Formation of a Contract - Offer

Question 1

Courts take an ‘objective’ approach when determining whether an agreement exists:
Which is?

Answer 1

The courts will look at what was said and done between the parties, from the point of view of a ‘reasonable person,’ and try to decide what a reasonable person would have thought was going on.

The courts will also look at factual indicators which suggest that the parties were entering into an agreement, i.e. an offer and an acceptance.

Question 2

Offeror and offeree?

Answer 2

Who makes the offer

Who the offer is made to

Question 3

What is an offer?

Answer 3

“an expression of willingness to contract on specified terms made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.”

Question 4

What must an offer be and what else could it be?

Answer 4

The terms of an offer must be sufficiently certain.

Words like ‘might be prepared to’ or ‘may be able to’ would indicate uncertainty.

Could be an ‘invitation to treat.’

Question 5

In what manner can an offer be presented?

Answer 5

Made orally, in writing or by a person’s conduct.

Question 6

What must be indicated in an offer?

Answer 6

Must indicate that the offeror is willing to be bound if their terms are accepted.

Question 7

Who can make an offer?

Answer 7

ANYONE!
Can be made by an individual, a business, a limited company, a partnership or other type of organisation.

Question 8

Give a case for making an offer and by anyone?

Answer 8

Thornton v Shoe Lane Parking [1971]- machine on behalf of company.

Question 9

What must the offeree have? Give a case.

Answer 9

Offeree must have knowledge of the offer.
- Can’t accept something they were not aware of.
The offer must be clearly communicated to the offeree for it to come into existence.
Taylor v Laird [1856]

Question 10

What is a bilateral offer?

Answer 10

A bilateral offer is one where both parties have obligations to one another.
Between two people or two organisations, etc.

Question 11

What is an unilateral offer?

Answer 11

A unilateral offer occurs where the offeror says to the offeree “If you do something, then I promise to do something in return.”
Sometimes seen as an ‘offer to the world.’
Usually involves the offeree performing an action in order to enforce the agreement.
E.g. A poster offering a reward for a missing pet.

Question 12

Give the MAIN case for a unilateral offer.

Answer 12

Carlill v Carbolic Smoke Ball Co. [1893]

Question 13

What is an invitation to treat. Is it an offer and give a case! What was held?

Answer 13

An invitation to treat is not an offer and therefore cannot be accepted.
An invitation to treat is an indication that one person is willing to negotiate a contract with another, but that he or she is not yet willing to make a legal offer.

Harvey v Facey [1893]
The courts held that there was not a valid offer and acceptance as Facey was merely responding to a request for information, not an offer.

Question 14

In what form does an invitation to treat come as? Give some examples.

Answer 14

It is important to be able to make a distinction between an offer and an invitation to treat.
Invitations to treat may come in the form of a request, an invitation, an opportunity for someone else to come and make an offer or the chance to open negotiations.
Necessary in commercial relationships.

There are several situations which have been established as being an invitation to treat:
Advertisements;
Displays of goods in shop windows;
Auctions;
Requests for tenders; and
Mere statements of price or a request for information.

Question 15

Advertisements? Case.

Answer 15

Advertisements are generally considered to be invitations to treat:
The potential purchaser is the one who makes the offer to buy.
Partridge v Crittenden [1968]

Question 16

What is the exception to advertisements? Case.

Answer 16

The exception to this rule is where the advertisement contains a clear indication that there is an offer because it is expected to be taken seriously.
This is usually the case with unilateral offers in advertisements, see Carlill.

Question 17

Goods on display. Case.

Answer 17

Displays on a shelf or in a shop window are classed as invitations to treat not an offer for sale.
Displays in a shop window encourages the purchaser to enter the shop and make an offer to buy the product displayed.
The shop keeper is under no obligation to accept that offer to sell that item.
Fisher v Bell [1961]

Question 18

Are goods on a shelf classed as an invitation to treat and how does offers work in shops? Give a case.

Answer 18

Goods on a shop shelf are also classed as an invitation to treat and become an offer made by the purchaser when they present the items to the cashier or self-service scanner.

The shop can accept or decline that offer through the check-out operator or self-service scanner.

Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953]

Question 19

Auctions? Case.

Answer 19

At an auction, the bidder makes the offer to buy the product by raising their hand, which the auctioneer accepts by bringing the hammer down.
The holding of an auction, and the auctioneer’s request for bids, amounts to an invitation to treat.

British Car Auctions v Wright [1972]

Question 20

What are the exceptions on auctions. Case.

Answer 20

Exception where the item auctioned is advertised as ‘without reserve.’
The auctioneer is making an offer to sell, and the highest bidder accepts that offer.

‘Without reserve’ means that no reserve price has been placed upon the auction item and the auctioneer must sell it to the person who places the final and highest bid.

Barry v Davies (Heathcote Ball & Co.) [2000]

Question 21

Request for tenders, what is it and explain with a case?

Answer 21

Tendering is where a person submits a bid or quotation in the hope of securing a contract as a result of that bid.
Sending out a request for tenders is an invitation to treat.
The firms that respond to that request are the ones making the offer.

Spencer v Harding (1870)

Question 22

What is the exception for request for tenders? Case.

Answer 22

Exception exists where the requestor makes a specific promise that they will accept the ‘best’ bid.

Blackpool & Flyde Aero Club Ltd v Blackpool County Council [1990]

Question 23

Is request for information/ statements of price an offer? Uses cases to explain.

Answer 23

A request for information and a reply to such a request is not an offer.
This might be a general enquiry such as when an item for sale does not have a price tag on it.

In Harvey v Facey the court held that Facey’s response to Harvey’s question to purchase the property was merely a reply to a request for information, not an acceptance of an offer. \
The same was applied in the case of Clifton v Palumbo [1944] - the Court of Appeal held that a statement in a letter saying “I am prepared to sell my Lytham estate for £600,000 was not an offer but a preliminary statement as to price.

Question 24

What is revocation?

Answer 24

To withdraw an offer. Must be successfully communicated to the offence before it is made affective.

Question 25

Give two cases for revocation.

Answer 25

Routledge v Grant
Payne v Care

Question 26

What happens to revocation if sent by letter? Give a case.

Answer 26

It will only take effect once the offeree has received it.

Bryne v Van Tienhoven

Question 27

What is revocation by a third party and give a case?

Answer 27

Has to be reliable. Agents, lawyers etc.

Dickinson v Dodds - in favour of D

Question 28

What is revocation of an unilateral offer? Is it hard to achieve?

Answer 28

Yes quite hard, case by case basis to see what point R took place.

Question 29

What is Errington v Errington say uni and revocation?

Answer 29

Once an offeree has started to perform an act, request in the offer, the offer cannot be revoked.

Question 30

What must revocation of an unilateral be communication wise?

Answer 30

Must still be communicated to be valid. Offerror must show that reasonable steps were taken to bring the revocation to the attention of the relevant individuals- think Carli v Carbolic.

Question 31

What is the rules in revocation in office hours?

Answer 31

If a notice of revocation is sent to a business during normal office hours, revocation will take effect where it is reasonable to expect a member of staff to e available to read it.

In this case, the revocation will be effective on receipt where it is telexed e.g. email The Brimnes 1975

Question 32

What is the test for office hours?

Answer 32

If the offeror knew, or ought to have known, that the offeree was not available until a week later date e.g. holiday.

Question 33

How can a offer be rejected?

Answer 33

The offeree declining the offer out right;

The offeree making a counter-offer to the offeror; or

The offeror makes a separate second offer which implies the first offer has been revoked (in other words, the offeror makes their own counter-offer).

Question 34

What happens with a counter-offer?

Answer 34

A counter-offer is where the offeree answers the offer with another offer containing new terms.
This has the same effect as a rejection and ends the original offer.

Question 35

In a counter-offer the offeror will then become the offeree and will have to choose whether they accept the new terms. What happens in they don’t?

Answer 35

If they don’t, the offeree cannot go back on the rejection once he or she has given the counter-offer, unless the offeror agrees to reinstate the original offer.

Question 36

Give a case for a counter-offer.

Answer 36

Hyde v Wrench (1840)

The defendant offered to sell a farm for £1,000, and the claimant made a counter-offer to buy at £950, which was declined. The claimant then offered £1,000 but the defendant refused to sell. The claimant sued but the court held that there was no agreement.
The original offer, to sell at £1,000, had ended when the counter-offer of £950 was made.
Also, the later offer to buy at £1,000 by the claimant was not accepted by the defendant.

Question 37

What is battle of the forms? Who does it usually concern?

Answer 37

A ‘battle of the forms’ usually arises in business negotiations.
Each time a business issues a new term in the negotiations it creates a counter-offer.

Question 38

Give a case for battle of the forms.

Answer 38

Butler Machine Tool Co v Ex-Cell-O Corporation (England) Ltd [1979]

The courts held that the general rule is that the last party to send its terms “wins”, as each redraft constitutes a new offer which cancels out the former.

Question 39

Is requesting information an offer or counter-offer?

Answer 39

A mere request for information is not a counter-offer and does not end the original offer.
The distinction can be difficult to draw upon when dealing with negotiations as discussed and it will depend on what the offeree appeared to have intended at the time.

Question 40

Give a case for requesting information.

Answer 40

Stevenson, Jacques and Co v McLean (1880)

The defendant offered to sell some iron to the claimants for cash. The claimants asked whether they could have credit terms and, when they received no reply to their enquiry, accepted the original offer.

Meanwhile, the defendants, taking the enquiry as a counter-offer, sold the iron to someone else without informing the claimants. The court held that the enquiry was not a counter-offer but a mere request for further information.

This did not end the original offer and the defendants were in breach of their agreement by selling the iron to a third party.

Question 41

What is the offeror’s counter-offer?

Answer 41

The offeror may also revoke the first offer by implication, by making a second, separate offer before the first one has been accepted.
This will happen if the offeror communicates a significantly different second offer which clearly intended to revoke the first one.

Question 42

Give a case for the offeror’s counter-offer.

Answer 42

Pickfords Ltd v Celestica Ltd [2003]

Pickfords had issued quotations (offers) for removal work. The first quotation was based on a price per load and the second quotation was at a fixed price for the complete job. Celestica then attempted to accept the first quotation.

It was held that this offer had been revoked by the second offer and was therefore no longer available to be accepted. In fact, Celestica’s “acceptance” of the first offer became a counter-offer to complete the work for the firstly quoted price, as it was introducing new terms different from the last offer.

Question 43

Explain a lapse of time and a fixed term.

Answer 43

An offer can come to an end by lapse of time.
If a fixed period for the duration of the offer is stated, then as soon as that expires there is no offer to accept.

Question 44

What happens in a lapse of time when no time limit is set?

Answer 44

The problem arises when there is no time limit set.
In this situation, the offer will end after a ‘reasonable time’ has lapsed. What is classed as ‘reasonable time’ will be for the courts to decide in each case.

Question 45

Give a case for a lapse of time?

Answer 45

Ramsgate Victoria Hotel v Montefiore (1866)

An offer to buy shares was made on the 8th June. The acceptance was received on the 23rd November and the court held that this was too late. The offer had lapsed in the time between the two dates. The reason for this decision was because the prices for shares can quickly change and this would indicate the offer would only be available for a short period of time.

Question 46

What happens if the offeree dies?

Answer 46

If the offeree dies, then the offer ends and those dealing with the deceased’s estate cannot accept it on his or her behalf.
They can, however, make a new offer.

Question 47

What happens if the offeror dies?

Answer 47

If the offeror dies, acceptance can still take place until the offeree learns of the offeror’s death.
This will not be the case, however, if the offer involves some personal service by the offeror.

Question 48

Explain acceptance.

Answer 48

Once an offer has been accepted, the offer will come to an end.
Acceptance of an offer will form an agreement between the offeror and the offeree.
Acceptance must be absolute, meaning it is final and unconditional.
Conditions may be seen as a counter-offer.
The agreement will be classed as a legally binding contract if the other essential elements are present:
Consideration and intention to create legal relations.
Acceptance will be discussed in more detail later.