Offer, Acceptance & Unilateral contracts Flashcards
State the 4 main elements required for a legally binding/enforceable contract
For a contract to exist the court states that there needs to be;
Offer & Acceptance
Consideration
Certainty
Intention
State the different ways a contract can be deemed unenforceable or non binding
Void; the contract had no legal effect
Voidable; the contract is legal until such time it is made void by one of the parties
Unenforceable; cannot be enforced by the courts due to the lack of legal evidence a contract was agreed.
Briefly explain the notion of an ‘offer’
It is generally accepted that an offer starts the process of a contract coming into existence. An offer is a expression of willingness to do business on certain terms / conditions.
Offers must be communicated person(s) need to know the existence of an offer in order to provide an acceptance.
Offers can be specific or general. Specific denoting the offer is made to a specific person or persons, which can only be accepted by the person(s) it was addressed to
Briefly explain the notion of ‘acceptance’
If an offer has been accepted, the offeree unconditionally agrees to the terms of the offer , and the basics of a contract can start being drawn up. The acceptance has to be communicated to the offeror. There are many forms of communicating acceptances, in today’s business environment instantaneous communication methods would be phone, fax or email, alternatively post or telegram could be used. The offeror can stiplulate in the terms of the offer the method the acceptance should be communicated and can also indicate a time limit for acceptances to be received.
The acceptance can be deemed invalid if communicated in a different way than stipulated
There is one rule when this does not apply, the exception, where post or telegram is used as the form of communication. Known as ‘the postal rule’. If the acceptance is communicated through post or telegram, it is deemed the offer has been accepted once the letter of acceptance has been posted
Explain the notion of ‘Consideration’
It can be ascertained as the price or value parties agree on for a promise on offer. If it is proved there is no consideration, then it is deemed that no contract exists. Consideration must exist for a contract to be valid. Consideration must be either executed or executory. Executed relates to the carrying out of a promise or payment for that promise in the present time. Executory relates to the carrying out of the promise or making payment for the promise in the future.
Consideration must move from the promisee for the law to assume consideration had taken place. It must also be taken that the consideration is deemed sufficient that it is good and has a value. Under consideration the courts do not consider the value.
If a party negotiates a bad deal, consideration does not have to be adequate.
Explain the notion of ‘Intention’ to create legal relations
It is assumed most commercial contracts are intended to be legally binding. If a party is not happy in an agreement and tries to get the contract annulled, the onus is on them to prove the contract has no legal standing. Some enter clauses to the effect that the agreement would not be binding in a court of law, instance where you find this today would be competitions in newspapers, with the inclusion of the clause “ editors decision is final”.
Key case relating to the issue of creating legal intentions is Rose & Frank Co v JR Crompton & Bros(1925) where a honour clause was written into an agreement. When a dispute arose the courts stated the defendants Rose had to honour the outstanding orders placed on them by the plaintiffs JR Crompton, as they had been accepted but did not have to continue with the agreement or accept any new orders.
Explain the importance of ‘Certainty’ in a contract
Every area of the law experiences tension between the need for clarity and certainty, so that conduct can be regulated by reference to predictable rules, versus the desirability of flexibility, giving the courts enough discretion to respond to the merits of a dispute.
In contract, this tension is particularly evident, but in most cases there is everything to be said for clarity and certainty, even if this means some harsh decisions on the merits. Commercial parties need to know where they stand and, on balance, would prefer to be the loser today if that means that, next time, they know precisely what to do to avoid being the loser again.
The law of contract is very definitely not just concerned with litigation and resolving disputes after the event, although (perhaps inevitably) the focus of commentators is on case law, which is, by definition, the product of litigation. It is also facilitative, a set of ground rules to enable parties to make and perform their desired bargains, and needs to be clear and accessible as such to practitioners drafting contracts and advising clients in negotiations
plain what the terms ‘offeror’ and ‘‘offeree’ mean
Offeror - person making the offer
Offeree - person to whom the offers being made to
Explain how to determined whether a valid offer and acceptance has taken place:
In working out whether there is a valid offer and acceptance, factors other than the apparent intention of the parties may also be relevant I.e. the distinction between an offer and an invitation to treat when examining the doctrine of intention to create legal relation
In some contexts we are happy to impose duties and bestow rights upon the parties that they have not agreed to. For example, we imply terms into a contract, despite the fact that the parties have not agreed to such terms. Similarly, in some circumstances, statute permits us to strike down terms of the contract that seem unfair, despite the fact that the parties have agreed to such terms.
Moreover, contract law is happy to give one party various remedies against the other party when the latter breaches a term of the contract, despite the fact that the parties have not agreed to any such remedies
Finally, if we take such a strict approach, by always requiring an offer and acceptance, the result will often be that no contract will be found between the parties. This is problematic, because the law is very unclear as regards when one party will have to pay for work done by the other, if there is no contract between them. Moreover, if there is no contract, one party cannot recover for loss caused to him by the other party because there is no contract between them to be breached.
Explain the difference between a Bilateral and Unilateral Contract
The key difference is that only the latter type of contract places obligations upon and grants rights to both parties.
Bilateral Contracts: A promise (offer) in return for an act (acceptance). Acceptance of the offer is performing the act. Effectively this contract places obligations upon and grants rights to both parties.
Unilateral Contracts: In a unilateral contract, the offeree makes no promise and so is under no obligation to do anything.Essentially an exchange between two parties is immediately binding. With unilateral contracts the promiser is bound to perform, if and only if, the person (or persons) with whom the promise is made performs the specified act. (i.e. carlill v carbolic smoke rewards)
Can an offer ever be accepted by silence?
The law requires steps to be taken to bring a purported acceptance to the offeror’s attention. Therefore, if the offeree decides he has accepted the offer but does nothing to indicate this to anyone, least of all the offeror, this will normally not constitute a valid acceptance.
This general rule that silence will not constitute an acceptance can be justified on two grounds:
- It protects the offeree from accepting offers that they do not intend to accept. Imagine that I received a large amount of offers through my mailbox, each saying something along the lines of ‘if I do not hear from you by tomorrow morning, I will take it you to have accepted my offer’. In the absence of the general rule, I would have to go to the trouble of expressly rejecting all these offers in order to stop myself entering into unwanted contracts. So it prevents unwanted contracts being thrust upon me.
- Silence is often equivocal, so if an offeree says and does nothing in response to the offer, it is very difficult for the offeror (and court) to tell whether the offeree intended to accept it.
Exceptions:
a) If the offeree does not say anything but his conduct clearly indicates to the other party that the offeree intends to accept the offer, then his intent is not equivocal and a contract is not being forced upon him.
b) The second exception is where the silence of the offeree does indicate to the other party an intention to accept the offer even in the absence of any conduct on his part. This will not often be the case, but this exception may apply where, for example, there have been previous dealings between the parties.
Explain when a unilateral contract is accepted
As a matter of general principle, an offer is only accepted when its terms are fully complied with, so if I offer you £100 for running the marathon and finishing it, the main unilateral contract only comes into force when you cross the finishing line.
Therefore, he appears to have viewed the effect of commencement of performance as being to prevent revocation of the offer, not to constitute its acceptance. Where the offer is clearly intended to be revocable even once performance has been commenced, then it can be so revoked.
Explain how an acceptance can be revoked
If the situation is one where the postal rule applies it would seem that a contract is formed when I post the letter, so it is too late for me to back out. However, what if I manage to get my retraction to the offeror before the offeror receives the letter (for example, by telephoning)
There is no English authority on this point (although Bramwell LJ commented in his dissenting judgement in Household Fire Insurance Co v Grant(1879) that the revocation would be effective).
The postal rule is merely one convenient way to strike a balance between the interests of the offeror and offeree, so where, as here, we can protect the offeree (by allowing him to revoke) without harming the offeror in the process, we should not let the postal rule stand in our way. On the other hand, allowing offerees to revoke in this situation allows them to hedge their bets: they can post the acceptance if the offer appears a good one at the time and then retract it if the market turns against them before the acceptance has reached the offeror.
Thus Routledge v Grant (1828) provides that an offer may be revoked (withdrawn) by the offeree at any time before acceptance.
Must an offeree know of an offer in order to accept it?
Must the offeree know of the offer in order to accept it?
This issue has arisen in a number of cases in which a reward was offered in return for information. While the position is far from clear, it appears that English law requires the offeree to know of the offer in order to validly accept it. So if I offer a reward of £100 to anyone who returns my lost dog, and, without knowing of the offer, you return my dog, you cannot claim the £100.
Gibbons v Proctor (1891) has often been relied upon in the past to support the proposition that knowledge is not required, but it seems that the offeree in that case did actually know of the offer. Similarly, in the other principal English case on the issue, Williams v Carwardine (1833), the offeree knew of the offer.
Explain the postal rule
In the case of acceptances by post, the general rule is that the offer will be accepted when the letter is posted, not when it reaches the offeror. This rule only applies where the parties contemplated that the acceptance might be posted, so this rule will be less likely to apply with the advent of modern, quicker forms of communication. Even if a postal acceptance is contemplated, the postal rule will not apply where the offer expressly or impliedly requires actual communication of the acceptance. It is found telegrams also fall under the postal rule.
If the offeree accepts by post, the general rule is that the offer will be accepted when the letter is posted, not when it reaches the offeror (Adams v Lindsell(1818)). This is known as the ‘postal rule’.
Under the postal rule, the letter of acceptance is relevant on posting.
The postal rule does not apply to more modern, instantaneous forms of communication (see Entores Ltd v Miles Far East Corpn (1955) in the context of telexes).
It is commonly said that where the method of communicating the offer is instantaneous (or virtually instantaneous), there will not be an acceptance unless and until it is communicated to the offeror.
