Offer and Acceptance

Question 1

What are the requirements of a binding contract?

Answer 1

The requirements of a binding contract are offer, acceptance, consideration and intention to create legal relations. OAK I

Question 2

Define Offeree

Answer 2

The person to whom an offer is made

Question 3

What approach does the court take when determining whether an agreement exists between the offeror and offeree?

Answer 3

An objective approach, by considering what the reasonable person would say was the intention of the parties having regard to all the circumstances

Question 4

Define Offeror

Answer 4

The person making the offer

Question 5

For a contract to exist, one party (the offeror) needs to make a clear and certain offer displaying an intention to be bound and the other party (the offeree)…

Answer 5

…needs to communicate an unequivocal acceptance.

Question 6

What 2 things produce an offer and acceptance?

Answer 6

• Clear and certain offer displaying an intention to be bound
• And an Unequivocal acceptance

Question 7

An offer must be clear and certain as illustrated by…

Answer 7

• Gibson v Manchester City Council [1979] 1 WLR 294
• The Council’s letter stating that it ‘may be prepared to sell’ was not sufficiently clear and certain to be an offer.

Question 8

An offeror must also show an intention to be legally bound. As illustrated by…

Answer 8

• Storer v Manchester City Council [1974] 1 WLR 1403
• in which the words ‘If you will sign the agreement and return it to me I will send you the agreement signed on behalf of the corporation in exchange’ (emphasis added) did demonstrate an intention to be bound.

Question 9

What are the two kinds of contracts?

Answer 9

• Unilateral: one party makes an offer or proposal in terms which call for an act to be performed by one or more other parties. For instance, the offer may call for specific lost property to be returned in exchange for a reward. (No mutual promise)
• Bilateral: Each party assumes an obligation to the other party by making a promise to do something, such as to sell an item to the other party in exchange for a payment. (most common)

Question 10

What is an invitation to treat?

Answer 10

A first step in negotiations which may or may not lead to a firm offer by one of the parties. It usually takes the form of an invitation to make an offer

Question 11

What is an offer?

Answer 11

An offer is an undertaking to be contractually bound by the terms of that offer in the event of an unconditional acceptance being made by the offeree

Question 12

In contrast to an offer, an invitation to treat…

Answer 12

…cannot be accepted to form a binding contract

Question 13

Give 4 examples of invitations to treat.

Answer 13

· Advertisements
· Displays goods
· Invitations to tender
· Auctions

Question 14

Advertisements are regarded as…

Answer 14

… statements inviting further negotiations or invitations to treat

Partridge v Crittenden [1968] 1 WLR 1204).

Question 15

Why is an advertisement an invitation to treat?

Answer 15

The advertiser may have limited supplies of the goods in question. If the advert was an offer (rather than invitation to treat) it could be accepted by a larger number of people than the advertiser was able to supply, which would result in the advertiser breaching one or more contracts

Question 16

When are advertisements no longer seen as statements? Key Case?

Answer 16

The general rule concerning advertisements does not apply where the advertisement amounts to a unilateral offer

Carlill v Carbolic Smoke Ball Co **(1893) 1 QB 256

Question 17

What was significant about Carlill v Carbolic Smoke Ball Co (1893)?

Answer 17

The advertisement in this case was held to be a unilateral offer because there was a clear prescribed act (using the smoke balls in a specified manner for a specified period but nevertheless contracting influenza) performance of which constituted acceptance. Further, the defendant’s intention to be bound was clearly demonstrated by their deposit of the £1,000 and the certainty of the language used in the advertisement.

Question 18

Why are price-marked goods displayed in a shop window not an offer for sale but an invitation to treat?

Answer 18

A trader would be obliged to sell the goods to anyone who accepted the offer (the act of acceptance might be taking items off the shelves or presenting them at the cash desk for payment) before any judgment could be made in relation to the particular customer concerned. This would be particularly problematic with certain goods – for example, those that can only be sold to customers of a certain age.

Question 19

In Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 QB 401 …

Answer 19

…the display of goods on the shelves was held to be an invitation to treat

Question 20

What is an invitation to tender?

Answer 20

The initial step in competitive tendering, in which suppliers and contractors are invited to provide offers for supply or service contracts

This action of inviting parties to tender is, as a general rule, deemed an invitation to treat (Spencer v Harding (1870) LR 5 CP 561)

Question 21

When is an invitation to tender an offer?

Answer 21

A displacement of the general principle has been firmly recognised where the invitation to tender expressly contains an undertaking to accept the highest or the lowest bid (Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd [1985] Ch 103).

In such a case, the party requesting tenders has made an offer to enter into a contract with the party submitting the highest / lowest bid. This is a form of unilateral contract: the required act is making the highest / lowest bid, and when this is carried out, the other party is bound.

Question 22

Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 it was held that an invitation to tender could give rise to a binding contractual obligation to consider tenders in circumstances where:

Answer 22

(1) the tenders had been solicited from specified parties who were known to the requesting party;
(2) there was an absolute deadline for submission;
(3) the party requesting tenders had laid down absolute and non-negotiable conditions for submission. On this basis, Bingham LJ held that there was a contractual duty to consider those tenders which had complied with the conditions for submission.

Question 23

What is the general rule in regards to auction sales?

Answer 23

the auctioneer’s request for bids is an invitation to treat (Payne v Cave (1789) 3 Durn & E 148). The bidder makes an offer which the auctioneer is then free to accept or reject. Acceptance of the bidder’s offer will be indicated by the fall of the auctioneer’s hammer. This is consistent with the rules of revocation of an offer ie the bidder may revoke their offer at any time before the hammer falls. It is also reflected in s 57 of the Sale of Goods Act 1979 which states:
“a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid”

Question 24

Wheat is auctions ‘without reserve’?

Answer 24

Many auction sales have a ‘reserve’ price: if no bid above this price is received, the seller keeps the goods. However, in an auction without reserve the seller promises to sell to the highest bidder whatever that bid turns out to be.
If the sale of the item in question is expressed to be ‘without reserve’ the auctioneer may be sued for breach of contract if they refuse to sell to the highest bona fide bidder. This view was expressed, obiter dicta, in Warlow v Harrison (1859) 1 E & E 309

Question 25

What are the 4 aspects to identifying whether there has been the communication of an unequivocal acceptance needed to form a contract?

Answer 25

a) Acceptance must be in response to the offer

b) Acceptance must be unqualified

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

Covered in a separate element
a) Acceptance must be communicated

RUPC

Question 26

Explain how acceptance must be in response to an offer

Answer 26

Only the person / people to whom an offer is made (the offerees) can accept the offer. For example, it would not be possible to accept an offer you overheard that was not addressed to you.

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 of the offer: Carlill v Carbolic Smoke Ball Co. (1893)

Question 27

Acceptance must be unqualified

Answer 27

Acceptance must be unqualified and must correspond exactly with the terms of the offer: Hyde v Wrench (1840) 3 Beav 334.

This is sometimes called ‘the mirror image rule’. Not all transactions lend themselves to an easy analysis in terms of ‘offer’ and ‘acceptance’.

Yet the court will always examine the communication between the parties to discover whether, at any one time, one party may be deemed to have assented to all the terms, express and implied, of a firm offer by the other party. An assent which is qualified in any way does not take effect as an acceptance

Question 28

If the offeree’s response to the offer is qualified, it will be necessary…

Answer 28

… to decide whether it constitutes a counter-offer or a request for information

Question 29

What is meant by Prescribed mode of acceptance

Answer 29

Acceptance may be communicated in any manner whatsoever. Generally, the offeree may decide for himself the manner of acceptance but if the offeror prescribes, the mode of acceptance, the question arises as to whether communication of acceptance in any other manner will suffice.

In Manchester Diocesan Council for Education v Commercial and General Investments [1970] 1 WLR 241, Buckley J explained that it is open to the offeror to prescribe a mode of acceptance ‘in terms insisting that only acceptance in that mode shall be binding’. Buckley J made it clear that particularly clear words would be required of the offeror to make their chosen mode mandatory:

“If an offeror intends that he shall be bound only if his offer is accepted in some particular manner, it must be for him to make this clear.”

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

However, unless the prescribed mode of acceptance is made mandatory, another mode of acceptance which is no less advantageous to the offeror will bind them (Tinn v Hoffman (1873) 29 LT 271).

Question 30

Acceptance must be communicated

Answer 30

The general rule is that acceptance must be communicated to the offeror. Acceptance applies from the moment it is communicated. Where the offeree merely intended to accept, but did not communicate that intention to the offeror, there is no contract, i.e. mere mental assent is not sufficient. Moreover, the offeror may not stipulate that they will take silence to be acceptance and thus bind the offeree.
As a general proposition, the rule that silence cannot amount to acceptance seems a sensible one. The offeror will want to know when they are bound. Furthermore, if silence in the face of an offer could amount to acceptance, this would place an unnecessary burden on the offeree to respond.

Question 31

Third party communication of acceptance

Answer 31

It is possible for a contract to come into existence where a person other than the offeree informs the offeror of acceptance; in other words, where a third party has informed the offeror of the fact of acceptance. However, no contract will arise if the communication is made by a third party without the authority of the offeree, in circumstances indicating that the offeree’s decision to accept was not yet regarded by the offeree as irrevocable.

Question 32

What is the postal rule?

Answer 32

It held that where post is deemed to be a proper means of communication, the acceptance takes effect from the moment the letter of acceptance is properly posted – not from the moment it is received by the offeror. A letter is properly posted when it is put into an official letter box or into the hands of an employee of the Post Office who is authorised to receive letters
Key case: Adams v Lindsell (1818) 1 B & Ald 681

Question 33

Where does the postal rule apply?

Answer 33

• The postal rule applies even where the acceptance is delayed or lost in the post.
• Applies even where the acceptance is delayed or lost in the post
• The rule applies even where the acceptance is delayed or lost in the post: Household Fire and Carriage Accident Insurance Co. v Grant (1879) 4 Ex D 216.

Question 34

Where doesn’t the postal roll apply?

Answer 34

• The postal rule does not apply if not contemplated post would be used; to letters revoking offers; if
  incorrectly addressed; if disapplied by offeror.
• Does not apply if it is not contemplated that post would be used, Henthorn v Fraser [1892] 2 Ch 27
  -Does not apply to letters revoking offers Byrne v Van Tienhoven (1880) 5 CPD 344
• Does not apply if the acceptance is incorrectly addressed
• Does not apply if disapplied by offeror

Question 35

Where acceptance is made by instantaneous communications (such as by telephone) it is effective when the communication is received by the offeror, but…

Answer 35

… the offeror may be estopped from denying receipt of a communication if they are at fault for the non-receipt. Depending on the facts, such a communication might not be deemed received until the start of office hours after receipt.

Question 36

A binding contract requires…

Answer 36

… all material terms to be certain and complete. Only an agreement which is sufficiently certain can be enforced by a court

Question 37

To determine whether the parties have reached an agreement on all material terms the court applies…

Answer 37

… an objective test, asking whether, in all the circumstances of the case, the parties have agreed all the terms they considered to be a precondition to creating legal relations (RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Company KG (UK Production [2010] UKSC 14)