Case Law Acceptance and Consideration

Question 1

Smith v Hughes and The Leonidas

Answer 1

The court applies a predominantly objective test and asks whether a reasonable person would regard the statement as an offer

Question 2

FISHER v BELL [1967] 1 QB 394

Answer 2

Goods on display in a shop window are generally an invitation to treat.

Question 3

PHARACEUTICAL SOCIETY GB v BOOTS CASH CHEMISTS [1953] 1 QB 401, CA

Answer 3

Goods on display in supermarkets and self service shops are generally an invitation to treat

Question 4

PARTRIDGE v CRITTENDEN [1968] 1 WLR 1204

Answer 4

Advertisements are generally regarded as an invitation to treat but in exceptional cases may be an offer if there is a clear intention to be bound - see, for example, Carlill v Carbolic Smoke Ball.

Question 5

CARLILL v CARBOLIC SMOKE BALL CO [1893] 1 QB 256, CA

Answer 5

An advertisement can constitute an offer if there is a clear intention to be bound. An offer can be made to the world. The need for acceptance to be communicated can be waived.

Carlill therefore is authority for the proposition that an advertisement can constitute an offer to ‘the world’ (that is anyone who learns of it), and that it may, by the way in which it is stated, waive the need for communication of acceptance prior to a claim under it.

Question 6

STEVENSON JACQUES AND CO V MCLEAN 1880) 5 QBD 346.

Answer 6

A request for information does not destroy the original offer, which can still be accepted.

Simply querying the method of payment, a prospective buyer is not saying ‘I do not want to buy at the stated price’; in other words he is not impliedly rejecting the offer. He is simply making an inquiry, the reply to which may determine his decision whether or not to accept. It is for this reason that a simple request for information does not affect the offer. It still stands and can be accepted.

Question 7

BARRY V DAVIES (T/A HEATHCOTE BALL & CO [2001] 1 WLR 1962, CA

Answer 7

In a ‘without reserve’ auction the promise to accept the highest bid is an offer of a unilateral contract.

Question 8

Harvela Investments Ltd v Royal Trust Company of Canada Ltd [1986] AC 207, HL,

Answer 8

Generally, such requests for tenders will be invitations to treat and the tenders will be the offers, which may, or may not, be accepted by the business which has invited them. There may be situations, however, where an invitation to tender does constitute an offer.

Normally, a requestor of tenders is free to accept or reject any tender to do the work, even if it is the lowest. This is because the tender is an offer and the bilateral contract is controlled by the requestor’s decision as to which bid to accept (Spencer v Harding).

However, if the requestor has expressly undertaken to award the work to whichever party submitted the lowest tender, it would be wrong not to recognize that promise. In Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd (1986), Lord Diplock considered this promise to amount to a unilateral offer and therefore adopted a two-contract analysis of the tender situation.

Two parties (the claimant and the second defendant) were invited to tender (ie put in an offer) for the first defendant’s shares in a company. They were each sent identical telexes stating, ‘We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer …’. The House of Lords held that the telexes were offers of a unilateral contract to sell to the highest bidder, which would be followed by a bilateral contract for the sale of the shares. So depending on the circumstances, an invitation for tenders may give rise to a unilateral contract.

Question 9

Blackpool & Fylde Aero Club Ltd v Blackpool Borough

Answer 9

An obligation to consider conforming tenders might be implied from the circumstances.
An obligation to consider tenders received before a set deadline was implied on the basis that the council had invited a limited number of parties to submit tenders according to a prescribed procedure.

Question 10

ROUTLEDGE v GRANT (1828) 4 BING 653

Answer 10

An offer can generally be revoked at any time before acceptance, even if the offeror has said he will leave it open for a specified period of time.

An exception to this is if the offeree has given (or promised) something to the offeror in return for keeping the offer open (Mountford v Scott).

Question 11

Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344,

Answer 11

Notice of withdrawal (Revocation) of the offer must be given and must be communicated to the offeree to be effective.

Question 12

Shuey v United States (1875) 92 US 73.

Answer 12

An offer made to the public at large may be revoked through the same channel as it was made, provided the revocation is given the same prominence

Question 13

HYDE v WRENCH (1840) 3 BEAV 334

Answer 13

A counter offer may impliedly destroy the original offer.

An acceptance must match exactly the terms of an offer, otherwise there can be no contract. Consequently, where the response to an offer suggests something different it will not be an acceptance, but a ‘counter offer’ and as such an implied rejection of the original offer.

Question 14

THE BRIMNES [1975] QB 929

Answer 14

There is a reasonable expectation that a notice of revocation sent to a business during normal business hours it is likely to be effective on receipt.

If a notice of revocation is received (eg a fax) but not read until the following day, the court will have to decide when communication takes place, and this will depend on the reasonable expectation of the sender.

Question 15

Errington v Errington and Woods [1952] 1 KB 290, CA

Answer 15

In the case of offers of a unilateral contract, it is likely that the offeror cannot revoke once the offeree has started to perform the act of acceptance.

Question 16

DICKINSON v DODDS (1876) 2 CH D 463, CA

Answer 16

Revocation of an offer can be communicated by a reliable third party

Question 17

R v CLARKE (1927) 40 CLR 227

Answer 17

The offeree must know of the offer to accept it (Australian case)

Question 18

WILLIAMS V CARWARDINE (1833) 5 C & P 566

Answer 18

Advertisements of a reward will normally be offers.

Williams v Carwardine is another case which involved an offer of reward for information leading to the conviction of a murderer. The claimant knew of the reward, but in fact provided the information because she was dying and wanted to ease her conscience. The court held that this did not preclude a valid acceptance of the offer

Question 19

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401, CA.

Answer 19

Battle of the forms.

The claimant offered to sell machinery to the defendant. Delivery was to be in 10 months time, and the price was £75,000. The claimant sent the offer on its usual standard form. The form said that the claimant’s terms were to prevail over any terms on the defendant’s standard form. The claimant’s terms included a price variation clause which allowed the claimant to increase the price of the machinery to keep pace with inflation. The defendant sent back a form purporting to accept the claimant’s offer. The defendant’s form of acceptance, however, said that the price must be fixed at £75,000. The defendant’s form of acceptance asked the claimant to sign and return a tear-off slip. This slip provided that the terms of the defendant should prevail. The claimant signed and returned the tear-off slip. When the claimant delivered the machinery it tried to invoke the price variation clause in its original offer, and claimed an extra £2,800. The defendant refused to pay and the claimant sued.

The Court found a contract on the defendant’s terms. The claimant made the initial offer. However, it was held that the defendant’s form of acceptance amounted to a counter offer. This had been accepted by the claimant returning the tear-off acknowledgement slip which provided that the terms of the defendant were to prevail. Consequently the defendant was not subject to the price variation clause and did not have to pay the extra £2,800.

Question 20

(Scammell v Ouston [1941] AC 251 HL).

Answer 20

In the absence of any other details of the hire purchase agreement (eg duration, number and amount of repayments) it is too vague to be a contract.

Question 21

ENTORES LTD v MILES FAR EAST CORP [1955] 2 QB 327

Answer 21

The general rule is that acceptance must be communicated and is effective when and where it is received. It also needs to be communicated either by the offeree or his duly authorised agent (Powell v Lee).

Question 22

FELTHOUSE v BINDLEY (1862) CB NS 869

Answer 22

Silence is not an acceptance of an offer

Question 23

ADAMS v LINDSELL (1818) 1 B & ALD 681

Answer 23

Subject to certain limitations, a letter of acceptance which is posted is complete on posting and the contract will be formed at that point.

Question 24

Holwell Securities Ltd v Hughes [1974] 1 WLR 155

Answer 24

The offer said ‘notice in writing to [the defendant]’ and the court held that, by using the word ‘notice’, the offeror had impliedly excluded the postal rule. So whilst it might have been appropriate to accept by post, the acceptance actually had to arrive with the defendant to be effective. The postal rule did not apply.

All the offeror needs to do is use words requiring actual communication of the acceptance (Holwell Securities Ltd v Hughes (1974): ‘notice in writing to [the offeror]’).
What other forms of wording do you think will suffice? Examples: ‘Let me know your answer’, ‘I must know by …’ Compare this form of wording with ‘send your response to …’.
The postal rule in Adams v Lindsell will only apply if it is reasonable to use the post; the postal rule has not been excluded by the offeror; and the letter has been properly posted.

Question 25

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelgesellschaft GmbH [1983]

Answer 25

The key statement is an obiter comment by Lord Wilberforce in Brinkibon Ltd v Stahag Stahl GmbH (1983) concerning such non-instantaneous telex (and presumably fax) messages: ‘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 judgment where the risks should lie.

Question 26

HOUSEHOLD FIRE & CARRIAGE ACCIDENT INSURANCE CO LTS v GRANT (1879) 4 EX D 216, CA

Answer 26

The postal rule may apply even if the letter of acceptance is lost or delayed in the post.

Question 27

BALFOUR v BALFOUR [1919] 2 KB 571, CA

Answer 27

In domestic agreements there is a presumption that the parties did not intend to create legal relations

Question 28

Merritt v Merritt [1970] 1 WLR 1211, CA

Answer 28

The presumption that in domestic agreements there is a presumption that the parties did not intend to create legal relations can be rebutted.

If the couple had been separated the likelihood is that they would have been bargaining at arm’s length. They would not have been prepared to rely on honourable understandings and accordingly would have intended the agreement to have legal effect.

Factors which will help to rebut the presumption of no contractual intention in domestic agreements include: (a) The consideration involved – that is the benefit conferred on the other party, or otherwise the detriment suffered by the claimant. The greater the value of the consideration, the more likely it is that the parties intended legal relations.

(b) The parties to the agreement are not on good terms;
(c) If it is a formal agreement in writing.

Question 29

EDWARDS v SKYWAYS [1964] 1 WLR 439

Answer 29

In commercial agreements there is a strong presumption of contractual intention.

In a commercial context very clear words are needed to rebut the presumption of an intention to create legal relations. In other words, it is much more difficult to rebut this presumption than the presumption of no intention to create legal relations in a social or domestic context.

Question 30

Currie v Misa (1875) LR 10 Ex 153

Answer 30

A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the party or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other. In other words, what is provided by way of consideration should either be a benefit to the person receiving it, or a detriment to the person giving it. Often both will be present

Question 31

WHITE v BLUETT (1853) 23 LJ EX 36

Answer 31

Can forbearance be valid consideration.

In White v Bluett a father promised not to enforce a debt against his son, on condition that the son stopped moaning about the distribution of his father’s property. The court decided that the son had not provided consideration for the father’s promise.

Question 32

Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87, HL

Answer 32

A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.

‘Consideration need not be adequate’ means that the consideration does not have to adequately reflect the value of the promise in return for which it is given. ▪ ‘Consideration must be sufficient’ means that the consideration must have some value.

Question 33

HAMER v SIDWAY (1891) 27 NE 256

Answer 33

American case. Can forbearance be valid consideration.

In Hamer v Sidway the question before the court was whether William Story was contractually bound to pay his nephew $5,000 on his 21st birthday. On 20 March 1859, William had promised his nephew that if he would stop drinking alcohol, smoking, swearing and gambling until he was 21 years of age, William would pay him $5,000. His nephew agreed and ‘in all things fully performed his part of the said agreement’.

It was argued that there was no consideration as the promise to stop smoking, drinking, etc did not in fact harm his nephew, but actually benefited him and that William gained no personal benefit from the promise. The court dismissed this argument. The nephew had a legal right to do all the things he abstained from doing. He had abandoned that right in consideration of the promise of $5,000 and the court was not prepared to speculate on the effort which had been required to give up the various activities

Question 34

ROSCORLA v THOMAS [1842] QB 234

Answer 34

A past act will not normally amount to sufficient consideration for a later promise.

For a past act to amount to consideration for a later promise of payment or other reward, the following three conditions must be satisfied:
▪ the act must have been done at the promisor’s request (ie at the request of the person who later promises payment) (Lampleigh v Brathwait), and
▪ there must have been a mutual understanding from the outset that the act would be rewarded in some way (Re Casey’s Patents), and
▪ had the promise of payment/reward been made in advance it would have been legally enforceable, ie all the requirements for a binding contract are satisfied

Question 35

LAMPLEIGH v BRAITHWAIT (1615) HOB 105

Answer 35

Occasionally a past act will be good consideration. The act must have been done at the promisor’s request.

The defendant had asked the claimant to seek a royal pardon for him, in relation to a crime which he had committed. The claimant made considerable efforts to do this and the defendant later promised him £100 for his trouble. The promise was held to be enforceable

Question 36

RE CASEY’S PATENTS, STEWART v CASEY [1892] 1 CH 104

Answer 36

Exception to the rule that past consideration will not be sufficient – there must be a mutual understanding that the act would be rewarded in some way.

Question 37

COLLINS v GODEFROY (1831) 1 B & AD

950

Answer 37

The performance of an existing duty imposed by law is not sufficient consideration in exchange for a promise of payment.

Question 38

Ward v Byham [1956] 1 WLR 496, CA

Answer 38

In this case, the father of an illegitimate child promised to pay the mother an allowance if the child was ‘well looked after and happy’. The mother had a duty imposed by law to support the child. The Court of Appeal had to decide if the mother had given any consideration in exchange for the father’s promise. Denning LJ decided that she had.

Denning - I have always thought that a promise to perform an existing duty should be regarded as good consideration because it is a benefit to the person to whom it is given.

Note, however, that in Ward v Byham the other two judges found consideration on the basis that the mother had in fact exceeded her legal duty by promising to keep the child well looked after and happy. To a large extent, the rule against using a legal duty as consideration seems couched in public policy. In a case such as Collins v Godefroy, it would clearly be against the public interest to allow the promise of payment to be enforced. However, in Ward v Byham there is nothing contrary to public policy in allowing the mother to enforce the allowance which she had been promised by the father.

Question 39

Williams v Williams [1957] 1 All ER 305,

Answer 39

Denning LJ said: a promise to perform an existing duty is, I think, sufficient consideration to support a promise, so long as there is nothing in the transaction which is contrary to public policy.

Question 40

SCOTSON V PEGG (1861) 6 H & N 3295

Answer 40

Performance of an existing contractual duty owed to a third party will amount to consideration (Scotson v Pegg).

If a person is already bound to perform a particular act under a contract, it seems that the performance of this act can amount to sufficient consideration for a separate contract with someone else.

Question 41

GLASBROOK BROS LTD v GLAMORGAN CC [1925] AC 270

Answer 41

Exceeding an existing legal duty can amount to sufficient consideration

Question 42

STILK v MYRICK (1809) 2 CAMP 317

Answer 42

Performance of an existing contractual duty is not sufficient consideration for a promise to pay more

Question 43

HARTLEY v PONSONBY (1857) 7 E1 B1 872

Answer 43

Exceeding a contractual obligation will be sufficient consideration

Question 44

WILLIAMS v ROFFEY BROS & NICHOLLS (CONTRACTORS) LTS [1991] 1 QB

Answer 44

Performance of an existing duty owed to the other party will be consideration, provided the other party receives a practical or commercial benefit.

So practical benefit per se may be consideration, but if the promise to pay more was only made under duress, the variation may be avoided.

Question 45

FOAKES v BEER (1884) 9 APP CAS 605 HL

Answer 45

Partial payment of a debt is not sufficient consideration for a promise to forgo the balance.

Question 46

PINNEL’S CASE (1602) 5 CO REP 117A

Answer 46

The rule on part payment of a debt.

A common law exception to the general rule that part payment of a debt is not consideration for a promise to forgo the balance is where the debtor can show that he gave something different for the creditor’s agreement to accept the lesser sum in settlement. For example, if the debtor provides, or promises to provide, goods instead of cash or if he pays early.

If the creditor accepts payment of a lesser sum early, he presumably does so because he regards it as being more beneficial than receiving the full amount on the due date. In fact, this is what happened in Pinnel’s Case, ie the debtor had paid early and had thereby provided consideration to discharge the whole debt.

Question 47

CENTRAL LONDON PROPERTY TRUST LTD v HIGH TREES HOUSE LTD [1947] 1 KB 130

Answer 47

The doctrine of Promissory Estoppel.
Where a party to a contract has, by words or conduct, made a promise to the other to forgo a legal right, then once the other party has acted on the promise he will have a good defence to any claim brought by the promisor which is inconsistent with the promise.

For the doctrine of promissory estoppel to apply, four conditions must be satisfied.

a) There must be a promise to waive a legal right (eg a promise to accept a reduced amount of rent), and the promise must be intended to be acted upon by the other party.
(b) The promisee must act on the promise (it seems that simply paying the reduced amount of rent would be acting on the promise).
(c) Promissory estoppel does not give rise to a cause of action; it can only be used as a defence. It has been said that the doctrine operates ‘as a shield not a sword’.
d) Note that there is also a fourth condition which may not be obvious from Denning J’s judgment. This is that it must be inequitable/unjust for the promisor to go back on his promise and insist on his full legal rights.

Question 48

HUGHES v METROPOLITAN RAILWAY CO (1877 2 APP CAS 439 HL

Answer 48

Promissory Estoppel

There must be a clear promise to waive a legal right. For example, in the High Trees case, the landlord promised to reduce the rent.

However, the promise need not be made expressly; the promise may be implied by conduct.

For example, in Hughes v Metropolitan Railway Company, the landlord did not expressly promise to suspend the notice.

However, such a promise could be implied from the landlord’s conduct in entering into negotiations for the sale of the property

Question 49

COOMBE v COOMBE [1951] 1 ALL ER 62

Answer 49

Promissory Estoppel can only be used as a defence

Question 50

D&C BUILDERS v REES [1966] 2 QB 617

Answer 50

Promissory Estoppel – it must be inequitable for the promisor to go back on his promise.

In this case, the defendants owed the claimants £482. The claimants were in financial difficulties and the defendants offered £300 in full settlement, indicating that if the claimants did not accept then they would not get any payment at all. The claimants accepted because they felt that they had no choice, but then sued for the balance.

Lord Denning MR said that the defendants could not rely on promissory estoppel.

It was not inequitable for the claimants to go back on their promise since it had not been freely given. It seems clear that when the court looks at whether it is inequitable for the promisor to go back on the promise, it will consider all of the circumstances of the case including the behaviour of the parties.

Question 51

Tool Metal Manufacturing Co v Tungsten Electric Co Ltd [1955] 1 WLR 761,

Answer 51

Notice may not always be necessary.

In this sort of situation (High Trees), where the promisor agrees to accept reduced rent, he will generally be able to give reasonable notice and claim full rent for the future, but he will not be able to claim the full amount of rent for the period before the notice expires (although this does depend on what was agreed)

In the case of Tool Metal Manufacturing Co v Tungsten Electric Co Ltd [1955] 1 WLR 761, Lord Tucker made it clear that notice may not always be necessary.

Therefore the court will consider whether the promise was clearly intended to last only until a particular event happened or a particular situation came to an end (such as war time conditions in the High Trees case). If so, it may be that the promisor is able to resume his right to the full amount of rent (or other form of continuing payment) from that point. If not then it is likely that the promisor can give reasonable notice and resume full rights when the notice expires. What will amount to reasonable notice will be a question of fact and equity in each case. The notice does not have to be in any particular form.

Question 52

Emanual Ajayi v RT Briscoe (Nigeria) Ltd [1964]

Answer 52

If the promisee cannot be returned to his original position then the promisor’s rights may be extinguished completely.