2. Agreement - Offer and Acceptance Flashcards
What is required for a communication to be an offer?
It must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of all material terms contained in the offer
An expression of what is required for a communication to be an offer?
An expression of a promise, undertaking, or commitment to enter into a contract
What are the requirments for a valid offer?
- The terms of the offer must be definite and certain enough (for a court to enforce)
- The offeree must have knowledge of the offer (thus, returning a lost dog is not an acceptance of a reward offer if the finder was not aware of thereward).
Remember:
A statement made to request information (what’s the lowest price you’d take for the car?) is not an offer.
A statement made in response to a request for information will not be sufficient to constitute an offer.
How does an offeree acquire knowledge of an offer?
The offer must be communicated to them
Is a statement made in response to a request for information an offer?
No
What is a unilateral contract?
A contract which arises when an offeror promises to do something if the offeree does something in return and the offeree actually does this thing
What is a revocation?
A retraction of an offer by the offeror
How is an offer revoked directly?
By directly communicating the revocation to the offeree before acceptance
How is an offer revoked indirectly?
If the offeree receives:
- Correct information
- From a reliable source
- Of acts of the offeror which would indicate to a reasonable person that the offeror no longer wishes to make the offer (for example, the offeree receives reliable information that the offeror sold the car the offeree was offered)
When becomes a revocation effective?
A revocation is effective when received by the offeree.
What are two limitations on an offeror’s power to revoke?
- Collateral contract
- Beginning performance under an offer for a unilateral contract
What is a collateral contract?
A separate contract which is collateral to an offer, in which the offeror promises (supported by consideration from the offeree), e.g., not to revoke an offer within an agreed time period.
Why is a unilateral offer irrevocable once performance has begun?
Because it would be unfair on the offeree if the offeror could revoke the offer after the offeree has already begun performance
Even though a unilateral offer is irrevocable once performance has begun, when is the contract formed and what is the effect of this for the offeree?
The contract is formed when performance is complete.
This allows the offeree to withdraw from performance at any time, even though the offeror cannot revoke after they begin.
Even though beginning performance under a unilateral and bilateral offer both make the offer irrevocable, what are the differing reasons for this?
Unilateral: beginning performance would make it unfair for offeror to revoke, even though contract is not formed until completion
Bilateral: beginning performance accepts the offer and a contract is formed
How may an offeree terminate an offer?
- An offeree may terminate an offer by rejection - either expressly or impliedly, such as through a counteroffer.
- Offeree can impliedly reject an offer by failure to accept within the time stated, or if no time is stated, within a reasonable time (you can’t accept my offer to sell you an ice lolly I’m holding an hour after I make the offer).
What is an express rejection?
A statement by the offeree that they do not intend to accept the offer
When is a rejection effective?
When received by the offeror
What is the effect of a counteroffer?
It rejects the original offer and makes a new one, reversing the roles of the parties
What is the test for whether a communication is a counteroffer or a mere inquiry consistent with the original offer being live?
Whether a reasonable person would believe that the original offer had been rejected
Does rejection or counteroffer regarding a collateral contract affect the offer that the collateral contract concerns?
No
How is an offer terminated through lapse of time?
If offeree does not accept within a time specified by the offeror, or within a reasonable time if no time is specified
What does the court take into account when determining if a time period is reasonable for the purposes of lapse?
The subject matter of a contract, e.g. a reasonable time in which to accept an offer for perishable goods will be shorter than non-perishable
What are the four ways in which an offer may be terminated by operation of law?
- Death of offeror/offeree
- Destruction of subject matter of offer/proposed contract
- Supervening illegality
- Failure of a condition contained in the offer
What is acceptance?
A manifestation of unqualified assent to the terms of an offer
Who has the power to accept an offer?
Anyone (including anyone within a particular class) to whom the offer was made
Can the power to accept be assigned?
No
Why does an agent accepting the terms of an offer on behalf of a principal not breach the prohibition on assigning the power to accept?
Because the agent is entering the agreement on behalf of the principal, and it is the principal who will be party to the contract
Can a person accept an offer they are not aware of?
No.
Even if they unknowingly perform what would be required of an offeree, there is no contract if they were not aware of the offer.
How can an offer be accepted?
Unless a specific method is stipulated in the offer, an offer can be accepted in any reasonable manner and by any reasonable medium
What is the effect of an offeree accepting the offer but not through a method stipulated in the offer?
The acceptance is not valid, unless the method is just different but no less advantageous to the offeror
Is someone who starts performance concerning a unilateral offer obligated to complete performance?
No
Is the offeree in a unilateral offer required to notify the offeror that they have begun performance?
No
(applies to unilateral only)
What is the offeree in a unilateral offer required to notify the offeror of?
That performance has been completed, within a reasonable time after completion
If a non-unilateral offer is to be accepted by conduct, what must the offeree do?
Make the offeror aware, so as to satisfy the communication of acceptance requirement
Must acceptance always be communicated?
Yes, unless the offer provides that acceptance need not be communicated
Must waiver to communication of acceptance be express?
No, it can be implied through conduct. In such a case, the offeror must be aware of the offeree’s conduct so as to satisfy the requirement of communication.
What is the postal rule?
Under the postal rule, acceptance by post creates a contract at the moment of posting, even if the letter gets lost in the post
What are 3 instances in which the postal rule will not apply?
- Letter not properly addressed and stamped
- Unreasonable for acceptance to be communicated by post
- Offer stipulates, expressly or impliedly, that acceptance is not effective until received
What is the only element to which the postal rule applies?
The postal rule applies only to acceptance. It does not apply to other events in the contract, such as rejection or revocation.
Does the postal rule apply to instantaneous communication, e.g. email?
No
What is the battle of the forms?
If offers and acceptances are exchanged containing different terms and each says its terms control (a battle of the forms situation), it is usually the last set of terms that were not objected which control (the party who fired the last shot before performance began wins).
What is a prevail clause?
A clause in a party’s draft contract stating that their terms will prevail over any terms which the offeror seeks to introduce
What difficulty do prevail clauses present?
When the other party makes a counteroffer to enter into the contract on their terms, they are rejecting the whole of the original offer, which would include the prevail clause
Additional Bullshit:
In an auction without a reserve price may the highest bidder in the auction bring an action to enforce the contract, if the bidder doesn’t accept the bid?
Yes. Under s57 (2) of the sale of goods act manifested in Barry v. Davies (2000).
