Agreement (offer and acceptance) Flashcards
A client went to an auction advertised by the auctioneer as being ‘without reserve’. The client was interested in a particular antique clock and bid £300 for it. No higher bid was made but the auctioneer refused to sell it to the client as they knew someone who would buy it for £400. The client has been reliably informed that to buy a similar antique clock elsewhere the client will have to pay £1,000.
Which of the following best describes the legal position?
A-The seller of the clock is in breach of contract and will be liable to pay the client £700 in damages.
B-The auctioneer is in breach of contract and will be liable to pay the client £100 in damages.
C-The auctioneer is in breach of a unilateral contract to sell to the highest bidder.
D-The auctioneer was entitled to withdraw the clock from the sale as the client’s bid was too low.
E-The client can sue either the seller or the auctioneer for breach of contract.
Option C is correct. Barry v Davies.
Option A is wrong as there was no contract of sale- the hammer did not go down.
Option B is wrong as the damages would be £700.
Option D is wrong. The auctioneer by advertising the auction as ‘without reserve’ was effectively promising to sell to the highest bidder.
Option E is wrong as there was no contract with the seller.
A client attended an auction. The client was interested in a particular painting and made the highest bid for it. The client’s bid was rejected by the auctioneer on the basis “reserve not met”.
What, if any, cause of action does the client have?
A-An action for breach of a unilateral contract by the auctioneer.
B-A damages action against the seller of the painting.
C-None, as the auctioneer was entitled to reject the client’s bid.
D-An action for specific performance against the seller.
E-A joint and several action against the seller and auctioneer.
A client decides to sell their farm. The client e-mails a competitor farmer offering it for sale for £100 million. After considering it, the farmer replies to the client, offering £95 million. After thinking about it further, the farmer e-mails the client for a second time, offering them the full asking price. In the meantime, the client has agreed to sell the farm to a third party.
Does the farmer have a contract with the client for the sale of the farm?
A-No, because the client’s initial offer was rejected when the farmer made a counter-offer.
B-No, because there is no certainty of terms surrounding the price of the farm.
C-No, because the client has made a contract with a third party and so there cannot be two contracts in existence.
D-Yes, because the farmer has offered the client the full asking price.
E-Yes, because the client did not revoke his initial offer before it had been accepted by the farmer.
CORRECT ANSWER: A. The client’s offer was impliedly rejected when the farmer made the counter-offer to buy the farm for £95 million. The farmer could not then accept the client’s offer: Hyde v Wrench.
B is wrong because there is something more fundamentally problematic on the facts: there is no acceptance of an offer. Hence there is no need to consider whether the terms are certain.
C is wrong because there could, in principle, be two contracts in existence and the client could be in breach of one of them if they fail to sell the farm. But there are not two contracts in existence here as one is not formed with the farmer.
D is wrong because the client’s offer was no longer open for the farmer to accept once the farmer had made the counter-offer.
E is wrong because the client’s offer was impliedly rejected by the farmer’s counter-offer and so it was no longer capable of being accepted.
A person advertised on their local Facebook group a £100 reward for anyone who found and returned their lost cat. The advertisement included the cat’s name and a photograph of it together with the person’s address and contact details. A client found the cat and telephoned the person to tell them. The person thanked the client but said they had changed their mind about the reward.
Is the client entitled to £100 reward?
A-No, because the advertisement was simply an invitation to treat and not an offer.
B-No, because the offer of reward had been effectively revoked before acceptance.
C-No, because there would be no intention to create legal relations.
D-Yes, because offers of unilateral contracts made to the public can never be revoked.
E-Yes, because there was an implied promise not to revoke the offer once aware acceptance had started.
Option E is correct- Errington v Errington/Soulsbury v Soulsbury. This also explains why option B is wrong.
Option A is wrong as offers of reward are deemed to be offers as a matter of public policy – Williams v Carwardine /R v Clarke. This explains too why option C is wrong.
Option D is wrong as offers made to the public are capable of being revoked – Shuey v US.
An electrical High Street retailer (the Retailer), advertised for sale in the local newspaper a Sony XR-55A95K OLED TV 55-inch screen at the knock-down price of £1,200 on a “first come, first served” basis in its post-Christmas sale starting on 27 December. A client, desperate to buy the TV, began queuing outside the Retailer’s shop on 26 December and was the first customer inside the next day asking to buy the TV. The Retailer refused to sell the client the TV for £1,200. The Retailer said the advertisement had been a ‘gimmick’ and said it would have to charge £2,000 by way of price match with online retailers.
If the client sues the retailer which of the following is the most likely outcome?
A-The client’s claim would fail as the advertisement was simply an invitation to treat.
B-The claim would succeed and the court would order specific performance.
C-The claim would succeed and the client would be awarded £800 by way of damages.
D-The client would be awarded damages including a sum representing distress and disappointment.
E-The client would be awarded damages of £1,200 for breach of a unilateral contract.
Option C is correct. The advertisement appears to be an offer of a unilateral contract– Leftkowitz. It will cost the client an extra £800 to buy a similar TV elsewhere.
Option A is wrong as the advertisement appears to be an offer of a unilateral nature– Leftkowitz.
Option B is wrong. Specific performance will not be ordered where damages are adequate.
Option D is wrong as damages for distress/disappointment are not generally awarded (Addis Gramophone) but only where the main purpose of the contract was to have a good time eg in relation to a spoiled holiday (Jarvis v Swans Tours).
Option E is wrong. A unilateral contract has been breached but the damages would be £800.
A client wanted a new kitchen for their home. The client went to a kitchen supplier (the Supplier) to discuss their requirements. The Supplier emailed the client a quotation and said that it would stay open for a month. A week before the deadline the client posted a letter to the Supplier accepting the quotation and asking when it would be able to start work. Ten days after posting the letter, the client phoned the Supplier. The Supplier said it had not received the client’s letter and that it was now too late to accept the quotation. The client had obtained proof of posting the letter.
Which of the following best explains the legal position?
A-The quotation was an invitation to treat and the client’s letter was an offer which was not accepted.
B-The client had accepted the Supplier’s offer when the client posted the letter.
C-The letter was a simple request for information and so there is no contract.
D-There is no contract as acceptance was not communicated before the offer lapsed.
E-As the offer was sent by email acceptance should have been sent by email in order to be effective.
Option B is correct. As the letter was properly stamped, addressed and posted the postal rule would apply and the letter would be effective acceptance on posting. It was reasonable to accept by post as there was still a week before the deadline and the postal rule had not been expressly or impliedly excluded by the Supplier.
Option A is wrong as quotes are offers.
Option C is wrong as the letter appears to be an acceptance followed by a request for info.
Option D is wrong. If the postal rule applies acceptance is binding when the letter is posted, not read.
Option E is wrong as the offer was open for a month and there is nothing to suggest acceptance by email was essential.
A client needed to hire a van to transport some goods and so contacted a van hire company. The company posted a quotation for £90 and said that if the client wanted to accept the company needed to know by Friday 19 April.
On Tuesday 16 April the client posted a letter accepting the quotation and asking when would be the earliest the company could supply a van. By 22 April the client had not heard back from the company. The client rang the company. It said it had not received the letter and had no vans available for hire now or in the near future.
If the client sued the company for breach of contract, which of the following best describes the most likely outcome?
A-The company would be liable for breach of contract because a contract was formed when the client posted the letter on 16 April.
B-The company would not be liable for breach of contract as the postal rule would not apply.
C-The company would not be liable for breach of contract as it had no more vans available.
D-The company would be liable for breach of contract as the client accepted its offer when the client rang on 22 April.
E-The company would not be liable for breach of contract because the client’s letter on 16 April amounted to a counter-offer.
Option B is correct.
An offer was made by the company to hire out the van for £90. The client purported to accept on Tuesday 16 April. The letter was not a counter-offer as the client was only asking a question and not imposing a condition, so option E is wrong.
Acceptance must be communicated. On that basis the client has no contract with the company, because by the time the client actually contacted the company (ie on 22 April) its offer had lapsed (19 April), so option D is wrong.
There will only be a contract if the postal rule applied. Under the postal rule a letter of acceptance is binding as soon as it is posted. For the rule to apply the post must have been a reasonable means of communication. On the facts it may have been reasonable to reply by post on 16 April as the offer did not lapse until 19 April and also the quote had been sent by post. Query though whether the letter was sent first or second class and at what time (eg was it posted after the last postal collection on 16 April?).
In any event the postal rule will only apply where a letter was properly addressed and posted etc. Query here why the client’s letter was lost in the post, eg had it been properly addressed? Also the postal rule may have been impliedly excluded as the company said it needed to ‘know’ by 19 April (Holwell Securities v Hughes). Only in the unlikely event of the postal rule applying would there be a contract. Option A therefore is not the best answer.
Option C is wrong because even if the company had no more vans it could be in breach and liable to pay damages.
On 8 March a company made an offer by email to sell goods to a client for £500. It said it would keep the offer open but needed to hear from the client before 15 March. The next day the client posted a letter to the company accepting the offer. The letter never arrived. On 16 March the company sold the goods elsewhere.
Is the company in breach of contract by not selling the goods to the client?
A-Yes, because the letter of acceptance would be deemed effective when posted.
B-Yes, because the company should have checked with the client before selling the goods elsewhere.
C-No, because the company needed “to hear” from the client and so the client should have communicated acceptance by phone or in person.
D-No, because the offer was made by email and so should have been accepted by email or other instantaneous form.
E-No, because the postal rule had been impliedly excluded or otherwise may not apply.
Option E is correct. The offeror said he needed ‘to hear’ by a certain date. This may have impliedly excluded the postal rule in the sense that if acceptance is made by post it must be received in order to be effective. Also, the letter may not have been properly stamped, addressed and posted – query why it did not arrive. Accordingly, option A is wrong.
Option B is wrong. There is no obligation on an offeror to check whether an offeree intends to accept.
Option C is wrong. If an offeror wants a particular mode of acceptance the offeror needs to make that very clear.
Option D is wrong. As the offer is being held open for a number of days, there is no need for an instantaneous form of communication.
A client bought a house and promised his son and daughter-in-law that if they occupied the house and made all the mortgage repayments on the house he would transfer the house to them. The couple duly started to make the mortgage repayments but then there was a dispute. The client told the couple he had changed his mind and sought to repossess the house.
Which of the following statements best describes the legal position?
A-The client was entitled to renege on his promise as the couple had promised nothing in return for it.
B-The client could revoke his offer as the couple had not completed the required act of repaying the mortgage.
C-The client would be in breach of an implied promise not to revoke his offer once the act of repaying the mortgage had started.
D-There was no contract between the client and the couple as there would have been no intention to create legal relations.
E-The client would be in breach of contract because the couple had accepted the offer and provided consideration by starting to repay the mortgage.
Option C is correct. As well as the express offer of a unilateral contract there would be an implied promise not to revoke the offer once the act had started.
Option A is wrong. The client made an offer of a unilateral contract. This is a promise (on the client’s part) in return for an act (on the part of the couple). The couple were not required to promise anything in return for that unilateral offer. Indeed, had they done so, the contract would be bilateral in nature (a promise in return for a promise). Once the couple had started to perform the act of paying off the mortgage, the client was unable to renege on his promise for the reasons given in the feedback to option C.
Option B is wrong. As identified in the feedback to option C, there would be an implied promise not to revoke the offer once the act of paying off the mortgage had started.
Option D is wrong. Bearing in mind the subject matter of the agreement, the normal presumption in relation to family members not intending legal relations would be rebutted.
Option E is wrong. With unilateral contracts, completion of the act (rather than starting to perform the act) is generally regarded as both the acceptance and consideration for the promise.
Postal Rule
If the letter was properly stamped, addressed and posted the postal rule would apply and the letter would be effective acceptance on posting. BUT also consider if it was reasonable to accept by post, for example it was reasonable to accept by post as there was still a week before the deadline and the postal rule had not been expressly or impliedly excluded by the Supplier.
No reserve price in an auction and highest bidder bid not accepted, implications?
An auctioneer’s request for bids is ordinarily an invitation to treat. The bid is an offer which the auctioneer may accept or reject (Sales of Goods Act 1979, S57(2)). If the auctioneer is acting as agent for the owner, a bilateral contract is formed between the owner and the bidder once the hammer falls. If the auctioneer refuses to accept a bid then there cannot be a contract between the owner and bidder.
However, if the auction is without reserve, the highest bidder may be able to bring an action against the auctioneer. If an auction is advertised ‘without reserve’, and the auctioneer refuses to accept the bid, the highest bidder will have a claim in damages against the auctioneers (Barry v Davies 2000) but will not have a claim against the owner.
Are there any rules on electronic communication and instant messaging with regards to acceptance and revocation?
There is no universal rule that applies to all forms of electronic communication and instant messaging. A court is likely to say that this will depend on the circumstances in question and the intentions of the parties. In a dispute such as this a court may also look at the decision in The Brimnes and say that a message sent to a business will be communicated when it would have come to the attention of the recipient acting in a business-like manner.
Items for sale in a shop window
These are only invitations to treat
A display of goods in a shop window is an invitation to treat, therefore as the shop owner has not made an offer they are not obliged to sell the item to the person who saw the vase [or at the price stated] (Fisher v Bell 1967). In addition, the offer to sell in a shop would be initiated by the person who saw the vase and the shop keeper would have only accepted it by taking the money. This did not occur on the facts.
Revocation of an offer
Revocation must be communicated to the offeree.
Communication does not need to be by the same method as the offer was made
A man advertised his car for sale at a price of £7,500. A woman telephoned him to say that she was interested in the car, but asked if he might be willing to reduce the price. He replied that he was prepared to offer her the car for £7,350. The woman said that she needed some time to see if she could raise the money. The man explained that he had another interested buyer, but that he would give her until 1.00pm the following day to telephone him if she wanted the car at that price. The woman gave him her telephone number in case he changed his mind before then. At 10.00am the following day, the other interested buyer offered the man £7,450 for the car, and he accepted the offer. At 11.10am, the man telephoned the woman and told her that he had sold the car, but the woman responded that she had managed to raise the £7,350 and she therefore considered the car to be hers.
Can the woman claim that she has a binding contract with the man for the sale of the car at the price of £7,350?
A-No, because the man had telephoned the woman and told her that he had already sold the car.
B-Yes, because the woman had accepted his offer within the agreed deadline.
C-No, because the man had already agreed to sell the car to the other interested buyer.
D-Yes, because the man was contractually bound to give the woman until 1.00pm to buy the car.
E-No, because the man’s offer lapsed when he telephoned the woman at 11.10am.
Option A is correct. The man offered to sell his car to the woman for £7,350 in response to her invitation to treat. An offer may be revoked at any time before acceptance, provided it is communicated by the offeror to the offeree.
Option B is wrong, because the woman’s acceptance followed the man’s communication of his revocation, i.e. the fact that he had already sold the car.
Option C is wrong because the mere fact of the sale of the car to the other buyer was not by itself an effective revocation until it was communicated at 11.10am.
Option D is wrong because an offeror is not contractually bound by a promise to keep an offer open unless the offeree has provided consideration in return for the promise (Mountford v Scott). The woman has provided no such consideration on the facts.
Option E is wrong. The offer would have only lapsed at 1.00 pm; however, the offer had in any event been successfully revoked before that time.
