Chapter 2- Offer And Acceptance

Question 0

To whom may an offer be addressed to?

Answer 0

It is usually addressed to a specific person, but it may also be addressed to a group of people, or even to the general public.

Question 1

What is an offer?

Answer 1

It is quite simply, a proposal to contract. More formally it is a declaration of intention by one party (offeror) to another (offeree), indicating the performance that he or she is prepared to make, and the terms on which he will make it.

Question 2

What is an example of an offer to the general public?

Answer 2

The offer of a reward, by an advertisement, is the most NB example of an offer to the general public.

Question 3

Can an offer give rise to binding obligations?

Answer 3

No, a contract is a bilateral juristic act founded on agreement. Being a unilateral declaration of will by one of the parties, and therefore an offer can’t in itself give rise to binding obligations.

Question 4

What is the legal effect of an offer?

Answer 4

It has the practical effect of placing the offeree in a position where, by unilateral act of acceptance, he or she can call the contract into being.

Question 5

Up until what time may the offeror withdraw an offer?

Answer 5

Until the offeree has accepted the offer, the offeror may withdraw the offer, unless he or she is bound by a separate agreement not to do so.

Question 6

What is an agreement not to withdraw an offer known as?

Answer 6

It is called an option.

Question 7

What are the common law requirements for a valid offer?

*READ PAGES 48-50!!!

Answer 7

An expression of intention will be regarded as sufficient of the purposes of a legally binding offer only when it meets certain requirements.

1) Offer must be firm:
Offer must be firm one, made animo contrahendi. Ultimately question of fact to be determined in light of all relevant circumstances.

2) Offer must be complete:
Offer must contain all material terms of proposed agreement- there can’t be further matters that still have to be negotiated before overall agreement can take effect.

3) Offer must be clear and certain:
Offer must be sufficiently certain; should be enough for addressee merely to answer ‘yes’, for contract to come into being.

4) Must be made with intention to create a legal obligation (animus Contrahendi).
5) Any formalities must be complied with.
6) Must be brought to offeree’s attention

7) Consumer protection Act 68 of 2008:
(i) Plain and understandable language;
(ii) Disclose reconditioned or grey-market goods;
(iii) Negative option marketing prohibited;
(iv) Cooling off period;
(v) Catalogue marketing regulated.

Question 8

What are the CPA requirements for a valid offer?

Answer 8

Consumer protection Act 68 of 2008:

(i) Plain and understandable language;
(ii) Disclose reconditioned or grey-market goods;
(iii) Negative option marketing prohibited;
(iv) Cooling off period;
(v) Catalogue marketing regulated.

Question 9

Does an advertisement constitute an offer made to the general public?

Answer 9

No, the general rule in our law is said to be that an advertisement constitutes merely an invitation to do business, rather than an offer. The authority usually cited in favour of this rule is the old case of Crawley v Rex (read pg 51).

Question 10

What is bait marketing?

Answer 10

In terms of s30(1) of the CPA, bait marketing is prohibited. This entails luring customers to your store with knowledge that stock won’t meet demand.

Question 11

Does a promise of reward constitute an offer?

Answer 11

Following the reasoning of the English Carliill case, the AD held in Bloom v American Swiss Watch Co that the advertising of such reward might be construed as an offer to the public. The first person who, consciously responding to the advertisement, performed the required act (eg giving info to police) would’ve accepted the offer and thus become contractually entitled to the reward.

Question 12

Does a call for tender constitute an offer?

Answer 12

An invitation to the public to submit a tender for work to be done isn’t an offer that is open to acceptance by the highest tenderer. At most, it is an invitation to potential tenderers to make offers that will be considered after the closing date for the particular tender.

Question 13

When does an offer terminate?

• 6 points
• Page 54-55

Answer 13

1) Rejection of the offer;
2) Death of either party;
3) Effluxion of the prescribed time, or of a reasonable time;
4) Revocation of the offer;
5) Loss of legal capacity to act;
6) Acceptance of offer.

Question 14

What is an acceptance?

Answer 14

It is a clear an unambiguous declaration of intention by the offered, unequivocally assenting to all the terms of the proposal embodied in the offer.

Question 15

How may the offeree’s intention to accept the offer be stated?

Answer 15

It may be stated either expressly (eg ‘I a accept your offer’) or it may be tacitly indicated (eg nodding of head). Silence can’t ordinarily be treated as acceptance.

Question 16

What are the requirements for a valid acceptance?

Answer 16

Acceptance will give rise to the formation of a contract between the offeror and the offeree, provided that certain requirements are fulfilled.

1) Acceptance must be unqualified:
Must be a complete and unequivocal assent to every element of the offer; only valid acceptance where whole offer accepted and nothing more or less is accepted. Ambiguous acceptance also doesn’t qualify as valid.

2) Acceptance must be by the person to whom the offer was made:
Where an offer is addressed to specific person(s), it may be accepted only by that person/(s).

3) Acceptance must be conscious response to the offer:
As matter of logic, a person can’t be said to accept an offer if he is unaware of it. This point is especially relevant to offers of reward. (Bloom v American Swiss Watch Co).

4) Acceptance must be in the form prescribed by the offeror (if any):
If offeror prescribes a method(s) of acceptance, generally no other form of acceptance will suffice).

Question 17

What does a so called ‘qualified acceptance’ constitute?

Answer 17

It constitutes a counter offer, which the original offeror may accept or reject.

Question 18

What are the different theories relating to when and where acceptance takes place?

Answer 18

1) Declaration theory- contract comes into being when and where offeree expresses acceptance- that is, when and where he writes or signs the letter of acceptance.
2) Expedition theory- contract comes into being when and where offeree posts his letter of acceptance.
3) Reception theory- agreement comes into being when letter of acceptance reaches address of offeror.
4) Information theory- agreement is concluded when and where offeror learns or is informed of the acceptance, i.e. when offeror reads letter of acceptance.

Question 19

What is the general rule in our law with regards to when and where acceptance takes effect?

Answer 19

The information theory is the general rule in our law.

It holds that the basis for contractual liability is actual and conscious agreement between the parties. Therefore, the offeror must learn of the acceptance of his offer before actual consensus can be said to have been attained. Until then, the minds of the parties haven’t truly met.

Since consensus is the basis of the contract in our law, the general rule is that the contract comes into being only when the acceptance is communicated to the minds of the offeror.

Question 20

What is a very NB exception to the general rule of the Info theory?

Answer 20

A very NB exception to the general rule occurs in the case of postal contracts. Under the influence of English law, our courts apply the expedition theory as the default rule for postal contracts, rather than the information theory.this is done on the basis of a fiction- unless he or she indicates otherwise, he or she is presumed to have intended that the contract would be concluded as soon as the letter of acceptance is posted.

Question 21

What case introduced the expedition theory into our law?

Answer 21

Canoe Explosive Works Ltd v South African Oil and Fat Industries; Cape Explosive Works Ltd v Lever Brothers (SA) Ltd.
*READ PAGE 58-59!!!

Question 22

When does the expedition theory apply?

Answer 22

The expedition theory applies only when all of the following circumstances are present:

1) Offer is made by post or telegram;
2) Postal services are operating normally;
3) Offeror hasn’t indicated a contrary intention, expressly or tacitly; and
4) Contract is a commercial one.

Question 23

Does the expedition theory apply to contracts concluded by telephone or fax?

Answer 23

No, in these cases, where communication is instantaneous and the parties are regarded as being ‘to all intents and purposes in each other’s presence’, the general rule applies (Info Theory).

Question 24

Does the expedition theory apply to contracts entered into by means of electronic communication?

Answer 24

No, contracts entered into by means if email and other means of electronic communication are governed by the Electronic Communications and Transactions Act. In terms of this legislation, an agreement of this type is concluded at the time when, and the place where, the acceptance of the is received by the offeror. Consequently the Reception theory applies in such circumstances instead of the Info theory.

Question 25

What is a pacta de Contrahendo?

Answer 25

It is simply a contract aimed at the conclusion of another contract. ‘Contracts about contracting’

Question 26

What forms of pacta de Contrahendo does SA law recognise?

Answer 26

SA law recognises two forms:

1) Option contract-
Is an agreement restricting an offeror’s right to revoke an offer.

2) Preference contract-
Agreement whereby one person binds himself to give preference to another person should he decide to conclude some other specified type of agreement. The right to be preferred is known a Right of First Refusal or (where contemplated agreement is one of sale) Right of Pre-Emption.

Question 27

What is an option to buy commonly referred to?

Answer 27

A call option

Question 28

What is an option to sell commonly referred to?

Answer 28

A put option.

Question 29

What does an option comprise of?

Answer 29

• An offer to enter into the main agreement (the main offer); and
• An agreement to keep the main offer open for a certain time.

Question 30

What rights and duties are created by an option?

Answer 30

Being a contract, an option creates rights and duties for the parties.

By granting the option, the grantor incurs a dual negative obligation:

• First, not to withdraw (or attempt to withdraw) the offer; and
• Second, to do nothing to prevent the coming into existence, through acceptance of the offer,of a contract that is capable of being performed (eg by selling and transferring property to 3rd party).

The grantee or holder has correlative rights to insist that offer be kept open and that his preferential right to acquire the property through exercise of the option shouldn’t be prejudiced.

Question 31

What is the duration of an option?

Answer 31

Usually, an option agreement will specify the time within which the option must be exercised- failure to exercise it within the prescribed time will result in automatic termination of option.

Question 32

What happens if no time limit is specified on an option?

Answer 32

An option that fails to specify a time limit might conceivably be void for vagueness, but better view is that offer must be kept open for a reasonable time limit if no limit is specified.