Termination of offer and acceptance PDF

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Contract Law – 08/10/18 Creating a Contract 1 – (i) Termination of offer (ii) Acceptance (i) Termination of offer: - Revocation (or withdrawal) of offer - Revocation of proposed bilateral contracts (promise in exchange for a promise): o An offer can be revoked (or withdrawn) any time before it is accepted Routledge v Grant (1982) o Revocation must be communicated to the offeree, but the communication can be done through a third party: Dickinson v Dodds (1876). In this case the D offered to sell a house to the claimant for £800, the offer to be left open until Friday. On Thursday the D sold the house to a third party, and the claimant sent the D his letter of acceptance on Friday. It was held that no contract had been concluded between the parties because the offer had been withdrawn before it was accepted. o Offeror can revoke even if time limit for acceptance has not expired (unless forming part of a separate contract) o The postal rule (discussed below) does not apply to letters of revocation Byrne v Van Tienhoven (1880) 5 CPD 344:  Acceptance: when the letter is posted (exception to the general rule applies)  Revocation: when the letter is received (no exception to the general rule)  In Byrne v Van Tienhoven the Ds sent claimants an offer on 1st October, offer received by claimants on 11th October and they sent off an immediate acceptance. However, the defendants had sent, on 8th October, a letter revoking their offer, which received the claimants on 20th October. It was held that a contract was concluded between the parties on 11th October. To be effective the withdrawal must be drawn to the attention of the other party and, for this purpose, the postal rule does not apply, so that the revocation only takes effect when it actually reaches the other party. So the purported withdrawal could not take effect until 20th October but, by that time, a contract had already been concluded, and the withdrawal was therefore too late. This case is a good eg of the objective approach which the courts adopt to the issues of agreement, because at no time were the parties actually subjectively agreed; by the time the claimants accepted the offer on 11th Oct, the Ds had already dispatched their ‘withdrawal’ of the offer. (Offer: 1st October; Received: 11th October; Acceptant sent immediately; Revocation sent: 8th October; Revocation received: 20th October.) - Revocation in the context of unilateral contracts (promise in exchange for an act): o An offer can be revoked any time before it is accepted

o Revocation must be communicated to the offeree o Revocation of general offers: equally prominent announcement is sufficient o What if the offeree has already started the performance of the act? If acceptance is the performance of the act, the contract is enforceable only when the act has been performed. If offeror can revoke the offer any time before acceptance, offeree may start on performance with the risk that offeror may revoke the offer. To avoid this outcome, the law places some limitations on revocation once offeree has commenced performance. o Revocation in unilateral contracts where offer is directed to specific individuals (Errington v Errington 1952): Acceptance is performance of the act  Enforceable contracts exists only when act performed  But secondary (‘collateral’) contract arises not to revoke offer once offeree starts to act.

o In case of unilateral offers made generally (e.g. adverts in newspapers or notices), revocation must be by equally prominent notice.

o Other methods of terminating an offer:  Rejection of offer or offeree makes a counter-offer  Occurrence of a specified event – if offer started to terminate on a specific event and that event occurs (e.g. ‘while stocks last’ or ‘subject to availability’)  Death of the offeror – although the law is not entirely clear on this point. It could be said that death always terminates an offer because the parties cannot enter into an agreement once one of the parties is dead. However, it seems to be the case that an offeree cannot accept an offer once he knows that the offeror has died, but that his acceptance may be valid if it made in ignorance of the fact that the offeror has died, provided that the contract is not one for the performance of personal services. There is no authority on the position where it is the offeree who dies. The generally accepted view is that on the offeree’s death the offer comes to a by operation of law.  Lapse of time – an offer which is expressly stated to last only for a specific period of time cannot be accepted after that date. An offer which specifies no time limit is deemed to last for a reasonable period of time.

(ii) Acceptance:    

Acceptance is the unqualified expression of assent to the terms proposed by the offeror, giving rise to concluded contract. There is no rule that acceptance must be made by words; it can be made by conduct, as was the case in Carlill v Carbolic Smoke Ball Co (1893). Compliance with any prescribed method of acceptance stated in the offer Compliance with expressed or implied time limits for accepting the offer

- Acceptance in Bilateral Contracts:  The mirror-image rule: acceptance must be to the exact terms of the offer.  If the ‘acceptance’ seeks to change the terms, or introduces new terms, it is a ‘counteroffer’ and not a valid ‘acceptance’ and will not create a contract.  The counteroffer ‘kills off’ the original offer, which cannot be accepted later: Hyde v Wrench (1840).  E.g. A (offeror) makes an offer and B (offeree) accepts exactly the same terms of the offer – this creates a contract provided other requirements are met. If B does not accept exactly the same terms of the offer and introduces new terms the law classes this as a counter-offer, not an acceptance. The counter-offer “kills off” the original offer and stands as a new offer, which original offeror (A) can choose to accept or reject.  Hyde v Wrench (1840) 3 Beav 334 : Defendant offer to sell land for £1000 offer Claimant offer to buy land for £950 counter-offer which “kills off” the original offer and stands as a new offer D refused the offer rejection of the counter-offer Claimant agrees to original price of £1000 No acceptance possible because no offer to accept. Counter-offer “killed off” original offer D refuses to sell Held: no contract. He does not have to accept the claimants offer because his original offer was no longer on the table. 

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A ‘mere enquiry’ does not ‘kill off’ original offer, which can still be accepted. (Meaning for instance in the case of Hyde, supposed they agreed on the original £1000, the offeree can ask questions like how can I pay? When would you want paying? These responses are as the law says ‘request for information’ and does not ‘kill off’ of the original offer. Stevenson v McLean (1880) 5 QBD 546 - a request for further information regarding the means of delivery was deemed to be a mere inquiry. Original offer was still valid.

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Gibbs v Lakeside Developments [2016] EWHC 2203 - there was a discrepancy between contents of an emailed ‘acceptance’ and a document attached to the email which contained slightly different terms. Held: no contract created since the purported ‘acceptance’ was in fact a counter-offer (note operation of objective test here).

- Rules concerning communication of acceptance to offer: There is a general requirement that acceptance of the offer must be communicated to the offeror and takes effect once they receive it (is not effective until it is communicated): Entores V Miles Far East Corporation - Lord Denning: If acceptance is not heard because of the noise of a passing aircraft, there is no contract between the parties because acceptance has not been communicated. In such a case, the parties have a contract only if the offeree repeats the acceptance. Where the acceptance is made clearly and audibly, but the offeror does not hear what is said, a contract is nevertheless concluded unless the offeror makes clear to the acceptor that he has not heard what was said. 

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Silence cannot constitute acceptance (in most cases!) – Felthouse v Bindley: ‘If I hear nothing further, I’ll consider the horse mine’. Held: contract could not be created in this way. The rationale behind this rule is that it is thought to be unfair to put an offeree to time and expense to avoid the imposition of unwanted contractual arrangements.

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Acceptance must be communicated in the form (if any) that offeror requests in order to create contract – but offeror may waive this by words or conduct (RTS v Muller)

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Acceptance can be made by conduct – Carlill and unilateral offers (conduct is the acceptance). Acceptance in unilateral contracts (promise in exchange for an act): Classic examples are the reward cases or Carlill v Carbolic Smoke Ball Co (1893) – where it was held that the advertisement was not an invitation to treat but was an offer to the whole world and that a contract was made with those persons who performed the condition ‘on the faith of the advertisement’. The effect of classifying a contract as unilateral rather than bilateral is that acceptance can be made by fully performing the requested act; there is no need to give advance notifications of acceptance. The principal difficulty lies in determining when the offer can be withdrawn, which in turn, depends upon when the offer has been ‘accepted’. The willingness of the courts to imply an obligation not to ‘prevent the condition becoming satisfied’ can be seen by contrasting the following two cases. The first is Errington v Errington (1952) where the Court of Appeal held that the father’s offer of a unilateral contract could not be revoked after the couple had started to pay off the mortgage instalments provided

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that they did not leave performance ‘incomplete and unperformed’. Contrasted to a different result reached in the case of Luxor Ltd V Cooper (1941)…  (Rule: offeror can withdraw/revoke/terminate offer at any time before acceptance of it  Can offeror withdraw offer once offeree has embarked upon performance of the requested act?  Errington v Errrington (1952) – unilateral offer could not be revoked once offeree had embarked upon performance (but must complete performance to become entitled to the promised benefit)) 

Acceptance must respond to the offer. Acceptance in ignorance of the offer does not create contract in bilateral situations (e.g. identical cross offers). The offer must have been present to his mind when he did the act which constituted the acceptance. Thus, in R v Clarke (1927), where the party claiming the reward had forgotten about the offer of a reward at the time he gave the information, it was held that he was not entitled to the reward.

- Exceptions to the rule requiring communication of acceptance: 

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Operation of the postal rule of acceptance (remember general rule is that acceptance must be communicated) o When it is reasonable to have used the post as the means of acceptance, acceptance takes place when the letter of acceptance is posted. o This is an exception to the general rule that acceptance must be communicated. Adams v Lindsell (1818): acceptance takes place when the letter of acceptance is posted by the offeree.

 Implications: (i) Contract created by posting acceptance – even if acceptance is delayed in the post or never received by offeror, this does not matter, and he is still bound by the contract. (Household Fire Insurance v Grant) – The letter of acceptance had been lost in the post, but the contract had still been concluded because the acceptance takes effect when it is posted and not when it reaches the offeror. (ii) Offeror cannot revoke offer one acceptance is posted (Byrne v Van Tienhoven) (iii) Offeree cannot retract his acceptance by quicker method – although see Scottish authority of Dunmore v Alexander.

- Some justifications for postal exception: 

Historically, post was the main way of communicating over long distance. A rule one way or the other (dispatch or receipt) was required.

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Offeror can choose/prescribe the mode of acceptance and if he does not, he takes the risk that the offeree might use the post and acceptance might be lost or delayed. Facts of Adams v Lindsell justified the exception in that case: it was the offeror’s fault that acceptance was delayed. Scotland proposing abolition of the rule: acceptance will be effective when it reaches the offeror (that is, when it is made available to the person in such circumstances as make it reasonable to expect the person to be able to obtain access to it without undue delay). The offeree should not be prejudiced once he has dispatched his acceptance and he should be able to rely on the efficacy of his acceptance.

- Limitations on postal exception:   

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The letter of acceptance must be correctly addressed. The postal rule only applies where it is reasonable to use the post: Henthorn v Fraser The postal rule must not cause ‘manifest inconvenience or absurdity’: Holwell Securities v Hughes. If the letter is not properly addressed; if it was not reasonable for the offeree to have used the post as means of acceptance (e.g. there was a postal strike and the offeree knew about it when she posted the letter); if it is implied in the offer that a quick response is needed, etc. Acceptance must accord with offeror’s instructions – Holwell Securities v Hughes: acceptance had to be given ‘by notice in writing’. Postal rule does not apply to instantaneous communications (faxes, e-mail, etc.). In these cases acceptance does not occur when it is sent but when it is communicated/ received by the offeror and at the place at which the offeror happens to be, which is when the contract will be formed. Although interpreting ‘communicated’ may be problematic. For example, is email acceptance effective when received in ‘inbox’ even if unread, when the email is actually read by the intended recipient, when it reasonably ought to have been read (during office/business hours), etc.?

- Acceptance and instant communications  

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Brinkibon v Stahag Stahl – contract formed in place where acceptance by telex was communicated to offeror (Vienna), not from where it was sent (London). Lord Wilberforce: “No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgement where the risks should lie.” Brimnes: acceptance communicated when it could be read (e.g., within office hours), not when it is read. Thomas v BPE – judge followed receipt rule in email acceptance

Summary

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Valid acceptance of an offer will create a contract provided other requirements are met (consideration and intention to create legal relations). Acceptance must be communicated to offeror to be valid, although there are exceptions to this rule. Acceptance in unilateral contracts occurs when the request act (finding lost dog; using the smoke ball; paying mortgage payments) is completed; but offeror may not be able to withdraw offer once offeree embarks on performance....