) in response to an offer (this has to match all the terms of the offer). - Felthouse v Bindley (horse selling between nephew and uncle) - In the case of unilateral offers there is no need for acceptance to be communicated: an unilateral contract means that one party (the promisor) binds itself to perform the stated promise upon the stated act performed by the promisee in response to the offer. Unilateral offers can be addressed to either an identified individual (Great Northern Railway CO. V Witham) or to a public at large / particular class of people (Carlill v Carbolic Smoke Ball). 1

CONTRACT LAW: Tutorial 2 – Offer and Acceptance - In these circumstances, the acceptance of the offer does not need to be communicated, as the actual performance of the requested action constitutes the acceptance of the offer (the performance of the act constitutes the acceptance, hence there is no need to communicate the fact that one is attempting to perform the act). This is because the unilateral offer does not constitute a binding contract made with the whole world (at which it is addressed) but rather it merely constitutes an offer made the whole world that will develop into a contract with the one individual who will commence performing the required action. Therefore, this means that once one performs the action, or commences performing the action there is an acceptance of such offer and on those terms. - Exception to the rule acceptance needs to communicated are postal rule and unilateral offers. - Acceptance in the case of unilateral offers becomes effective when the required performance is undertaken: however, for it to signify a full acceptance, the action must be fully performed. - This can be explained with the example of a motorist buying and paying for a parking ticket to enable him to park there following the terms and conditions of the contract: once he has parked there (so the action has been completely performed), the acceptance of such offer is effective, and this becomes a binding contract. 3. What will happen if the offeror revokes the offer before it is accepted? What if the offeror does not know the offer has been accepted and purports to revoke it? For an offer to be accepted, it must be specifically have been done with the intention to be bound, and must be current – if acceptance occurs after an offer has ceased to be valid, then there is no binding contract. - The general rule is that an offeror is free to withdraw an offer at any time before acceptance takes place (however, revocation of an offer after it has been accepted is ineffective). - A “firm offer” is when the offeror, alongside with his initial offer, promises to not revoke the offer within the settled period of time, however this solely constitutes a pre-contractual promise, and is unenforceable unless it is supported by separate valuable considerations. This means that a firm offer is still freely revocable unless it is expressly supported by consideration. - Case of Offord v Davies (guarantees for discounts) - Dickinson v Dodds (knew the house had already been sold, and there was knowledge of it, therefore the offer had lapsed and could not be accepted) 4. What happens where the offeror prescribes a certain mode of acceptance and the offeree accepts using another mode? - Acceptance must contain no variation of the terms of the offer or at least none of which materially alters it. - Case: Manchester Diocesan Council 5. What is the effect of an offeree inserting a new term into his acceptance? An acceptance must be unconditional and correspond exactly to terms proposed by the offeror: if the offeree inserts new terms or modifies those held in the offer, this will constitute a counter offer (this no longer constitutes an acceptance of the original offer,

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CONTRACT LAW: Tutorial 2 – Offer and Acceptance instead, this constitutes a new offer, made on behalf of the offeree to the offeror, who now has to decide whether to accept the new counteroffer or not). - The counter offer operates in the same way that the rejection does: the original offer is destroyed and this prevents the offeree to back track and accept the accept the original offer. THIS REFERS TO THE PRICES, HOWEVER IN THE CASES OF TERMS, IT IS THE BATTLE OF THE FORMS. - Battle of the forms: case – Butler machine tool v ex-cell-on: price variation clause (beneficial to the seller) versus price variation clause non-included (the buyer sends it without this clause). The contract is on the terms of the buyer, because the seller had signed the terms referred to the counter offer (the buyer) with a cover letter saying that it was accepted on the previous terms. - this was not effective, because the agreement was signed on the last contract, so made by the buyer. 6. In what circumstances does an offer lapse? There are various circumstances in which an offer might lapse – these are: the lapse of time, death and revocation. - LAPSE OF TIME: even though an offer is left open indefinitely, there might come a time when the offeree can no longer accept (however, there is no way to give a reasonable amount of time within, or after which this might happen). - If the offer does underline a specific amount of time (“a fixed amount of time”), it means that after that time, the offer will automatically lapse. There might be instances in which some late acceptances might be taken in consideration, however, the offeror has to clearly inform the offeree of this policy without delay. -> In the case that an acceptance has been dispatched, however is in delay due to transmission process, but was supposed to be received in due time, the offeree can count on this being kept in count of, unless the offeror clearly inform the offeree that the offer has lapsed. - Ramsgate Victoria v Montefiore: The defendant offered to purchase shares in the claimant’s company at a certain price – six months later the claimant accepted the offer, but the value of shares had fallen. - The defendant had not withdrawn the offer, but refused to go through with the sale. The claimant brought an action for the specific performance of the contract. Held: The offer was no longer open due to the nature of the subject matter of the contract, the offer for contract lapsed after a reasonable period of time – therefore there was no contract and the claimant’s action for the specific performance was unsuccessful. - Financings v Stimson: A purchaser signed a hire purchase agreement for a motor vehicle – a clause in the agreement provided that when the form was signed by the purchasers it would become binding “upon the acceptance by signature” of an officer or a finance company. - An officer of the finance company did not sign the agreement until late March and the intervening period of the purchaser retuned the vehicle due to dissatisfaction with its condition and performance, however the vehicle was subsequently stolen and resulted in damage. Held: The purchaser’s signature on the hire purchase agreement form was in law not an agreement but only an offer by the purchaser to enter in an agreement with the company – there was an implied condition in the offer that the subject matter of it must remain in the same conditions as it was at the time of the offer, falling when the offer lapsed.

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CONTRACT LAW: Tutorial 2 – Offer and Acceptance - Pearson LJ stated that the judge found in terms that the car had suffered severe damage before the acceptance and that there was substantial deprecation as a result: therefore, in order to have a business efficiency, which the parties will have intended for this to have, an implied condition that this offer was capable of acceptance only if the car remained in the same conditions, with the same value (this condition was clearly not fulfilled because the car was severely damaged and the value deprecated by far), hence when the plaintiff purported to accept it, it was no longer capable of acceptance and therefore no agreement was concluded. - Lord Denning MR held that it was not necessary for any particular action to be taken to manifest a revocation of an offer, so long as the intention is clear. - DEATH: The death of either of the parties might terminate the offer, however the terms or precise circumstances in which death lapses an offer in not clear. If the death of the offeror, who offers a service dependent on his personal skills, which are exclusive to the offeror, is the case, then the offer automatically lapses. - For example, the death of a pianist: the offer made by the offeror (the pianist) to play at a concert, cannot be accepted after his death and the offer automatically lapses. - However, if the object matter of the offer is something available to the open market, and there is no difficulty in obtaining a substitute performance (of what was being offered). - The orthodox view believes that this “burden” should not fall on the executor of the offer, provided that the offeree has been informed of the offeror’s death, this cannot accept the offer. However, in the case that the offeree is unaware of the offeror’s death, and accepts the offer, then the deceased’s estate will be bound. - In the case of the death of the offeree, the offer ceases to be an offer at all, however, the offeree’s representatives can still accept the offer if it is not of personal nature. - REVOCATION: revocation might occur when it is expressly terminated or so it is implied (an example would be when a counteroffer is made, or when a second offer is made the offeror). - There is a difference between revocation of an offer when a second one is made (this means that the first offer is automatically revoked), while if the offeree asks for a second quotation offer based on different facts, this means that the offeree has a choice between these two offers, because the second offer was requested and provided on the basis of providing a greater choice rather than rejecting the original offer. - The general rule is that in a bilateral contract, the offeror is free to withdraw the offer anytime before acceptance. 7. Norman lost his favourite dog. He advertised in the local paper an offer of £5,000 for the return of his dog. Julian believed the dog had returned to the town Norman used to live in. Julian travelled there by train and stayed for a week in a B&B while he searched for the dog. Julian incurred certain expenses as a result of this search. However, three days after Norman placed his advertisement he learned that he could not keep dogs in his new flat. Accordingly, he revoked his offer by placing a small notice in the local news agent's window. When Julian returned the dog, Norman refused to pay him the £5,000. Advise Julian. Always explain two stances (argument and counterargument) and then state your opinion: always back up your arguments with evidence. - Discrepancy between how he advertised the loss of his favourite dog (in the local newspaper) compared to how he advertised the revocation of the reward for his dog (in the local news agent window). 4

CONTRACT LAW: Tutorial 2 – Offer and Acceptance - This can also be counter argued: the revocation was made in a similar way (similarity is a legal term, and there is no exact definition of it). - Julian was not forced to perform, and Norman had no knowledge of it. - Overall no, Norman is not forced to pay because the action was not completed and the offer was revoked. - Errington v Errington 8. M, a dealer, offers by advertisement £10,000 for any 2014 Mini car, the offer to be accepted within one week. The offer is made on 1st October and A, B, C, and D each have one such car for sale. (1) A posts his acceptance on 2nd October. It is wrongly addressed and is subsequently returned to A by the Post Office. - The offeror might require for the acceptance to be sent using a particular method of communication or to respond to a particular address: when the offeree fails to comply, then it might be thought that the acceptance in invalid. - However, if the offeror has not made it clear as to what method the acceptance has to be delivered by, and then any other method will suffice. - Cases: Adams v Lindsell: The defendant wrote to the claimant offering to sell them wool asking for a reply in the course of post – however, the letter was delayed in post – the claimant posted a letter of acceptance the same day, when the letter was received. Due to the delay in the letter arrival, the defendant assumed that the claimant was no interested in the wool and sold it to a third party: the claimant sued for breach of contract. Held: It was held that there was a valid contract, which came in to existence the moment the letter of acceptance was posted in the post box. This case establishes the postal rule: this applies where the post is the agreed form of communication between the parties, the letter is addressed to the right party and it carries the right postage stamp – the acceptance becomes effective when the letter is posted. - Korbeits v trainsgrain shipping: In a demurrage claim, the postal acceptance of the appointment of an arbitrator was sent to the wrong address – the issue was whether a contract was till formed, regarding the appointment with jurisdiction Held: No, there was contract being formed because it was the fault of the offeree: this follows from the notion that the postal rule does not operate where the letter of acceptance is wrongly addressed. (2) B posts his acceptance on 2nd. He receives a better offer on 3 rd October, and immediately sends an email cancelling his acceptance. The email arrives before his letter. - If the letter of acceptance is posted yet arrives later, the form of communication that reaches B first will be what is taken in consideration, hence in this case the email cancelling his acceptance. - Possible case link: Byrne & Co v Leon Van Tienhoven & Co - Not allowed because email is quicker, and it is not fair – acceptance in therefore effective. (3) C writes on 2nd October “£10,000 is too little. I am prepared to sell for £10,500.” He receives no answer and on 5th October he writes, “I have reconsidered your offer and accept it at £10,000.” - This is a counteroffer: this means that the second offer destroys the first one – this effectively prevents the first offer to be later accepted (it is done so to protect the rights of

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CONTRACT LAW: Tutorial 2 – Offer and Acceptance the seller): this means C cannot accept the first offer after having counter offered as the first one has lapsed. - Hector v Wrench: The claimant refused an offer to purchase land by sending a counter offer, however then the claimant tried to accept the initial offer when his counteroffer was no accepted. The issue that arose was whether there was a contract formed at the initial offer price. Held: It was decided that there was no contract, and the reasoning for this was that there had been a rejection of the initial offer, as there had been the proposal of a counter offer, and this destroys the initial offer, which can no longer be accepted. (4) D telephones M and says, “I have just seen your advertisement.” M says, “I withdraw my offer.” D replies, “ You are too late, my clerk has just left the office to post my acceptance.” - Acceptance in the post is when it is posted it becomes effective; it does not have to reach the offeree. This is done because it would go on at infinitum: you would have to wait for the confirmation of receiving the post, by both sources; hence it would be long and indefinite. - Revoking an offer by post is effective only when it is communicated to the offeree (case: Byrne v Van Tienhoven) Byrne v Van Tienhoven: The defendant mailed an offer to the plaintiff regarding tin plates, seven days letter the defendant mailed a revocation of the offer – the plaintiff, a couple days later received the original offer and therefor immediately telegrammed his acceptance: then again he sent an acceptance letter by mail, however a few days later the plaintiff received the letter of revocation, and therefore he sued the defendant for the breach of contract. - The issue that arose was whether a valid contract had been formed, and if the withdrawal of an offer has any effect before it is communicated to the person to whom the offer was sent. Held: The holding was done in favour of the plaintiff: the mailbox rule does not apply on revocation – if this is sent by post it does not take effect until it is received by the offeree – and an offer cannot be revoked after it has been accepted. - A not communicated revocation is no revocation at all: acceptance occurs when the letter is delivered to the post office, however this is inapplicable to the withdrawal of an offer. - There is no legal principle that states that revocation occurs when the letter is posted – therefore, as the offer was accepted, and this was received, before the revocation was, this means it is legally accepted – an uncommunicated revocation is no revocation at all. - Following the general rule, acceptance occurs when the letter is delivered to the post office, however this does not apply to the withdrawal of an offer: there is no stated legal principle regarding how revocation occurs when the letter is posted, therefore in this case the offer was accepted by the plaintiff when he sent the letter communicating his offer (an offer cannot be revoked after it has been accepeted).

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