Formation II: Acceptance Flashcards
Understand acceptance in relation to contract formation
Goals
· The communication of acceptance and the postal rule
· Default rules and mandatory rules
· The “mirror image rule” and the “battle of the forms”
Something that is not binding becomes binding → state can enforce these agreements
Why should we have this immense power → to harness the coercive power of the state to uphold the agreement between two people.
First formality → offer
We know what an offer is → a thing that we say when objectively interpreted signifies intention to be bound at the moment of acceptance
Offeror → master of the offer → can decide who accepts it. Etc.
As long as it represents their intention to be bound
GOALS:
Counterpart → acceptance
Acceptance → has to utter an intention to be bound
Topics surrounding acceptance
First set of challenges → what can constitute acceptance and what cannot.
Postal rule
Distinction between → Default rules and mandatory rules
Most rules we know in law → are mandatory rules → we don’t get a say in what happens to it
Contract law → there is a rule that says an offer will be open for a reasonable time only
Other rules → if contract does not talk about delivery has to be delivered in a reasonable time → general rule
default rule → able to be amended in the contractual content (agreements)
For example → specify a time for deliver → default rule
Postal rule → exception → is a default rule
What happens when parties exchange continuous offers → battle of the forms →
COMMUNICATION OF ACCEPTANCE:
Acceptance must be communicated in response to an offer for there to be a contract → general rule
Two cases
Fenthouse, and Williams
Felthouse v Bindley [1862] 142 ER 1037 (Common Pleas)
Uncle writes to nephew → your price is 30 Guineas (30 pounds and 30 shilling). I offered 30 pounds → and you said it was mine → As there may be a mistake ill split the different → If i hear no more about him → I consider the horse mine at 30 pounds 15 shillings.
In relation to offer and acceptance → The offer in the letter → is to buy the horse for 30 pounds and 15 shillings
Proposed mode of acceptance contemplated by offeror → If you don’t respond that would be acceptance.
Silence
· The general rule on communication of acceptance.
· The letter of January 2nd, followed by silence from the nephew.
· “My dear Uncle,—My sale took place on Monday last, and we were very much annoyed in one instance. When Mr. Bindley came over to take an inventory of the stock, I said that horse (meaning the one I sold to you) is sold. Mr. B. said it would be better to put it in the sale, and he would buy it in without any charge. Father stood by whilst he was running it up, but had no idea but he was doing it for the good of the sale, and according to his previous arrangement, until he heard him call out Mr. Glover.”
I said that the horse → the one I sold to you → is sold
The Nephew did not respond to the letter
He intended to sell it to Uncle → SUBJECTIVE INTENTION → FELTHOUSE V BINDLEY
Subjectively they think they have a contract
But objectively they don’t
· The rule: acceptance must be communicated. Silence is not enough.
JUSTICE WILLIS:
Clear no complete bargain
Uncle had no right to impose on Nephew for 30 pounds and 15 shillings
ACCEPTANCE MUST BE COMMUNICATED
COURT → can you make an offer that says this offer is accepted if you don’t say anything? → NO
Why can you not do that? →
Why is mere silence not enough → Silence cannot be good evidence of choice → there may be many reasons not to say anything
Fact not saying anything is not good sign that you are choosing something
Utility → No expression of will or choice →
Someone can say give me your computer for 50 bucks if you dont say anything its mine.
SILENCE IS NOT ENOUGH.
· Discussion:
o Can silence be enough?
o An external expression of will to accept
o Economic efficiency
Silence does not amount to choice → not good rule to have on efficiency grounds.
Williams v Carwardine [1833] EWHC KB J44, 117 ER 1101 (Assizes)
FACTS:
Handbill → offering 20 pounds for anyone bringing information to bring a conviction on murder of Miss Carwardine
Ms Williams gave information about the murder which allowed the murderer to be convicted
Plaintiff argued that → the defendant’s intention was to clear her conscience rather than gain a reward
Case about the brother of murder victim
Who posted an advertisement offering a reward
A UNILATERAL CONTRACT → just like Carlil
How is the offer in the advertisement accepted?
By behaviour
By performing the thing that is said in the offer for the reward
Who is the plaintiff? → Ms Williams →
Defendant → Carwardine → brother of deceased
Brother of deceased not happy about giving reward → because husband killed brother
She said I did the thing in the offer and there is a contract
CARWARDINE”s CLAIM:
Why did he say her acceptance was invalid?
Her intention wasn’t for the reward it was to clear her conscience → it was not her motive.
· Case about a different part of the communication: communication of the offer to the offeree.
· Factual findings as to motivation
o It is a unilateral contract, and the claim was that there was no acceptance, because Williams did not act on the offer.
Matter of fact → it is to be taken as found by jury → that plaintiff gave information which came to discovery → but not for 20 pounds → but for stings of conscience → murderer also beat her up → she thought she was dying so she gave guilty conscience of her husband. → CARWARDINE’s Claim
Claim of Carwardine → if she was motivated subjectively by the handbill → by offer of reward → behaving in the way that complies with the offer does not amount to acceptance
· The rule
o Mr. Justice J. Parke.—I take this to have been a contract with any one who did the thing.
o Mr. Justice Littledale.—If the person knows of the handbill and does the thing, that is quite enough. It does not say, whoever will come forward in consequence of this handbill.
o Denman, C. J.—As the plaintiff is within the terms of the handbill, she is entitled to the reward.
o Mr. Justice Patteson.—The plaintiff being within the terms, her motive is not material.
COMMUNICATION OF ACCEPTANCE AND UNILATERAL CONTRACTS
4 judges → if you have done the thing in the offer → no matter what your subjective motivation is → you have accepted the offer
Subjective intent does not matter → it is the action in the unilateral contract
MOTIVE IS IRRELEVANT
IS KNOWLEDGE NECESSARY? → not 100% clear that the person doing the deed has to know of the offer at all
The difference is one of them goes to actual objective ability to respond to an offer → to know about it → the other goes to subjective intent
Motivation does not matter → but what if Miss Carwardine never heard of the award
Never knew of the offer → would that make it not acceptance?
R v Clarke (1927) 40 CLR 227 (HC)
“Making allowance for what is in at probability an abridged report of what was actually said, I cannot help thinking, on the whole, that not only Denman C.J. but also some at least of the other members of the Court considered that the motive of the informant was not inconsistent with, and did not in that case displace, the prima facie inference arising from the fact of knowledge of the request and the giving of the information it sought.” (Isaacs ACJ, at 232)
HAVE TO KNOW OF THE OFFER → R V CLARKE (australia) → reward for 100,000 dollars → person did not know about the offer, did not know it was made, HC says making allowance for what is in at probability (in relation to Williams) → Denham, and others was not inconsistent with and did not displace Prima Facie inference arising from the fact of knowledge of the request and the giving of the information → HC of Aus → have to know of the offer. To accept it.
Does not make sense otherwise
In contract law → there must be offer and acceptance of the offer → you cannot accept something you don’t know exists
Subjective intention or motivation is neither here nor there
THERE MUST BE KNOWLEDGE OF THE OFFER
Formalities of contract law → principle of equal choice and freedom of contract → and why we have those rules → economic efficiency and corrective justice
Have to go through the formalities → see choice in entering the contract → even if you think there is a better arrangement that you think would got you to a more efficient result
Can’t always do the efficient thing or the just and fair thing → we follow the rules in a principled way which overall makes sense
Hard balance to get → greatest of judges and scholars do that.
· Intentions discussed:
o Mental or expressed?
o Mere conduct?
o Substantive or formal? (Cross offers?)
CROSS OFFERS:
For example: I want to buy my friend’s computer for $50 → and actually he wants to sell it to me for $50 → I write him an email and say i will take it for $50 → and at that very moment → I will offer you my laptop for $50
Two offers
Do we have a contract?
Two offers → might embody the same subjective intent → they may even embody the same objective intent
Objectively we want to do the same thing at the same time
But contract not formed until formalities satisfied principle of choice satisfied
And the law says we have a contract
Cross offers → DO NOT CONSTITUTE A CONTRACT
Have to have offer and acceptance.
WHAT INTENTION IS NEEDED?
What kind of intention is needed in the formation of a contract → mental (subjective) or expressed?
EXPRESSED
Can mere conduct count → YES IT CAN
Substantive or formal (e.g. cross offers) → real agreement about content → or formal agreement in terms of offer and acceptance → have to go through the formalities → formal agreement through offer and acceptance
What we think what we want , and what we wish does not matter
Have to go through the formalities.
Henthorn v Fraser [1892] 2 Ch 27 (CA)
To explain the postal rule → why it makes sense and what its limits are.
· The timeline
FACTS:
There is an offer made on July 7th to sell for 750 pounds
Is the offer binding → can they retract the offer → Dickinson v Dodds → Yes
Someone offers 750 pounds and they take it → on July 10th Morning
They have to tell the offeree → the person who holds the offer → that the property was sold to another
They rush to the post office
And sometime before 1pm → they send the letter of revocation → rescinding the offer they made
That letter is delivered in the same day → and received at 8pm in the evening and delivered between 5 and 6 pm
On the same day → without knowing of the revocation → the offeree responds (at 3 50 pm) → without knowing of the revocation → the offeree also responds → sends the acceptance letter after the revocation letter was sent
Sends the acceptance at 3 50 pm ⇒ delivered later ⇒ and received on the following day
Acceptance lags behind revocation at every step
Was a contract formed? → YES
· The postal rule
o The general rule (Kay LJ at 36)
The ordinary rule → is that to constitute a contract there must be an offer and acceptance and communication of the acceptance to the person making the offer
You always have to communicate acceptance → Felthouse v Bindley → must be communicated (acceptance)
Posting an acceptance of an offer → may be sufficient where it can be fairly inferred that it might be sent by post
COURT SAYS → when acceptance is expected to happen by mail (snail mail, not email) → under these circumstances when you expect it by post → Under these circumstances when you accept these → it must be within the contemplation of the parties → when that is the case → ACCEPTANCE IS COMPLETE AS SOON AS IT IS POSTED
We give up on formalities sometimes
GENERAL RULE → in order to form a contract → acceptance of offer must be communicated to the offeror → ordinary rule
Now → there is an exception → postal rule → in some circumstances where they contemplate acceptance by post → contract is concluded not when acceptance is communicated → BUT WHEN IT IS POSTED
POSTAL RULE.
THE PROBLEM → it is solving people who are contracting over long distances.
o The postal rule exception: When acceptance by post is contemplated (Kay LJ at 36, Herschell L at 33)
For example one person in Liverpool and Birkenhead → warrant use of mail
And same thing applies for one party in Ny and other in San fran
These are circumstances that are contemplated
For example: if you are in san fran, and receive mail in NY → to say i will sell you interest in rail company for $1 million → then you need to respond back by mail to say if you are interested
Are you likely to send a mail with your acceptance → YES you would send snail mail (in old times)
If you wrote a letter → what might happen → you will have to wait three weeks until letter gets to NY → then a contract is formed once acceptance is communicated → you would not know → if you never hear back you will never know
You expect it to arrive → sometimes it doesnt → people move addresses → people who don’t want to respect the offers they made → don’t want to etc.
Over long distance → under ordinary rules of formation
The offeree accepting the offer → under mercy of offeror whether to receive the acceptance or not
Which means → that people wont usually do that
THIS IS THE ISSUE THAT THE POSTAL RULE IS RESPONDING TO
The minute you post the acceptance you can rest assure you have a contract
WHAT KIND OF RULE?
Responds to high transaction costs
To conclude a contract over distance is costly
There are frictions → you don’t know your acceptance letter would reach the other side
Law does not like high transaction costs → they try to reduce them
· The use of default rules
o What is the problem underlying the postal rule?
o What are transaction costs?
o How can default rules help reduce transaction costs?
· Why the postal rule does not apply to the letter of revocation.
o “the anomaly, if it be one, arises from the different nature of the two communications. As to the acceptance, if it was contemplated that it might be sent by post, the acceptor … has done all that he was bound to do by posting the letter, but this cannot be said as to the notice of withdrawal. That was not a contemplated proceeding. The person withdrawing was bound to bring his change of purpose to the knowledge of the said party, and as this was not done in this case till after the letter of acceptance was posted, I am of opinion that it was too late.” (Kay LJ, at 37)
CONTRACTUAL SURPLUS (TRANSACTION COSTS):
Oats $3000 (for farmer) and value of oats to trainer ($3600)
But to make known to market → you have to pay money
In Smith v Hughes for example: he had to lose two days of work to do this
After advertisement is done → You need lawyers
Lawyers are expensive → negotiate → negotiation costs
That is also time and money
After you are done and you have a contract you have more costs
Who gets oats from one place to another?
These are all transactional costs
For example → -$650 for everything outside the contract.
Have a contract which we want to see happening
Would this contract be concluded with this costs → it will cost more than $600 to get the contract going → which is bad because this is a surplus contract → it wont be concluded
Roles of state → reduce transaction costs
Builds roads → that reduce transport costs
Builds phone lines etc.
Reduces the costs of business
Contract law does not do any of this → Contract → relates to negotiation costs
Negotiation costs can be reduced by law
THROUGH DEFAULT RULES
Rules that parties can decide to opt out
This is the efficient rules you do not need to negotiate
This would be the choice of most parties
If you want to contract about the delivery of certain goods
Dont have to worry about stipulating the delivery time
As there is a rule that says delivery has to be done in a reasonable time
If we remain silent → default rule is read in
Even if we don’t mention the price
Reasonable price will be read in
The choice of most parties
Not going too far → saying this is the rule that binds everybody → this is the rule that fits most people
If you want to say otherwise you can opt out of the rule
Logic of default rules etc.
APPLICATION
For example: two parties
Send each other mail over long distance
John makes offer, Joanne makes acceptance through mail
Joaness fear is through the time that the letter is on ship or in air
John may conclude deal with third party
And this may be the first in time
Most merchants → would choose a rule that allows her to accept the offer at the moment of posting her acceptance letter
If you asked the offeror → in NY → what rule would you want to apply to your offer
How would you want your offer to be accepted?
Offeror would say → before the fact → i would want it to be accepted at the moment of mailing or posting the acceptance
Otherwise nobody would accept my offer
Both parties want a rule that reduces transaction costs.
Both parties choose to have a rule that makes it easier for them to do business together → to actually conclude a contract
Logic → double → the main justification is → economic efficiency (analysis) → this is an efficient rule → but also a just rule → because it is in the choice of the offeror → they know what they are doing
If they make an offer that can be accepted over post
They know what default rule applies to their offer
They are choosing the mode of acceptance → Carlil v Carbolic smoke ball
Intention of the offeror → that the offer will be accepted by way of behaviour
This is another illustration of that rule
Acceptance over mail → the offer will be accepted at the moment of posting acceptance
This is not just an efficient rule → but also coherent with the logic of contract law
Choice of parties to be bound by acceptance
THIS IS JUST A DEFAULT → it can be altered in terms.
It is a rule used for merchants to create contracts
LAST PART (REVOCATION):
Henthorn → postal rule already live
Acceptance is valid when posting
Lawyer argues based on formalities
States → if acceptance valid from moment of posting, then revocation is as well
DOES THE POSTAL RULE APPLY TO REVOCATION → NO
It has never been held that this doctrine applies to a letter withdrawing the offer → Kay LJ
AN EXCEPTION THAT DOES NOT APPLY TO OTHER COMMUNICATIONS
SOLUTION:
Acceptance was valid at 3:50pm
Revocation was valid only when it was received by the offeree
Received too late
Received at 8pm, sent acceptance at 3:50pm
The minute they post acceptance they have a contract.
Holwell Securities Ltd v Hughes [1974] 1 All ER 161 (CA)
· The timeline
Holwell
We have an application of postal rule
Offer that is open to acceptance within six months
Can the offer be retracted when the offeror wants to?
This particular offer cannot be retracted because → because there is a contract that says offer will be open for six months → 19th October 1971
Dickinson → only a promise to keep it open
Here → contractual obligation → contract
Option shall be exercisable any time in six months
A few days before the time elapses → the offeree responds → and sends a letter to a lawyers
Notifying in writing that they accept the offer
The acceptance letter is posted but never applies
IF the postal rule applies we have a contract → if not → we don’t
· Russell LJ:
o 164: the meaning of “notice in writing”
· Lawton LJ:
o 166: the postal rule is a default rule, and parties are free to opt out.
o 167: Opting out is a matter of construction.
Lord Justice Lawton → does not apply when the express terms of the offer specify that it must reach the offeror
The Court says the postal rule is a default rule → if they want another rule to apply to them then that is the case
This does not have to be done expressly
If the application of the postal rule →will produce manifest inconvenience and absurdity→ clear objectively that the parties could not have intended for it to apply (offeror)
Lord Justice Russel →
There was express opting out of the postal rule →
The judges said → the language says → the option shall be exercisable by notice in writing to the [defendant] → expressly opted out of the postal rule
Wants the communication to reach them
THE POSTAL RULE IS A DEFAULT RULE
Lord Justice Lawton → all these rules are illustrations of a wider principle
All the rules are illustrations of a broader principle
Rule does not apply if having consideration to the agreement → they cannot have intended → including the negotiation and subject matter → cannot have intended until party exercising the offer communicates it → DEPENDS ON THE OBJECTIVE INTERPRETATION OF THE INTENTION OF THE OFFEROR → all comes down to choice
If it was the choice for the postal rule to not apply → then the postal rule does not apply
The postal rule is a default rule
A QUESTION OF CONSTRUCTION OF PARTIES INTENTION.
Electronic communications
CCLA Ss. 212-17
· Instantaneous communications: Entores Ltd v Miles Far East Corp [1955] 2 QB 327 (CA).
Postal rule are of very little practical importance anymore → because of emails which have their own rules
But still good law for contracts over mail
But teaches a lot about contract law
IN NZ CONTRACT LAW IS FOUND IN THE COMMON LAW
Contract and Commercial Law Act 2017:
Part of contract law is legislated
Codifies some common law doctrine
Changes to common law doctrine
And in parts → it gives us the law on sale of goods between merchants (commercial law)
The part that applies to general contract law → we have rules of Formation for email
These are also default rules
Sections 213 to 216 → says they are default rules and you can opt out of them
Section 217 → the time of communication of acceptance of offer to the offeror is the time determined by s213 → the time that the email is received → NOT THE POSTAL RULE → OPPOSITE OF POSTAL RULE
This says the minute the email is received acceptance is received then a contract is formed
Time of receipt of an email→ s214 → when it moves out of the system in the control of the center → and into the system of communication of the person receiving the email
Out of my server and into your server → that is the moment acceptance is received for electronic communication.
Rule is as soon as email makes it into offeror’s system
POSTAL RULE DOES NOT APPLY HERE
FOR INSTANTANEOUS COMMUNICATIONS (FAX AND TELAX)
Entores case → Postal rule also does not apply for fa
The minute you receive the telex → that is when there is acceptance.
POSTAL RULE ONLY APPLIES TO SNAIL MAIL
It does not apply because we don’t need it.
Acceptance must be communicated → but there are exceptions as mentioned.
RECAP OF FIRST LECTURE:
Basics → acceptance must be communicated in order to be binding
Although → the offeror → is the master of the offer → and the offeror → can stipulate the ways which the offer can be accepted → saying yes or by doing the act → or by otherwise expressing the willingness to be bound by contract on the forms of the offer.
Not everything can count → SILENCE CANNOT BE ACCEPTED → and is not a reasonable expression of choice → cannot be an acceptance.
Acceptance → knowledge of the offer → cross offers cannot amount to a contract → must be offer and acceptance
POSTAL RULE → still the law → but most communications are through phone calls and zoom calls → started the postal rule → to understand contract law and it’s principled nature.
There can be parties that require postal acceptance.
Postal rule → general rule → can opt out.
TWO CASES in second lecture:
Powierza → helps exercise offer and acceptance skills.
Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 (CA)
Timeline
· Denning L, at 404, applies the mirror-image rule from Hyde v Wrench.
· Denning L’s analysis.
· Denning L, at 404-405, discussing “the battle of the forms”
FACTS:
Offer to deliver a machine → seller gave their offer to the buyer
Buyer responded with delivery agreement → changed terms and conditions on sellers offer
Two Corporations → Butler, and Excel Corp.
Excel Corp → changed terms and conditions → does business on their own terms
Got offer from machine operator → (butler) → they said no here is our offer
Here is the terms in which you can supply this machine.
Manufacturer → accepts these conditions. → is more keen to sell.
Clause in original offer → dictates the price depending on when it is delivered.
Sellers original terms → include price variation clause → we will ask price of machine at time it is delivered → You find price variation clauses at times in construction contracts, and potentially a lease.
Price variation → these are prices now → but everything will depend on price during the actual construction.
The new terms of conditions → Counter offer → Counter offer → diminishes the original offer. → it cannot be revived afterwards (original offer).
What should we make of the response from the buyer after the counter offer?
Hyde v Wrench → if someone makes an offer → and in response you say, yes but, yes and → it is not acceptance it is just a counter offer.
Lord Denning → additional costs of installation, date of delivery and so forth → when the buyer responds with own terms → it is a counter offer and kills original → the initial correspondence is the offer → the second is a counter offer → the communication at the end is acceptance of the counter-offer.
MIRROR IMAGE RULE → they say yes and. → sounds like counter offer → but Lord Denning says
As a matter of construction → June 5th (last) is decisive → that it is on the buyers terms not the sellers → what makes it clear that there is acceptance?
Butler signed an acknowledgement clip → and signed their terms → then added their own terms at the back → added a note on their signature →
Lord Denning says → yes acceptance to the offer → and I construe the additional comment from the seller → as just reference to time and type of the machine.
IN REFERENCE to earlier terms → accepting the terms in a mirror like state → but the additional reference is just explanatory → and accepted the initial offer.
Cross v Davidson → There was an offer → and offeree said yes, payement into the bank branch, and delivery within two weeks → and the Court said → that is not a Mirror → it adds a term.
Taking terms and signing them → makes a difference →
Lord Denning → Doing what is coherent with Contract law → Trying to interpret the objective intention of the offeree at the time of making a communication → the objective intention of the seller was to accept the terms of the buyer. → evidenced by the signing.
Puts strain on rigid rules of formation from Cross v Davidson →
The law we already know was very clear → if it doesn’t mirror then no acceptance → but after this case → not so clear. → less clear → and interpret the objective intention of the offeree in every transaction → but gets to the root of what contract law is supposed to do. → gauge the objective intention of the parties.
There is a tension between the formal rules of intention → Want to make sure you are entering the contract. → but sometimes the rules dont work perfectly like in this case.
Parties did agree in parties counter-offer → but rigid rules → in Hyde v Wrench → help us notice this disagreement.
BATTLE OF THE FORMS:
Lord Denning → where one party sends one form then the other sends another form.
What are the terms that govern that contract? With each other.
In butler each one is sending their own terms → Lord Denning → should not be too quick to decide these → the last person that offers terms → and the other who says yes.
But in other cases the person who sends the offer first.
If the difference is so material that it could affect the price → the buyer cannot change the difference if it draws the intention of the seller → new addition.
Lord Denning → if you send your terms → then I send terms → I am bound by the initial terms. →
Collin and Shields → clearly that is not what the parties met. →
Here there is a rule based on the practice of merchants → most people when they send another form and it is different from the offer → that is good commercial practice → not to hide it in the fine prints but to say this is different.
Sometimes it is the last shot (Hyde and Wrench) → sometimes it depends on shots fired on both sides.
Terms and conditions of both parties have to be construed together. → if mutually contradictory → then replaced by reasonable implication.
Denning → if it is so far removed from Hyde v Wrench → if there is offer and acceptance and choose to be bound → there is a contract even if terms don’t fully agree with each other –.> up to the Court to decide the right terms.
Note → connecting this case to Boulder Consolidated → Cooke → not worried about formalities of offer and acceptance, and use the universal approach → and the next case.
In Boulder → the judge said don’t worry too much about formalities if Intention to be bound → clear parties want to reach an agreement. →
If there is a issue don’t get too hung up on it → because the objective intention of the parties.
Wants to be a good law for sophisticated commercial parties → shapes the way it construes objective intention of the parties.
Objective intention → WHAT DID COMMERCIAL PARTIES ACTUALLY INTED → did they intend to be bound, signature → additional is just specifying original price of the machine and type.
What Lord Denning is doing is drawing on → American Law. →
In Early 20th century → Karl Lewelin → drafted the uniform commercial code → 50 states → 50 different contract codes → when there is trade between state lines there is issues → Commercial contracts → adopted by all American states (commercial code)
Lewelin developed it by looking at the commercial practice of merchants → what are the best practices of merchants today? →
UCC → a definite and reasonable communication of acceptance in reasonable time → even if it differs from original terms → opposite of Cross v Davidson → this is where Lord Denning gets his reasoning from.
Battle of form → back and forth, between to parties → and we need to know what are the terms governing the contract → governed by the same principles that govern all formation → WHAT IS THE OBJECTIVE INTENTION OF THE PARTIES WHILE COMMUNICATING.
Objective intent → might be different from common rules from the 19th century → when they sign something and say yes and → they mean to accept the offer and make a reference to something else.
Powierza v Daley [1985] 1 NZLR 558 (CA)
Timeline
· Cooke J, at 561: The crossing out of figures and initialling of the change was not a counter-offer.
· The test: What would a reasonable offeror understand it to be?
FACTS:
Exam question on formation → first create a timeline → no solving questions without it → you need to figure out the dates and times. To understand offers and counter offers.
Powierza makes offer to agent to seller → makes counter offer to buyer.
Wants two payments.
Lee Crosses 40k and puts 20k → P initials it
Lee puts back 40K → Powierza initials it
Leading agent calls back to the sellers → says you have a buyer →I have signed with Powierza → and says no we have already sold → after concluded the contract with Powierza → and before you told us.
Offer → makes offer first.
Secondly makes offer from seller (counter offer) → counter offer kills offer,
Cross of $40k → is it counter offer or mere inquiry?
How do we understand initially → is this offer or acceptance?
Cooke → The finding of judge in lower Court is fine → I understand 40K to 20K as mere inquiry → if that is mere inquiry then the initialling is good enough
When Powierza makes an agreement for 40k that is acceptance.
