Offer & Acceptance - Notes PDF

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OFFER & ACCEPTANCENotesThere are five basic elements of a contract: Offer and Acceptance. Intention to enter into contract. Certainty regarding terms of agreement. Capacity to enter into contract. Consideration. For a contract to exist, there must be an offer from one party to another and th...

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OFFER & ACCEPTANCE Notes

There are five basic elements of a contract: 1. Offer and Acceptance. 2. Intention to enter into contract. 3. Certainty regarding terms of agreement. 4. Capacity to enter into contract. 5. Consideration. For a contract to exist, there must be an offer from one party to another and the other party must accept it. Once this acceptance takes place a contract will usually be binding upon both parties. In contract law, the concept of unilateral and bilateral contracts needs to be understood for better clarity regarding offer and acceptance. Bilateral Contract: A bilateral contract is the most common form of contract. An offer is made from one party and the other party takes on the obligation. There are mutual obligations from the parties that they agree to undertake. Unilateral Contract: In contrast to bilateral contracts, unilateral contract is one where one party assumes an obligation under contract. A classic example to this is the case of Northern Railway Vs. Witham (1873) where a reward of $100 was offered to someone who walks from London to York. Here it is noteworthy that nobody undertook the obligation when the reward was offered. Only the one offering the reward has assumed the obligation to pay $100 for the travel and nobody has in turn promised to do the task.

OFFER: The person to whom the offer is made is known as the offeree and the person who makes the offer is known as the offeror. An offer, for it to be deemed as one, should indicate the terms on which the offeror is prepared to enter into a contract.

An offer can be an express (clear) offer, as where one person offers to buy a car for $1000 and another promises to sell the car. An offer can also be implied (assumed). For example, a person goes to a shop and takes a packet of chips to the cash counter. This will be an implied offer. Offers to the public at large: In most cases offers will be made to a specified individual. However, offers can be made to the general public or a group of people. The classic case for this example is Carlill Vs. Carbolic Smoke Ball Co. (1893). An advertisement was made where it was stated that anybody who caught the flu while using their smoke balls for a specified time would be paid $100. The Court ruled that the advertisement is to be treated as an offer for a unilateral contract. The offer was accepted when a member of the general public acts upon it. More recent case law for this is Bowerman Vs. British Travel Agents (1996). Invitations to Treat: Some communications are at preliminary stage where one party invites the other to make an offer. This communication is called an Invitation to Treat. The case of Gibson Vs. Manchester City Council (1979) illustrates the difference between an offer and an invitation to treat. Negotiations to enter into a contract can amount to an invitation to treat but not an offer. Advertisements for Unilateral Contracts: These are usually treated as offers as no further negotiation is needed for the acceptance of the contract and the advertiser intends to be bound by the contract while making the advertisement. Carlill Vs. Carbolic Smoke Ball Co. (1893) Advertisements for Bilateral Contracts: These types of advertisements are usually advertised goods/items at a specified price. Since the advertisement may lead to further negotiations and bargaining, and since the goods/items could run out of stock, it would be unreasonable to expect the advertisers to sell to everybody who applies. Therefore, such an advertisement is considered to be an invitation to treat. Partridge Vs.

Crittenden (1968) Grainger & Sons Vs. Gough (1896)

Shops and Shopping: Goods marked with price and on display upon shelves in shops are considered as invitations to treat. Fisher Vs. Bell (1960) Where goods are sold on a self-serve basis, the customer makes an offer to buy when presenting the goods at the cash counter. Pharmaceutical Society Vs. Boots Cash Chemists (1953) Since the displayed goods are not an offer, the customer can neither insist that the shop sell the goods at the marked price nor insist on buying a particular item on display. An invitation to treat is not an offer and as such cannot be made binding upon a party. Transport Timetables and Tickets: The legal position here is quite unclear. The exact point at which an offer, or contract, is made is confusing and depends on the particular facts of each case. Denton Vs. GN Railway (1856) It was held that railway company advertisements detailing time and conditions under which trains would run were offers. Wilkie Vs. London Passenger Transport Board (1947) A contract between a bus company and a person intending to travel was made when he puts himself on either the platform or inside the bus. Thornton Vs. Shoe Lane Parking (1971) Passengers asking for tickets to their destination are making an invitation to treat. The bus company makes and offer by issuing the tickets and the passenger accepts the offer by keeping the tickets without objection. How long does an Offer last? An offer may cease to exist under any of the following circumstances; 1. Specified Time: When an offeror states that an offer will remain open for a specific length of time, it lapses when that time period expires. 2. Reasonable length of time: When a time period for the offer has not been specified, it will lapse after the passage of a reasonable length of time. The reasonable time period will depend on the facts of each case such as the nature of the goods and the mode of communication. Ramsgate Victoria Hotel Vs. Montefiore (1866) 3. Failure of a precondition: Some offers may be made subject to certain conditions and if these conditions are not in place then the offer may lapse. For example, person A offers to buy a nice car from person B for $1000 at the end of the month. During the course of the month the car gets into an accident and is no longer a nice car. Person A cannot be held bound to the contract. Financings Vs. Stimson (1962) 4. Rejection: An offer lapses when the offeree rejects it. 5. Counter-offer: A counter-offer terminates the original offer. Hyde Vs. Wrench (1840). 6. Requests for information: Inquiries about the goods or services, would not amount to a

counter-offer, but would instead be termed requests for information. Stevenson Jaques & Co. Vs. McLean (1880)

7. Death of the offeror: If the offeree has knowledge that the offeror has died, then the offer will lapse. If the offeree is unaware of the death of the offeror, then it probably might not. 8. Death of the offeree: The offer lapses and the offer cannot be accepted by the offeree’s representatives or agents. 9. Withdrawal of offer: An offer may be withdrawn before it is accepted by the offeree. Payne Vs. Cave (1789). The offer may be withdrawn before the expiry of the period granted for communicating acceptance as long as it was before acceptance. Routledge Vs. Grant (1828). The withdrawal must be communicated to the offeree for it to be effective. Byrne & Co. Vs. Leon Van Tienhoven (1880). The revocation of the offer can be made by the offeror or some other reliable source. Dickinson Vs. Dodds (1876). An offeror who vows to keep an offer open for a specified time period may still revoke that offer before that time period expires provided the offer has not been accepted, unless the promise to keep the offer open is supported by some consideration. Where an offeree changes his known address, communication of withdrawal on his last known address will be effective. Letters received but not read will also be deemed to have been communicated. Please study the case of Pickfords Ltd. Vs. Celestica Ltd. (2003) for further understanding. Withdrawal of an offer to enter into a unilateral contract. An offer to enter into a unilateral contract cannot be revoked once the offeree has commenced performance. Errington Vs. Errington (1952) Daulia Ltd. Vs. Millbank Nominees (1978) An exception to this rule that applies in the case of commission agents for the sale of goods/items Luxor (Eastbourne) Ltd. Vs. Cooper (1941) A unilateral offer made to the general public can be revoked by communicating the revocation in the same manner, such as an advertisement. It cannot be expected of the offeror to inform the world of the revocation but should take reasonable steps to bring the withdrawal to the attention of such persons or group of persons. Shuey Vs. United States (1875)...