Contract Formation Flashcards
Offer and Acceptance doctrine
- an offer which has been accepted by the other party
- helps identify if there is a valid contract
What makes something an offer?
- Objective + contextual interpretation:
-> how would a reasonable person interpret these words - Principles/rules established in case law
-> how to interpret the parties conduct in certain common fact patterns
invitations to treat
- a preliminary statement/action that invites someone to make an offer to buy or sell good or services
-> an expression of willingness to negotiate
Acceptance
- must respond to and match the offer
- be communicated to the offer or in an appropriate manner
Counteroffer ‘kills’ an earlier offer
- if a response to an offer introduces any new terms, it is a counter offer
- if a counter offer is made this is a rejection of the original offer - and so the offeree cannot later accept the original offer
The last shot rule
The rule principle in Brogden that acceptance can be communicated by conduct, plus
2.The rule that a counteroffer kills an earlier offer (Hyde v Wrench)
is that where parties are engaged in a battle of the forms and goods/services under the contract are being supplied, the contract will be on the terms of the party who “fires the last shot”, ie the party who sent the last set of terms that met with no objection.
The last shot rule
The rule principle in Brogden that acceptance can be communicated by conduct, plus
2.The rule that a counteroffer kills an earlier offer (Hyde v Wrench)
is that where parties are engaged in a battle of the forms and goods/services under the contract are being supplied, the contract will be on the terms of the party who “fires the last shot”, ie the party who sent the last set of terms that met with no objection.
Limits to last shot rule
If the parties have not started performing, since there will then be no “conduct” that could count as an acceptance (short of an express acceptance).
•Where a party is making it clear that they reject the other’s terms (as in British Steel Corp v Cleveland Bridge and Engineering Co Ltd).
Postal acceptance rule
- an acceptance is deemed effective as soon as it is placed in the post
Limitation of postal acceptance rule
Hardship and inconvenience to offerors (risk of being contractually bound without knowledge)
•Complicates the law by being inconsistent with the general rule that acceptance must be communicated …
Revocation of offers
- offers can be revokes at any time before acceptance is communicated
- With unilateral offers:
•“Acceptance” is by performance of the act; once performance is complete, clearly the offer cannot be withdrawn
•Whether the offer can be withdrawn once performance has commenced would seem to depend on the interpretation of the offer: Errington v Errington; Luxor v Cooper.
Criticisms of O+A
Artificiality – legal categories seem to be imposed by the courts to achieve the “expected” results.
•Technicality – does the law need to be as complex; could it apply a more broad-brush standard,
Acknowledgement by the courts of the limitations of the doctrine
Strengths of O+A
Arguably, the offer and acceptance analysis usually produces sensible outcomes(?)
•The need to match an offer to an acceptance, and the detailed rules on what counts as each, arguably promotes certainty: businesspeople and their advisors know where they stand.
•Despite various judicial dicta to the effect that not all contracts are formed as a result of offer and acceptance, it is very hard to find clear-cut examples of the doctrine being set aside.
Subject to contract
The parties can stipulate during negotiation that no contract will come into existence until some further step, eg signing a document, is taken.
This is very common, for example, when selling/buying a home.
The courts will give effect to such “subject” clauses.
Subject to contract
The parties can stipulate during negotiation that no contract will come into existence until some further step, eg signing a document, is taken.
This is very common, for example, when selling/buying a home
The courts will give effect to such “subject” clauses.
