Contract: Offer and Agreement

Question 1

Definition of offer & authority

Answer 1

Professor Treitel defined an offer as ‘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 approach does the court adopt when deciding whether there was an agreement between parties? (authority)

Answer 2

An objective approach (Smith v Hughes)

Question 3

What is an invitation to treat?

Answer 3

Simply inviting negotiation

Question 4

OFFER OR INVITATION TO TREAT?: Good on display (authority)

Answer 4

Invitations to treat (Boots Cash Chemists; Fisher v Bell)

Question 5

OFFER OR INVITATION TO TREAT?: Advertisements (authority)

Answer 5

Invitations to treat (Partridge v Crittenden)

Question 6

OFFER OR INVITATION TO TREAT?: Advertisement of a reward (authority)

Answer 6

Offer (Williams v Carwardine)

Question 7

When may an advertisement be an offer? (Authority)

Answer 7

If there is a clear intention to be bound - unilateral contract (Carlill v Carbolic Smoke Ball)

Question 8

What is a unilateral contract?

Answer 8

A promise in return for an act.

Question 9

What is a bilateral contract?

Answer 9

Where one party makes a promise in return for a promise from the other party.

Question 10

What is the offer and acceptance process at a ‘reserve price’ auction?

Answer 10

Section 57(3) of the 1979 Act refers to a ‘reserve price’:

1. The advert is likely to be an invitation to treat - Partridge v Crittenden
2. An auctioneer’s request for bids is an invitation to treat
3. The offer to purchase is made when X makes their bid and the auctioneer is free to accept or reject this (s.57(2) SGA 1979).
4. The sale by auction is complete on the fall of the auctioneer’s hammer, in which case that is the acceptance (s.57(2) SGA 1979).
   a. If the auctioneer accepts a bid then, as the auctioneer is acting as agent for the owner, a bilateral contract is formed between the owner and the bidder.
   b. If the auctioneer does not accept the bid and there is no contract for sale.

Question 11

What is the offer and acceptance process at a ‘without reserve’ auction?

Answer 11

1. The auction was advertised as being ‘without reserve’, meaning the auctioneer is effectively promising to sell to the highest bidder because there is no reserve price.
2. Such a promise amounts to an offer of a unilateral contract. As Garrett made the highest bid, this would constitute acceptance of this offer (Barry v Davies).
3. However, if the auctioneers hammer did not go down, there is no bilateral contract of sale (s57(2)SGA).
4. If the auctioneer refuses to accept the bid, the highest bidder will have a claim in damages against the auctioneer (Barry v Davies) but will not have a claim against the owner
   a. May seek damages.
   b. Namely, the difference in value between their highest bid and the cost of procuring a similar product elsewhere.

Question 12

What is an invitation to tender?

Answer 12

Invitation to put in an offer. Putting the matter out to tender does not imply any intention to accept any particular tender (Spencer v Harding)

Question 13

When will there be a contractual obligation in relation to a tender?

Answer 13

1. Depends upon the intention of the parties, and whether an ordinary tenderer would construe the document in the circumstances as giving a contractual right to the tenderer (Carlill v Carbolic Smoke Ball Co)
2. Blackpool & Fylde Aero Club: Offered to consider all tenders. Therefore under an obligation to consider the tender. If they are in breach of this obligation, X can sue for damages.
3. Harvela Investments: “We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer” – formed a unilateral contract. Performance of this unilateral contract (by making the highest bid) constituted valid and binding acceptance.

Question 14

What are the three ways an offer can be terminated?

Answer 14

1. Rejection by the offeree
2. Revocation by the offeror (before acceptance)
3. Lapse of time

Question 15

How can an offeree REJECT (1) an offer?

Answer 15

A counter-offer impliedly rejects an offer, thus terminating it (Hyde v Wrench).

Question 16

Is a request for further information a rejection of the offer?

Answer 16

Requests for further information are distinct from counter offers because they don’t change any of the material terms. The offer still stands (Stevenson, Jacques & Co v McLean)

Question 17

What is the general rule in relation to revocation of an offer? What is the exception to that rule?

Answer 17

General rule: An offer can be revoked at any time before acceptance even if the offeror
has said he will leave the offer open (Routledge v Grant)

Exception: An offer cannot be revoked if the offeree has provided extra consideration to keep it open ( Mountford v Scott)

Question 18

How must revocation be communicated?

Answer 18

1. Revocation must be communicated to the offeree (Byrne v Van Tienhoven);
2. Revocation may be communicated by a reliable third party (Dickinson v Dodds) - need not be authorised but must be objectively perceived as being reliable

Question 19

How can a public offer be revoked?

Answer 19

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

E.G. by a notice that was at least as prominent as the original advertisement and in the same section of the newspapers (Shuey v United States)

Question 20

How can you revoke an offer sent to a business?

Answer 20

Will be effective on receipt where it is reasonable to expect a member of staff to be available to read a notice of revocation.
If it can be reasonably be assumed that staff would be at work, the failure to read a notice of revocation will not amount to a failure to communicate revocation (The Brimnes)

Question 21

Can an offer of a unilateral contract be revoked?

Answer 21

Yes. However, partial performance of a unilateral contract is sufficient to prevent revocation by the offeror (Errington v Errington and Woods)

Question 22

Define acceptance

Answer 22

Professor Treitel’s definition of acceptance is ‘a final and unqualified expression of assent to the terms of an offer’

Question 23

What must the offeree know at the time of acceptance?

Answer 23

The offeree must know of the offer at the time of acceptance in order to accept (Australian case of R v Clarke).

The fact he may have mixed motives is irrelevant (Williams v Carwardine)

Question 24

What is a battel of the forms?

Answer 24

Where two businesses who are in negotiation purport to contract on their own standard terms.

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation: Claimant’s terms were impliedly rejected by the submission of the defendant’s terms.

Question 25

How was acceptance found in Hillas v Arcos?

Answer 25

1. The parties had dealt with each other in the past
2. They were well acquainted with the timber trade
3. The contract had been partly performed

In other words, as far as the parties themselves were concerned there was no uncertainty.

Question 26

What are the 5 rules for the communication of acceptance?

Answer 26

1. The general rule is that acceptance must be communicated (Entores Ltd v Miles Far East Corp)
2. It can be communicated by an agent authorised by the offeree (Powell v Lee)
3. For unilateral offers, only performance of the act is necessary (Carlill v Carbolic Smoke Ball Co)
4. Mere silence is not consent, but an offeree can bind himself by silence (Re Selectmove)
5. Acceptance by conduct (e.g. delivery) is possible (Brogden v Metropolitan Railway)

EXCEPTION: If the postal rule applies

Question 27

What are the 3 rules for acceptance by post?

Answer 27

1. Acceptance occurs at the moment of posting (Adams v Lindsell)
2. Acceptance is still valid, even if the letter is lost or destroyed in the post (Household Fire and Carriage Accident Insurance Co v Grant)
3. Offeror cannot revoke their offer after acceptance is posted, even if they are unaware of its posting, as their offer has already been accepted (Byrne v Van Tienhoven)

Question 28

What are the limitations to the postal rule?

Answer 28

Holwell Securities v Hughes:

1. It must be reasonable to use the post as a means of communication
2. The letter must be properly posted
3. The offeror must not have excluded the rule either expressly or by implication

Question 29

What is the presumption regarding ICLR in domestic and social agreements?

Answer 29

For domestic and social agreements the presumption is that there is no intention to create legal relations (Balfour v Balfour)

Question 30

What are the three ways to rebut the presumption regarding ICLR in domestic and social agreements?

Answer 30

1. Parties to the agreement are not on good terms (Merritt v Merrit)
2. Consideration involved - the greater the value of the consideration, the more likely it is that the parties intended legal relations (Parker v Clark)
3. A formal agreement in writing (Merritt v Merritt)

Question 31

What is the presumption regarding ICLR in commercial agreements?

Answer 31

There is a presumption that the parties intended the agreement to be legally binding (Edwards v Skyways)

Question 32

How can the presumption regarding ICLR in commercial agreements be rebutted?

Answer 32

Presumption can be rebutted by providing clear evidence to the contrary.

E.G. The inclusion of an ‘Honourable Pledge Cause’ in a commercial agreement provided express wording which rebutted the presumption of ICLR in a commercial context (Rose & Frank Co)