Lecture 1 Agreement Offer &Acceptance PDF

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Offer & AcceptanceA. Determining Agreement ✅The objective approach Smith v Hughes [1871] 1 LR 6 QB 597 () objective approach:observe what one say, what one do Facts: The defendant was shown a sample of new oats by the claimant. The defendant bought them in the belief that they were “old” oats; h...

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Offer & Acceptance A. Determining Agreement The objective approach

Smith v Hughes [1871] 1 LR 6 QB 597 (*) objective approach:observe what one say, what one do

Facts: The defendant was shown a sample of new oats by the claimant. The defendant bought them in the belief that they were “old” oats; he did not want “new” oats. Was the contract void for mistake? Held: The mistake was merely as to the quality of the subject-matter and could not render the contract void, even if the claimant seller knew of the mistake.

dictum: “If, whatever a manʼs real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other partyʼs terms.” RTS Flexible Systems Ltd v Molkerei Alois Midler GmbH & Co [2010] 1 WLR 753 affirm the objective principle, a modern case

Centrovincial Estates plc v Merchant Investors Assurance Co [1983] Com LR 158 (*) application of the objective approach mcf.: Hartog v Colin and Shields [1939] 3 All ER 566 (*)

Facts:The defendants, Merchant Investors Assurance Co Ltd, were the lease holders of an office building from 1969. In 1982, Centrovincial Estates Plc completed a surrender from the initial landlords. Consequently they became the direct landlords of the defendants. Upon completion of the surrender, they wrote a letter to the defendants, offering them a reviewed rental value of £65,000 per annum. The defendants were paying minimum of £68,000 annual rent to the previous landlords. Therefore, they gladly accepted their offer and sent their letter of acceptance.However, as it turned out later, a mistake was made in the proposal and the intended reviewed rent amounted to £126,000 per annum. The defendants rejected the suggested correction and held the plaintiffs to the binding agreement, which as they held, was concluded by their letter of acceptance. The plaintiffs, on the other hand, held that there was no legally binding contract between the parties Held:Above all, the court held that there can not be a legally binding contract present, if the offeree knew or ought to have known that an offer by an offeror contained a mistake. However, in Centrovincial Estates Plc v Merchant Investors Assurance Co Ltd there was no evidence that could show ʻthat the defendants either knew or ought reasonably to have known of the plaintiffsʼ

error. Therefore, the plaintiffs were bound by the acceptance of their offer and the defendantsʼ appeal was allowed.

per Slade LJ “... it is contrary to the well established principles of contract law to suggest that the offeror under a bilateral contract can withdraw an unambiguous offer, aer it has been accepted in the manner contemplated by the offer, merely because he has made a mistake which the offeree neither knew nor could reasonably have known when he accepted it.” Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing (2004) affirmed in HK; Objective test as applied to conduct

1. A contract may be inferred

from the objective conduct of parties

2. Not be lightly inferred. The conduct must unequivocally refer to the contract. Objective test is met only if the partiesʼ conduct was consistent with there being an implied contract, and inconsistent with there being no such contract. 3. Objective test not to be applied when one knows that the other hand no intention of contracting. The residual relevance of subjective intentions

Hartog v Colin and Shields [1939] 3 All ER 566 (*) Principle: A contract will be void for unilateral mistake where the mistake is as to the terms of the contract and the other party is, or must be taken to be, aware of the mistake.

mcf.:Centrovincial Estates plc v Merchant Investors Assurance Co [1983] Com LR 158 (*)

Facts: Subject matter: 3000 pieces Argentinian hare skins; Quote: 10d per pound; Intended: 10d per piece; (1pound=3piece)Buyer brings action for nondelivery. Held: there is a duty to correct a mistake that is known to not be the real intention of the person making it. You cannot simply take advantage and ʻsnap upʼ the offer. Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR 594 (*) modern application of the principle

Facts: HP printers; Usual retail price SGD 3,854; Priced at SGD 66. Kowloon Development Finance Ltd v Pendex Industries Ltd (2013) 16 HKCFAR 226 at [20]. Note possibility of rectification for unilateral mistake.

Rectification for common mistake (the document does not reflect what the parties have agreed) Rectification for unilateral mistake (rectification to give effect to mistaken understanding which is known to the counter-party.) “Fault”: Mistake induced by non-mistaken party

Scriven Bros v Hindley [1913] 3 KB 564

Facts: Sale by auction• Hemp ($$) >> Tow ($)• Lots available for inspection• Auctioneer labelled the parcel in a misleading manner, labelling all lots as ʻS.L.ʼ• S.L. 63-67 Hemp vs SL 68-79 Tow• Buyer examined goods examined in SL 63-67 and successfully bid for goods in SL 68-79. Held:“Such a contract cannot arise when the person seeking to enforce it has by his own negligence or that by whom he is responsible caused, or contributed to cause, the mistake.” per Lawrence J. Problems with the traditional objective approach Butler v Ex-Cell-O Corp [1979] 1 WLR 401 (*) Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209, [2009] All ER (D) 208 Clark v Dunraven, The Satanita [1897] AC 59 (*) B. Offer vs invitation to treat. offer: “An offer is an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.” -Edwin Peel, (Treitel) The Law of Contract (15thed, 2020) at p. 10.

Gibson v Manchester City Council [1978] 1 WLR 520 (CA); [1979] 1 WLR 294 (HL). offer was not valid, only ITT

Fact: a council, in pursuance of a policy of selling council houses, wrote to a tenant, stating that they “may be prepared to sell the house” to him at a stated price. The tenant submitted a formal application but the transaction was broken off at that point by a change in the councilʼs policy. Held: The House of Lords held that there was no contract; the tenantʼs application was an offer rather than an acceptance;

Store v Manchester City Council (1978) offer was valid

invitation to treat: “[An] invitation to treat: he does not make an offer but invites the other party to do so... a statement is not an offer if it in terms negatives the makerʼs intention to be bound on acceptance...” -Edwin Peel, (Treitelʼs) Law of Contract (15thed, 2020) at p. 12.

Advertisments: see the words whether there is sufficient intention to be bound, once the terms of the offer is unequivocally accepted . Partridge v Crittenden [1968] 1 WLR 1204. Generally,In addition to advertisements, all circulars, catalogues and price lists distributed by traders will normally be regarded as invitations to treat

Fact: The appellant, who placed an advertisement in a periodical which said“Bramblefinches, 25 shillings each” was charged with the statutory offence of “offering for sale” a wild bird. He was convicted and he appealed.

Held: His conviction would be quashed because the advertisement was not an offer but an invitation to treat.

Cf. Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. Exception: these can amount to offers when the advert is actually a unilateral offer bilateral contract: a promise in exchange for a promise unilateral contract: a promise in exchange for a certain act [unilateral offer= performance of specified act + intention to be bound]

Cf. Lefkowitz v Great Minneapolis Surplus Stores 86 NW 2d 689 (1957) Supreme Court of Minnesota US case law: clear, explicit. do not use

Fact:“Saturday 9am ... 1 Black Lapin Stole ...worth $139.50 ... $1.00;First come first served.” Held: Murphy J:“The authorities emphasize that, where the offer is clear definite and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract... Whether in any individual instance a newspaper advertisement is an offer than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances...” Tenders Harvela Investments v Royal Trust Co of Canada [1986] AC 207 clearly intended---offer

Fact: the first defendants invited the claimants and the second defendants to make sealed competitive bids for a parcel of shares, stating, “we bind ourselves to accept (the highest) offer”. The claimants bid $2,175,000 and the second defendants bid $2,100,000 or $101,000 “in excess of any other offer”. The first defendants believed that they were bound to accept the bid of the second defendants, as being the higher bid. The House of Lords held that the invitation to tender amounted to an offer to sell to the highest bidder; however, the“referential” bid of the type adopted by the second defendants was not permissible in a transaction of this kind and therefore the first defendants were bound to accept the claimantsʼ bid. Held: an invitation to tender may amount to an offer of the unilateral type if that is what was clearly intended. Blackpool and Flyde Aero Club Ltd [1990] 1 WLR 1195 liable for not consider

Fact: the defendants invited tenders for an airport concession, laying down a clear procedure for the submission of bids. Due to an administrative error on the part of the defendants, the claimantʼs bid, which had been properly submitted, was not considered. Held: The Court of Appeal held that the defendants were contractually bound to consider the claimantʼs tender.

City University of Hong Kong v Blue Cross (Asia Pacific) Insurance Ltd [2001] HKCFI 1356 affirmed in HK

Display of goods in retail outlets. Pharmaceutical Society of GB v Boots [1953] 1 QB 401 Automatic machines Thornton v. Shoe Lane Parking Ltd [1971] 2QB 163. Terminating an offer Acceptance Express rejection by the offee destroyed by a counter-offer Revocation (can be expressly or impliedly) Express revocation general rule: offeror is free to withdraw the offer at any time before acceptance

Byrne v Tienhoven (1880) 5 CPD 344 revocation must be communicated to the offeree.

Dickinson v Dodds (1876) 2 Ch D 463 (*). revocation could be communicated by third party

Lapse of time An indefinite offer will lapse aer a reasonable period of time

Failure to comply with a condition precedent Death of one of the parties C. Acceptance: “An acceptance is a final and unqualified expression of assent to the terms of an offer.” -Edwin Peel, (Treitel) The Law of Contract (14thed, 2020) at p. 18.

Where the offeror prescribes method for acceptance. Manchester Diocesan Council for Education v Commercial and General Investment [1969] 3 All ER 1593 (*) Fact: the claimants invited tenders, requesting the tenderers to supply an address to which acceptances should be sent.The defendantsʼ tender was accepted but the acceptance was sent to an address different to the one given by the tenderers. Held: This was held to be a good acceptance; the claimants had introduced the prescribed method for their own protection and it could be waived by the claimants providing the defendants were not prejudiced. If the offeror prescribes a particular method of communicating acceptance and makes it clear that no other method will suffice, then there may be no contract if a different method is used by the offeree.

If, however, a method is prescribed without it being made clear that no other method will suffice, then it seems that an equally advantageous method would suffice. Where the offer does not prescribe a method of acceptance, the appropriate method may be inferred from the form in which the offer is made; thus it was held in 1883that if an offer is sent by telegram, a reply by post would be ineffective; Quenerduaine v Cole, 1883. What if the offeree adds to or qualifies the offer[unqualified]?

Hyde v Wrench (1840) 3 Beav 334 counter-offer kill the original offer

Fact: the defendant offered to sell a farm to the claimant for £1,000. In reply, theclaimant offered £950. This was rejected by the defendant. Later, the claimant purported to accept the original offer of £1,000. Held: It was held there was no contract; the counter-offer of £950 had impliedly rejected the original offer which was no longer capable of acceptance.

Stevenson v Mclean (1880) 5 QBD 346 (*) a mere request for information

Fact: in response to an offer to sell goods at a stated price made by the defendants, the claimants replied inquiring whether delivery could be made over two months. No reply to this inquiry was received but the claimants accepted the offer. Held: It was held that there was a binding contract, the claimantʼs reply was a request for information and not a counter-offer. Battle of forms. The counter-offer analysis has been applied to the so-called “battle of the forms”where one party, A, makes an offer on a document containing his standard terms of business and the other party, B, “accepts” on a document containing his (conflicting)standard terms. At this stage, there is clearly no contract, although the courts have held that if Bʼs communication is acted on by A, e.g. by delivery of goods, a contract may come into being on Bʼs terms on the basis that his counter-offer has been accepted by conduct.

Butler v Ex-Cell-O Corporation [1979] 1 All ER 965 (*) last shot

Fact: The plaintiffs offered to provide delivery of a machine tool for the price of £75,535. The delivery of the tool was set for 10 months, with the condition that orders only qualified as accepted once the terms in the quotation were met and prevailed over any of the buyerʼs terms. The buyer responded to the offer with their own terms and conditions, which did not include the ʻprice variation clauseʼ listed in the sellerʼs terms. This included a response section which required a signature and to be returned in order to accept the order. The sellers returned this response slip with a

cover letter signalling that delivery would be in accordance with their original quotation. The tool was ready for delivery but the buyers could not accept delivery, for which the sellers increased the price which was in line with their initial terms. This was denied by the buyer and an action was brought by the seller to claim the cost of delay and interest. Held: The court allowed the buyerʼs appeal. The court found that the buyerʼs order was not an acceptance of the initial offer from the seller but a counter-offer which the sellers had accepted by returning the signature section of the buyerʼs letter. On this basis, the court found that the contract was completed without the price variation clause and therefore the seller could not increase the cost of the tool. Traditional approach: Last Shot Approach: “The battle is won by the person who fires the last shot. He is the man who puts forward the latest term and conditions; and if they are not objected to by the other party, he may be taken to have agreed to them.” -Lawton LJ: “By letter dated 4 June 1969 the sellers' acknowledged receipt of the counter-offer, and they went on in this way: 'Details of this order have been passed to our Halifax works for attention and a formal acknowledgement of order will follow in due course.' That is clearly a reference to the printed tear- off slip which was at the bottom of the buyers' counter-offer. By letter dated 5 June 1969 the sales office manager at the sellers' Halifax factory completed that tear-off slip and sent it back to the buyers. It is true, as counsel for the sellers has reminded us, that the return of that printed slip was accompanied by a letter which had this sentence in it: 'This is being entered in accordance with our revised quotation of 23rd May for delivery in 10/11 months.' I agree with Lord Denning MR that, in a business sense, that refers to the quotation as to the price and the identity of the machine, and it does not bring into the contract the small print conditions on the back of the quotation. Those small print conditions had disappeared from the story. That was when the contract was made. At that date it was a fixed price contract without a price escalation clause.” -Minority: Lord Denning MR: [Amounts to the judge creating a contract for parties] so, no! “... look at the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them.”

“If he offers to sell at a named price on the terms and conditions stated on the back and the buyer orders the goods purporting to accept the offer on an order form with his own different terms and conditions on the back, then, if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller. .” “The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable, so that they are mutually contradictory, then the conflicting terms may have to be scrapped and replaced by a reasonable implication.” OKA Electronics Ltd v Manohar Chugh (t/a Electric & Electronic Industries) [1991] HKCA 266 affirmed the last shot doctrine, following butler

Au Wing Cheung v Roseric Ltd [2008] HKEC 591 diff. outcome by district Court in HK

District Ct: last-shot doctrine should bed is placed if the ʻlast shotʼ contract differed materially from the initial contract, such that it would be unjust for the sender to take advantage of the differences without telling the receiver Communication must reach offeror.

Entores v Miles Far East [1955] 2 QB 327 (*) General rule: acceptance will not be effective unless communicated to the offer or by the offeree or by someone with his or her authority.

Held: The communication of acceptance must be actually received by the offeror, and, where the means of communication are instantaneous(oral, telephone, telex), the contract will come into being when and where acceptance is received. Brinkibon Ltd v Stahag-Stahl [1983] 2 AC 34 affirm Entores case, although technology developed.

Other things need to consider the postal acceptance rule. Acceptance is effective the moment the letter of acceptance is posted.

Adams v Lindsell (1818) 1 B & Ald 681 The rule is that where acceptance by post has been requested, or where it is an appropriate and reasonable means of communication between the parties, then acceptance is complete immediately the letter of acceptance is posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror; Household Fire Insurance v Grant (1874-80) All ER Rep 919 (*)

What if the posted acceptance never arrives? apply postal rule

Fact: The acceptance of Gʼs offer to buy shares in the claimant company was posted to him but he never received it. When the company was wound up,G refused to pay for the shares. Held: The contract was concluded on posting and G had therefore become a shareholder. Holwell Securities v Hughes [1974] 1 WLR 155 (*) Excluding the application of the postal acceptance rule

Other things need to know about the "Postal Rule" the postman doesn't count Re London and Northern Bank, ex p Jones (1900) the rule does not apply to revoking offers

Byrne v Tienhoven (1880) 5 CPD 344 applied even if letter is lost in post

Household Fire Insurance v Grant (1874-80) All ER Rep 919 (*) only applied if it was contemplated that post would be used

Henthorn v Fraser (1892) ...