Contract Law - Offer & Acceptance (Ch1)

Question 1

According to Trietel’s definition what is an offer?

Answer 1

An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed

Question 2

What kind of offer does the offeror need to make?

Answer 2

Needs to make a :

1) Clear,
2) Certain,
3) Displaying an intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.

Objective test - concern is not with mental intent of parties but what a reasonable person would say the intention of the parties.

Question 3

Why is ‘may’ not acceptable form of intention?

Answer 3

It lacks the intention to be legally bound, i.e. enter into a legal relationship.

It’s not clear and certain

Question 4

What kind of intention is required?

Answer 4

Must demonstrate an intention to enter into a legal relationship.

Must be clear and certain e.g. ‘I will sell this for £50’ rather than ‘may be prepared to sell’ this is just first step in negotiations not actually an offer.

Example: ‘The council may be prepared to sell you the house at the purchase price…’…this is just an invitation to treat.

Question 5

Is a statement of information, i.e…I am prepared to sell my car for around £5,000 an offer?

Answer 5

No. A mere statement of information is not an offer, just a ‘mere puff’.

Question 6

How can an offer be expressed?

Answer 6

By letter, newspaper, advertisement, email, text message..

Question 7

Who must the offer be addressed to?

Answer 7

Can be addressed to:
a) specified person
b) specified group of persons
c) to the world at large

Question 8

Can an offer and acceptance be made by conduct?

Answer 8

Yes it can.

For example,

1) if someone made an offer to buy goods, and you deliver the goods to them

2) an offer in request for using your services, and you start supplying the services.

Question 9

Is an invitation to treat, i.e. goods on display an offer?

Answer 9

General rule - an ITT is not an offer when it comes to goods on display.

Goods on display - an invitation to select goods and put them in your trolley. If you later change your mind and decide that you do not want the goods then you can put them back without any obligation.

Fisher v Bell : A shopkeeper displayed a knife in their shop window and was charged with offering the knife for sale contrary to the Restriction of Offensive Weapons Act 1959. It was held that the display of goods in a shop window with a price attached is merely an ITT.

Same general principle applies equally to goods displayed on the shelves of a self-service store (Pharmaceutical Society of GB v Boots).

Exception:
1) if retailer has stated unequivocally that he will sell to the first customer who tenders the specified price.
2) Chapleton v Barry - display of deck-chairs for hire was an offer which was accepted by a customer taking a chair (ticket issued not part of contract).
3) University of Edinburgh v Onifade - notice stating any parking without permit would cost £30 per day, was an offer and motorist parking there was an accpetance.

Question 10

What are invitations to treat and can invitations to treats be offers?

Answer 10

An invitation to treat is a communication that a person would like to negotiate or discuss the terms on which goods may be sold, or services may be provided, that will lead to a contract at a later date.

Exception 1: Unilateral offers
These are offers and the promise to pay the reward (if the specified condition is met)

Carlil v Carbolic Smoke Ball: An advert for a smoke ball claimed that in order to guarantee the effectiveness of the smoke ball remedy, the company offered a reward of £100 to anyone who used this remedy and contracted the flu.

They also confirmed that they had deposited £1000 in the bank account ready to make payments under their promise, showing great confidence in the smoke ball and tempting customers to buy one.

Once aware, Mrs Carlil accepted it when she purchased the smoke ball, she completed the prescribed course and then contracted flu. She sued for £100 under the unilateral contract. HELD: companies promise to pay £100 was an offer of a unilateral contract, i.e. a promise in return for the specified act that Mrs Carlil had peformed.

Question 11

Are vending machines an ITT?

Answer 11

General rule: offer.

Goods displayed or offered by vending machines are offers.

Acceptance - a person who puts the money in the vending machine, or pays by card, accepts the offer.

Question 12

What is a unilateral contract?

Answer 12

• One party makes an offer or proposal which requires an act to be performed by one or more other parties.
• Not a mutual promise.
• The acceptance of the offer is when actual performance of required act will constitute acceptance.

Example- ‘if you deliver a watch to me in the next 10 days, I will immediately pay you £100.’

Offer is accepted by performance of required act (delivering watch) and at that point, other party becomes bound to pay £100.

Question 13

What is an invitation to tender?

What is the general rule offer or invitation to treat?

Answer 13

An invitation to tender is a process where qualified suppliers are invited to submit bids to provide a specific service or supply of specified goods.

General Rule: invitation to a tender is an invitation to treat and each tender is an offer that others are free to accept or reject.

(Spender v Harding): Spencer sent the highest offer, but this was not accepted. Harding did not state ‘we will sell to the highest bidder’ and so he was free to choose which offer to accept, or to accept none.

Question 14

What is the exception to an the general rule which makes an invitation to tender an offer?

Answer 14

Exception 1: if a tender-offering party expressly undertakes that they will consider all valid bids, and **accept the highest **or lowest bid - the party who submitted the highest/lowest bid would form a unilateral offer.

Exception 2: Blackpool & Fydle Aero Club: Claimant was invited by the council to tender for a concession to operate flights from the airport. Tenders had to be submitted to a letter box by a deadline.

The council did not check the mailbox and failed to consider the claimants offer - the claimant claimed for ‘loss of chance’ - an invitation to tender was therefore an offer in this case. ‘If C submits a confirming tender before the deadline, he is entitled to, not as a matter of mere expectation, but contractual right to be sure that his tender will after the deadline be opened and considered’

Question 15

What is the general rule with regards to Auctions?

Answer 15

General rule: items for sale at auctions is an invitation to treat.

Bids by potential purchasers are offers which can be accepted by the fall of the auctioneers hammer. up until that point the bid may be retracted.

Example (Payne v Cave)
Cave made the highest bid at an auction sale but withdraw it before the hammer fell. Payne tried to claim for the existence of a contract of a contract of sale to Cave.

Held: An auction bid is an offer, it is only accepted on the fall of the auctioneer’s hammer.

Question 16

How is an offer terminated by Rejection (Counter-offer)?

Answer 16

Once an offer is rejected. It cannot then be accepted unless the offeror makes the same offer again - the rejection must be communicated.

1) Counter-offer: an attempt by the offeree to create a new contract on new terms (how about £300 then, rather than £500).

• When an offeree makes a counteroffer, the original offer is deemed to have been rejected and cannot subsequently be accepted.
• Counteroffer can only be accepted by the person to whom it is addressed to form a binding contract.
• When an offer is made on the standard terms of the offer or and the acceptance is made on the standard terms, but if the terms are different - the offeree has made a counter. Person who last asserts their own terms is likely to prevail

Hyde V Wrench - Wrench offered to sell Hyde his farm for £1,000. Hyde offered £950 which was rejected.

Question 17

How is an offer terminated by Rejection (Request for further information)?

Answer 17

If an offeree responds to an offer by seeking clarification of extent and terms of offer, to see if offeror would change parts of offer - this is simply a request for further information and NOT a counter offer.

Therefore the original officer will remain open for acceptance.

Examples: flexibility on payment terms - offeree asks whether they could pay for goods and services over a period of time or instalments (Stevenson, Jacques & Co)

Question 18

How is an offer terminated (Lapse)?

Answer 18

1) Passage of time
Where an acceptance is not made within the period prescribed by the offeror.

If no period is mentioned - should be done within a reasonable amount of time.

2) Death of the party
- If the offeror dies (and an offeree knows the offeror has died = will lapse.
-If the offeree is unaware of the offeror’s death = it will NOT lapse.
-If offeree dies, offer will lapse and cannot be accepted after offeree’s death by offeree’s represenatives.

3) Non fufilment of a condition precedent.

E.g. a car was damaged after the customer offered to take it on a hire purchase, but before the finance company had signed the contract. Offer was held to have lapsed, as it was an implied term of the offer that the car would remain in the same condition up to the time of the acceptance.

Or if a company was struck off by the Registrar after entering into a contract for the sale of a property, the striking off terminated the contract.

Question 19

How is an offer terminated by Revocation?

Answer 19

Revocation can occur at any time before acceptance, (but once valid acceptance is made, offeror is bound)

1) Post: Revocation of an offer is only effective upon actual notice of it reaching the offeree by post, not at the time of posting.

2) Provided offeror has shown by words or conduct a clear intention to revoke offer and notice has reached the offeree, revocation is effective.

Question 20

How is a statement likely to be a request of information?

Answer 20

1) if it uses interrogatory language

2) asks about a matters ancillary to the contract

3) Does not change any of the material terms.

Question 21

How is an offer terminated by Revocation? Unilateral offer

Answer 21

General rule : It is possible in a unilateral offer at any time prior to the completion of the required act - given acceptance is seen as the performance of the act.

Exception: where offeree has partly performed obligation and is willing and able to complete-offeror may be under implied obligation not to revoke offer once performance has commenced - offeree’s acceptance and consideration is starting to perform required act.

Example: Errington v Errington & Woods-father agreed to give house to son if they paid off mortgage-made numerous payments but father sought to revoke offer-court held promise could not be revoked after couple had started to pay instalments.

Revocation of unilateral offer to the whole world:
- No requirement for those starting to perform obligation under unilateral offer to communicate intention to accept.

• Offeror may have no knowledge of who or how many offerees may be responding-communication of revocation is almost impossible and it seems likely revocation will be effective if offeror takes reasonable steps to bring revocation to the attention of all those who may have read offer.

Question 22

How is an offer accepted?

Answer 22

Acceptance is a final and unqualified expression of assent, whether by words or conduct, to the terms of an offer.

Question 23

What are the four elements of acceptance of an offer?

Answer 23

Four elements:

1) Acceptance must be in response to the offer.

2) Acceptance must be unqualified.

3) It may be necessary to follow a prescribed mode of acceptance.

4) Acceptance must be communicated.

Question 24

What is ‘prescribed mode of acceptance’?

Answer 24

Acceptance may be communicated in any mode, but offer can prescribe mode of acceptance.

1) Offer must prescribe a mode of acceptance

2) if the offeror makes clear they will not be bound unless acceptance is communicated in that precise way and by no other then only that mode will suffice.

Question 25

What if the offeree decides to email acceptance of offer? Would this be accepted?

Answer 25

Unless the prescribed mode is made mandatory, another mode of acceptance, i.e. email is no less advantageous to the offeror will bind them.

Question 26

Can communication of acceptance be of a third party or conduct?

Answer 26

Yes.

Third party = Acceptable. provided that they are authorised by the offeree.

Example: Powell v Lee : Lee applied for a post as a headmaster, the interview panel decided to appoint him.
- An interview panel member without authority communicated the decision to appoint him - was held to be invalid.

By conduct: Acceptance inferred from conduct would only have effect if the offeree performed the act in question with the intention of accepting the offer.

You cannot accept an offer by simply deciding in your head that you will do so. There has to be external evidence would suggest to a reasonable person that you had an intention to accept.

Question 27

What are the exceptions to the general rule that silence doesn’t constitute acceptance?

Answer 27

Exception 1: Unilateral offers : all the offeree needs to do to accept a unilateral offer is to perform the act prescribed by the offer.

Exception 2: If the offeror is responsible for the failure to receive the acceptance (Entores v Miles Far East Corporation)

Exception 3:
- If there has been a course of dealing whereby the offeree has taken the benefit of services offered, the offeree’s silence (or conduct) can constitute acceptance

Question 28

When does the postal rule NOT apply?

Answer 28

If is not contemplated that post would be used:

o Postal rule is only applicable when it was reasonable in all the circumstances for the offeree to have used the post.

o Unreasonable where there is an implied condition that prompt acceptance is required or there is a postal strike etc.

o Letters revoking offers:
Rule only applies to letters of acceptance, not letters revoking an offer-revocation of an offer must be received to be effective.

If incorrectly addressed:
oId acceptance is incorrectly addressed-offeree by their own carelessness has lost benefit.

If disapplied by offeror:
oOfferor can require actual communication-if offeror ousts postal rule -letter of acceptance must be received to be effective.
Ouster clauses = ‘acceptance is not binding until it reaches me’ or ‘acceptance by notice in writing to me’
‘offer can only be exercised by notice in writing to the intending vendor’ .

Question 29

What are the battles of the forms?

Answer 29

When two businesses are negotiating over a contract, they may wish for the agreement to be governed by their standard terms.

Some of the standard terms may conflict with each other, and if is not resolved prior to performance of the agreement, this can lead to arguments over the terms of the agreement. Courts may find that the contract was agreed on one of the other party’s standard terms, or they may find that the parties never in fact reached an agreement, i.e. there was never a matching offer & acceptance.

What is the courts approach?
1) may try to find a matching offer and acceptance

2) court may revert to contract first principles

3) even if there is no written agreement, court will look at what has been said and done with a view of seeing if this indicated a clear intention to create legal relations.

4) Even where there is no clear offer and acceptance, the parties have acted as if they had an agreement in place, the courts may infer an agreement from their conduct, where the court found that an offer set out in a draft, unsigned contract had been accepted by conduct.

Question 30

What is the postal rule? (in relation to the acceptance of an offer)

Answer 30

Where post is deemed to be a proper means of communication, acceptance takes effect from the moment the letter is properly posted, not from the moment it is received by the offeror.

oA letter is properly posted = when it is put into an official letter box or into the hands of a postal operative authorised to receive letters (not a post man).

o Postal rule applies where the acceptance is delayed or lost in the post (Household Fire and Carriage Accidenet Insurance Co v Grant).

Question 31

Whats the difference in the rules for posting the letter of acceptance vs. posting letter of revocation?

Answer 31

Posting letters of acceptance = offer is accepted from when the letter is properly posted, i.e. put in an official letter box, hands of postal operative (not post man). EXCEPTION: if there is an ouster clause, where it must be sent in writing then it is only accepted when it reaches them…

Posting letter of revocation= offer is revoked only when this is received - NOT WHEN POSTED.

Question 32

What is acceptance by instantaneous communication?

Answer 32

General rule-acceptance takes place at the moment it is received by the offeror.

Question 33

When the acceptance is via an instantaneous means, what does the court look at?

Answer 33

Acceptance occurs when communication is received.

Court will look at whether the offeree has done all that the offeree might be reasonably expected to do so to get their message through, acceptance should take effect when the offeree might reasonably expect it to have been communicated to the offeror.

Question 34

What are examples of acceptance by instantaneous means of communication?

Answer 34

Example: Entores v Miles-person sending acceptance knows or ought to know whether message has been received.
If the offeror does not have a fault - no contract.

*Telephone- treated as face-to-face, if offeror does not hear or understand acceptance, not communicated (e.g. shouting across the river or noise on the phone)

*Fax-if offeror is aware acceptance is being sent but does not receive it or it is unreadable when it is received, offeror must ask offeree to re-send.

Question 35

What is the rule for acceptance by instantaneous communication for unilateral contracts?

Answer 35

*Offeree accepts a unilateral offer by conduct and this acceptance does not need to be communicated.

*No need for separate notification of acceptance.

*Reward cases-acceptance is complete when finder returns object to offeror

Question 36

Are office hours relevant when acceptance is sent via instantaneous communication?

Answer 36

If Acceptance received within office hours, but offeror does not read it, communication still counted as received. (Offeror to blame for ignoring it)

Outside working hours - counts as having been received at the beginning of the next working day.

‘Ordinary business hours’ - context of parties, negogiations and business hours will be looked at.

Question 37

Is the postal rule applicable to email-email acceptance?

Answer 37

No.

Thomas v BPE Solicitors-postal rule is inapplicable to email-email acceptance is effective when received (i.e. as per the acceptance by instantaneous communication rule).

Question 38

What is meant by ‘a binding contract requires all material terms to be certain and complete?’

Answer 38

*Objective test- have the parties agreed all the terms they considered to be a precondition to creating legal relations?

*A party who signs a contract cannot say they did not read or understand it.

*Courts will consider
1) whether the parties are in the same trade
2) trade usage
3) whether the agreement has been acted on for any length of time;
4) whether there is an objective mechanism for resolving any uncertainty such as an arbitration clause.

Example:
1) Any agreement to buy ‘timber for fair specification’  may seem vague but the court held that there was a binding contract for the particular facts of a case. The parties had dealt with each other in the past; they were well acquainted with the timber trade; and the contract had been partly performed. In other words, as far as the parties themselves were concerned there was no uncertainty.

2) An agreement between a petrol company and filling station to supply petrol at the market price prevailing at the date of delivery. Although the exact price has not been agreed, if the agreement provides a mechanism by which the uncertainty can be resolved, there would be a binding contract.

3) Draft contracts: Provisional agreement is drawn up and is to operate until a fully legalized agreement drawn up by a solicitor and embodying the conditions of the provisional agreement is signed. The fact that a formalized agreement has yet to be drawn up is irrelevant. Generally, contracts do not have to be in any particular form, and clearly the parties are in agreement and so there would be a contract.

Question 39

What happens if a party specifies that ‘only a particular method by which the offer must be accepted’? How do they ensure that this is the only method of acceptance?

Answer 39

In order to preclude other methods of acceptance, the offeror must make it EXPLICITLY CLEAR that the prescribed mode of acceptance is mandatory.

For example: by ‘fax only and in no other way’ - otherwise any equally efficacious method will be acceptable.

Question 40

Can silence constitute acceptance? i.e. someone gives an offer and you remain silent about accepting it.

Answer 40

No. In Bilateral contracts, silence cannot constitute acceptance.

Felthouse v Bindley Case
Facts: An uncle wrote to his nephew offering to buy the nephew’s horse and said that if he heard no more about it, he would consider the horse his own at £30.

The nephew did not reply but withdrew the horse from an auction. Bindley the auctioneer mistakenly sold the house and the uncle sued Bindley.

Held: Nephew’s silence could not amount to acceptance of his uncle’s offer.

Question 41

What is the general rule relating to Acceptance must be ‘communicated’?

Answer 41

The general rule is that acceptance must be communicated to the offeror.

*Silence cannot amount to acceptance.
*Offeror cannot say ‘assume offer has been accepted if he does not hear.’
*Mere acknowledgement of the offer is insufficient.

The court applies an objective test to determine valid acceptance, i.e. whether the reasonable observer would think that the offeree intended to accept the offer.

An email with the word ‘confirmed’ was sufficient to constitute acceptance and this was line with industry practice.

Question 42

Explain how ‘acceptance must be in response to the offer’.

Provide example cases.

Answer 42

1) Only the person/people/ to whom is made can accept the offer.

2) Where an offer is made generally to the world at large, then everyone with notice of the offer is an offeree and a valid acceptance may be made by any person with notice.

3) Authorised agent can also accept an offer.

Example cases:

R v Clarke: Clarke provided information without knowing that a reward had been offered. Clarke could not accept an offer he did not know about.

Tinn v Hoffman: Two identical cross-offers made in ignorance of the other do not amount to a contract, unless or until one is accepted. As neither of them can be construed as an acceptance of the other.

Question 43

Explain what is meant by ‘acceptance must be unqualified and must respond to the exact terms of the offer’?

Answer 43

Unqualified = No condition is imposed on their acceptance.
- A condition response like ‘I will agree to buy your car but can only afford to pay you half’ is NOT an acceptance.

Must respond to exact terms of the offer =
Mirror-image rule: an acceptance must be exactly the same as the offer to which it relates.

Court will see whether at any one time, one party was deemed to have assented to all the terms, express and implied of a firm offer by other party.

Question 44

Who would be liable for damages if the auctioneer doesn’t accept the offer of a auction without reserve?

Answer 44

The auctioneer. Given that the auctioneer should have accepted the highest bid, they may be liable in damages to the bidder.

There is no sales contract with the actual item in the auction - therefore you cannot retrieve the goods itself.

Question 45

What are the exceptions to an Auction not being an offer?

Answer 45

An auction without a reserve price (no minimum price) could constitute an offer.

Two contracts:
Bilateral contract - offer which can be accepted - bidder makes an offer capable of rejection or acceptance - determines who gets the goods.

Unilateral contract - promise that auction without reserve - if the highest bid is not accepted - breach of unilateral contract - entitled to damages but not entitled to goods.

Question 46

How can an offer be terminated?

Answer 46

1) Rejection
2) Lapse
3) Revocation

Question 47

What is a bilateral contract?

Answer 47

*Each party assumes an obligation to the other party by making a promise to do something-e.g., sell an item in exchange for payment.

Example-‘in 10 days’ time, you will deliver a watch to me and I will pay you £100.’

Both parties are making a promise. Offer can be accepted by unequivocal communication of acceptance.

Question 48

What is an exception that an ITT can be offers? (Exception 2)

Answer 48

Exception 2: Adverts from a product’s manufacturer.

Grainger v Gough - A wine list with prices was circulated by a wine merchant to regular customers.

Held: The wine list was an ITT not an offer, otherwise the merchant would have been obliged to sell to everyone who had accepted, despite the limited supply of wine.

It was held, that where an advert is clear and certain enough to demonstrate intention to be bound, and is from the products manufacturer (who is in theory capable of meeting any demand) an advert may constitute an offer.

‘I think that when one is dealing with advertisements, and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers.

Question 49

Is an ITT (Advert) an offer?

Answer 49

When goods, services are simply advertised with no specified condition or award, e.g. in a newspaper simply ‘offering for sale’ or like an agent ‘putting the house for sale on a brochure’ this is NOT an offer.