contract formation/ offer + acceptance Flashcards
lecture 2
5 steps to contract formation
- agreement/ offer & acceptance
- certainty of terms
- intention to create legal relations
- consideration
- capacity to contract
offer + acceptance
The standard way of establishing agreement is to show
that there has been an offer which has been accepted
by the other party.
power of offer and acceptance model
- addresses 3 questions at once:
> did the parties reach agreement at all
> when did the contract come into existence
> what are the terms
offer
an expression of a willingness to be legally bound on a given set of terms, effective as soon as the person to whom the offer is made accepts
what makes something an offer
- depends on object + contextual interpretation
- principles/rules established in case law
- importance of wording and language is crucial
invitation to treat
- to deal or carrying negotiations to bargain
- Carhill v Carbolic Smoke Company; was decided to be a contractual offer
display of goods
- When items are on display on the shelves of a shop at a
certain price, this is not an offer - Pharmaceutical Society of GB v Boots
- The display is a mere invitation to treat. The offer is made by the customer when they present the goods for sale and it
is accepted by the shop when the cashier authorises the sale at the checkout.
advertisements
Fisher v Bell [1961] 1 QB 394
Held: a display of
a flick knife in the window of a shop was not an offer
website purchases
- Invitation to treat > a contractual offer
- The customers order is the offer, and this is accepted when the trader delivers the goods or when they send an earlier email confirming the dispatch
Down to the trader to define when the contract is concluded to make that explicit
unilateral contract
a one-sided action or decision performed by or affecting only one party, person, or group involved in a particular situation, without the agreement or participation of others
acceptance basic principles
- respond to and match the offer
- be communicated to the offeror in an appropriate manner
- “saying that one will assume there is a contract ‘if I hear no more’ and receiving no response, will not generate a contract
acceptance by conduct
- Is possible to accept an offer by manifesting an acceptance through conduct
- Brogden v Metropolitan Rly Co |(1887) 2 App Cas 666
- The coals suppliers counteroffer was placed in the draw by the customer who then began to accept the delivery of coal
- -> there was a contract on the suppliers terms
- If a response to an offer introduces any new terms, it is a counteroffer
- If a counteroffer is made, this is a rejection of the original offer - and so the offeree cannot later accept the original offer
counter offer kills off an earlier offer -»
Stevenson, Jacques & Co v McLean:
* D offered to sell iron;
* Cs replied asking if they could have that price “for
delivery over 2 months, or if not, the longest limit
you could give”;
* D did not reply and instead sold to another;
* C then telegraphed an acceptance.
Held: C’s reply asking about delivery was not a
counteroffer, hence the offer remained open and was
later validly accepted by C
“last shot” rule
The combined effect of:
1. The rule principle in Brogden that acceptance can
be communicated by conduct, plus
2. The rule that a counteroffer kills an earlier offer
last shot rule example:
S quotes to sell on “S’s T&Cs”
* B places an order stating that “B’s T&Cs” apply
* S then sends the goods accompanied by an
invoice that again states that “S’s T&Cs” apply
* B receives the goods without objection,
… S’s terms will prevail as S got the “last shot” in.
The “last shot” rule: example
application of last shot rule:
- Butler Machine Tool Co Ltd v Ex-Cell-O Corp
- S issued a quote for supplying machinery on S’s terms saying these would ‘prevail’
- B placed an order on B’s terms; the form included a tear-off acknowledgement slip
- S signed and returned the slip, saying delivery would be ‘in accordance with our quotation”
-» HELD: there was a contract on S’s terms, the statement that S’s terms would prevail had no effect after B made a counteroffer, and the reference to the quotation did not override the ‘clear + unequivocal acknowledgement slip”
limits to last shot rule
- has no relevance, 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 others terms
valid communication of an offer:
- in person, phone, video call, by post
mishearing during phone calls:
what if B says words of acceptance but A doesn’t hear them?
-> there is no contract in that moment, must wait until he is able to hear him so he can shout back his acceptance (aircraft flying over)
-> phone call doesn’t count, should be listening, the circumstances are clearly bound; it’s the individuals own fault that they didn’t hear the information
postal acceptance rule:
deemed effective as soon as placed in the post, valid contract once in the post
Criticism:
-> the rule can be expressly or impliedly ousted by the language of the offer itself, if this indicates that actual receipt is necessary
-> rule may be impliedly ousted if the context indicated that the parties did not intend for a binding agreement to be reached until actual communication of acceptance
criticisms of postal 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 revoked at any
time before acceptance is communicated (even if the
offer is stated to be open for a given period):
Routledge v Grant (1828) 4 Bing 653. - 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 offe
unilateral offers: rules
- “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
criticisms of offer and acceptance doctrine
- artificial: 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
offer and acceptance positives:
- offer and acceptance analysis usually produces sensible outcomes
- the need to match an offer an acceptance, and detailed rules on what count as each promotes certainty
-> Despite various judicial dicta to the effect that not all contracts are formed as a result of offer and acceptance - very hard to find clear-cut examples of the doctrine being set aside
certainty
- even if one party has proposed a deal and the other has communicated acceptance of those terms, there might not be a valid contract where
- further negotiation was anticipated
- the terms of the agreement are too vague
“subject to contract”
- parties can stipulate during negotiation that no contract will come into existence until some further stem; very common courts will give effect to such subject clauses
excessive vagueness
- for a contract to be valid, the terms must be such that their meaning can be determined with a reasonable degree of certainty
agreements that are too uncertain
- agreements that have been held to be too uncertain to generate a binding contract
- to sell and to seek
general principles on certainty
1) Courts have bias towards upholding agreements rather than striking them down for uncertainty
2) It will be particularly hard to argue that an agreement is too uncertain once performance had commenced
3) The more variables that have been left undetermined, the more likely it is that an agreement will be insufficient certain to be enforced
