Offer and Acceptance

Question 1

Smith v Hughes

Answer 1

Objective test

Question 2

What ingredients must be present for a contract to be binding?

Answer 2

1. Offer
2. Acceptance
3. Intention to create legal relations
4. Consideration

Question 3

An agreement may be made:

Answer 3

• in writing
• by word of mouth (orally)
• by inference from the conduct of the parties and the circumstances of the case
• by any combination of the above modes

Question 4

Bilateral and Unilateral Contracts:

Answer 4

Bilateral: most common form. Parties make each other a promise to do something. Eg. Sell item in exchange for payment.
Unilateral: one party makes an offer which calls for an act to be performed by one or more other parties. Eg. offer calling for lost item to be returned for a reward.
*Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256

Question 5

Unilateral contract quote

Answer 5

“Why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition?” per Bowen LJ

Question 6

What is an offer?

Answer 6

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

Grecoair Inc v Tilling [2005] Lloyds Rep 151

Question 7

Is it an invitation to treat?

*Gibson v Manchester City Council [1978] 1 WLR 520 (CA); [1979] 1 WLR 294 (HL)

Answer 7

Ratio: Permissive language negates an offer
Facts
• Council willing to sell council houses to tenants. Council contact Gibson telling him they may be willing to sell him the house if he completes forms etc. Change of council, cancelled offer. Gibson said they made him an offer.
Held
• Court said the council said they “may be willing” if certain steps were fulfilled.
• Were not therefore willing to be legally bound and were inviting Gibson to make an offer which was never accepted by the council, therefore do not have a contract.

Question 8

Is it an invitation to treat?

*Storer v Manchester City Council [1974] 1 WLR 1403

Answer 8

Facts
New city council refused to proceed with sale of house to sitting tenant arranged by the previous council. Only the date when lease would cease and mortgage payments would commence was left open.
Held
Parties to negotiations may, by their words and conduct, make it clear that they do intend to be bound even though there are other terms yet to be agreed.
The legal rights and obligations of the parties turn upon what their words and conduct would reasonably be understood to convey, and not upon their actual beliefs or intentions.
“Exchange” of contracts is not necessary to form a concluded contract where the terms are agreed in correspondence between the parties.
Held that M Council were bound from the moment S completed and returned the “agreement for sale.”

Question 9

Displays and Adverts

*Pharmaceutical Society of GB v Boots [1953] 1 QB 101

Answer 9

Adverts invitation to treat or offer?
Goods are an offer, if picked up offer and acceptance has happened and contract complete, therefore sale completed w/out supervision by registered pharmacist. Boots argued goods on display merely an invitation to treat and offer and acceptance only happens once goods taken to till. Retailer still able to refuse to sell. Court ruled in favour of Boots.

Question 10

Displays and Adverts

Fisher v Bell [1961] 1 QB 391

Answer 10

Display of flick knives not an offer but invitation to treat.

Question 11

Displays and Adverts

Partridge v Crittenden [1968] 2 ALL ER 121

Answer 11

Newspaper advert for cocks and hens. Charged for unlawfully selling live birds. In appeal claimed to be making only an invitation to treat there for not in violation of protection of birds act. Contrast w/ Carlill

Question 12

Train Timetables

Answer 12

Denton v Great Northern Railway
If people are doing as encouraged by the other party then that is sufficient exchange of values and therefore a contract. The timetable is the offer, going to the train station is the acceptance.

Question 13

Buses

Answer 13

Wilkie v London Passenger Transport Board
Obiter Lord Greene: public bus plying for hire is offer. Boarding is acceptance.
Problem: How could bus driver refuse drunk or abusive passengers?
Maybe better to consider plying ITT, boarding the offer, and the acceptnce takes place with the bus driver

Question 14

Auctions

Answer 14

Advertising the auction (ITT)
Putting up goods for sale (ITT)
Bid (offer)
The fall of the hammer (acceptance

Question 15

Auctions

Case 1

Answer 15

Warlow v Harrison

Highest bona fide bidder can sue the auctioneer if goods are withdrawn without a reserve

Question 16

Auctions

Case 2

Answer 16

Barry v Davies
Confirms Warlow
Auctioneer is obliged through colateral contract with buyer to accept highest bona fide bid (if no reserve)

Question 17

Tenders

General rule

Answer 17

An invitation to tender is an invitation to treat
Offer is made by persons submitting tender
Acceptance is made when the person inviting the tenders accepts one of them

Question 18

Tenders

Referential bids are not valid case and reasoning

Answer 18

Harvela Investments Ltd v Royal trust Co of Canada (CI) Ltd [1986] A.C. 207
Referential bids are not valid. They conflict entirely with the purpose of tenders which is an idependent, self contained bid

Question 19

Tenders

Collateral contract case

Answer 19

Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 W.L.R. 1195
There is a collateral contract with bidders implying that the requester will inspect all bids

Question 20

Communication of the offer
Offer must be communicated to the offeree
Bilateral contract case

Answer 20

Taylor v Laird [1856] 25 LJ Ex 329
A captain of a ship decided to step down during a trip and went back to working as a normal member of the crew. Upon returning, he tried to claim wages from the owner of the ship, but the ship owner was unaware of Taylor’s decision to quit his job as captain and he had not received an offer from Taylor to work in alternative capacity.
Held: His claim failed because Laird did not have an offer from the commander to do a different job, so there was not a binding contract.

Question 21

Communication of the offer
Offer must be communicated to the offeree
Unilateral contract case

Answer 21

Carlill

An offer may be communicated to a particular person or group of people or generally to the whole world

Question 22

Pricing Errors and Electronic Communication

Answer 22

Pricing errors don’t really matter even electronically. Only ITT, customer still makes the offer at checkout, so the seller can not accept if the price was wrong
WHSmith internet terms and conditions:
Although we make every effort to ensure the prices on the website are correct, mistakes may sometimes be made. If we discover a mistake in the price of the products you have ordered, we will tell you and give you the option of either reconfirming your order at the correct price or cancelling your order. If we are unable to contact you or we receive no reply from you, we will cancel your order. If your order is cancelled and you have already paid for the products you will receive a full refund.”

Question 23

What is an acceptance?

Answer 23

Day Morris Associates v Voyce [2003] per Black J

“A contractual acceptance has to be a final and unqualified expression of assent to the terms of the offer.”

Question 24

General Rules of acceptance:

Answer 24

The acceptance must correspond with the terms of the offer
The acceptance must be given in response to the offer
The acceptance must be made by the appropriate method
The acceptance must be communicated to the offeror

Question 25

Correspondence with the offer

Mirror image rule:

Answer 25

Acceptance must mirror the terms of the offer.

Question 26

Correspondence with the offer

Is it an acceptance, or just a counter offer?

Answer 26

*Hyde v Wrench (1840) 49 ER 132
W offered to sell farm to Hyde for £1000. H declined. W wrote to H’s agent offering to sell for £1000, as final offer that he would not alter from. H offered £950.W refused, and informed Hyde of this. H agreed to buy the farm for £1000 without any additional agreement from W, and after W refused to sell the farm to him he sued for breach of contract.
Held that a counter offer negates any previous offer. Can’t return to and accept earlier terms.

Question 27

Is it a counter offer, or just a request for further information?

Answer 27

*Stevenson Jacques & Co v McLean [1880] 5 QBD 346
RFFI id not a counter offer and does not negate the original offer. Revocation of the offer must be communicated to the offeree

Question 28

‘Battle of the Forms:’ confusion over the sequence of events

*Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965

Answer 28

B makes offer to E with price variation clause. E makes CO on own terms. B say they accept but on their own terms. Try to enforce PV clause
Court says no, that B accepted E’s CO and thus their terms

Question 29

*Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Denning’s approach

Answer 29

Look at all documents.
Agreement found where material points are decided. In most “battle of forms” cases there is a contract as soon as the last form is sent and received without objection.
Content is determined in three points. Traditional analysis of last form. Differences affecting price must be brought specifically to attention to be enforceable. Where forms vary T&Cs should be construed together where possible, if irreconcilable, replaced with reasonable implication.

Question 30

*Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Traditional approach

Answer 30

Pro: Relative simplicity. Foramation and content are one issue as content must be agreed for formation to take place.
No distinction between different types of terms; the court identifies differences in reply and draws the appropriate conclusions.
Cons: Encourages form-spamming so that yours is the last
If seller doesn’t deliver there is no contract so can’t claim, if they do and there is a dispute may have inadvertently impliedly accepted by taking delivery
Parties have “unjustifiable locus poenitentiae”. May renege even where one may have substantially performed and reason may bear no relation to discrepancies in reply

Question 31

Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Traditional approach: counter to third con

Answer 31

Same criticism may be made of any stage of contractual negotiations.
Argument must claim that there is st special about BoF to warrant prevention of such renegation. Claim rests on two assumptions: that businessmen don’t read fine print, and that they consider the deal concluded when major terms are agreed.
Research from Beale and Dugdale refutes these assumptions.
“considerable awareness of the fact that in many cases an exchange of conditions would not necessarily lead to an enforceable contract.”
Businessmen do not always ignore fine print. While certain items always agreed expressly, actual negotiation over standard conditions varied substantially. But “in the majority of cases at least a few of the more important terms dealt with in the standard conditions would be discussed and agreed.”

Question 32

Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Denning cons

Answer 32

Does not resolve form spam
Almost any term could affect price so specific notice is impractical, and doubtful that there is much that can be done in standard forms to increase awareness.
Reasonable implication difficult.
Categorisation of terms must be arbitrary and therefore liable to produce much litigation. Subsections 1 and 2 of section 2-207 of the Uniform Commercial Code attempted similar categorisation and incited much litigation as to what consitutes material due to the varying importance attached to different terms by different businessmen
Courts adopting such a categorisation would either risk distorting commercial expectations or produce a flood of litigation as to the subjective importance attached to each term in every case

Question 33

Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Thesiger approach

Answer 33

Held that by stating their terms “ shall prevail,” sellers had acted so emphatically as to cause all future dealings to be subject to those terms, such that the buyers must be taken to have agreed to them. Solution was properly
rejected on appeal.
It would encourage the offeree also to insert a prevailing clause. But in such circumstances it seems unfair to
allow the offeror to impose his terms.

Question 34

Butler Machine Tool Co. Ltd v Ex-Cell-O Corp. (England) Ltd. [1979] 1 ALL ER 965
Rick Rawlings The Battle of Forms
Professor Guest’s approach

Answer 34

While any divergence in reply would produce a CO, acceptance of that CO might be implied from subsequent silence. Bridge L.J. and Denning felt that this approach went too far. Had the difference been one of basic price, sellers would not expect to have to reply. Here, the traditional approach may mirror commercial expectations.

Question 35

‘Battle of the Forms:’ confusion over the sequence of events

2nd case

Answer 35

*Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209
T made orders on their terms. A sent acknowledged orders but on their terms. Proceeded with supply and purchase of the goods.
If no further documents after A’s acknowledgment then its terms would apply. Need to show that both parties intended that some other terms would prevail, either expressly agreed or inferred from the circumstances. That other T&Cs would make more commercial sense insufficient, and it would always be difficult to displace the traditional analysis that A’s T&Cs would apply as their statement was the last.

Question 36

Acceptance ‘subject to contract’

Case defining when subject to contract does and doesn’t work

Answer 36

Van Halzfeld-Wildenburg v Alexander [1912] 1 Ch 284, 288, per Parker J
Purchaser wrote offering to buy a house, saying acceptance was subject to her solicitor approving title, covenants, lease and form of contract.
“It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract, contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will in fact go through. In the former case, there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract entering into a contract. In the latter case, there is a binding contract and the reference to the more formal document may be ignored.”

Question 37

Acceptance ‘subject to contract’

Reasonable honest businessman test case

Answer 37

*RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC 14 (Supreme Court):
Reasonable honest businessman test as to whether it seems that the subject to contract provision was waived
SC said it was “unconvincing” that RTS “was agreeing to proceed with detailed work… on a non-contractual basis subject to no terms at all” and “inconceivable that the parties would have agreed only some of the terms” and not MF/1.

Question 38

Acceptance ‘subject to contract’

Case identifying where O&A happens

Answer 38

*Immingham v Clear Plc
A quotation was emailed to C, “Subject to board approval and tankage availability”, stating “a formal contract will follow in due course”. C returned the quote, signed. I confirmed Board approval and said “our full contract for this business will now be raised… and sent for your signature and return.” The “formal contract” was emailed to C, but was not signed or returned. C did not utilise the storage, invoices were not paid and C denied the existence of a binding contract, claiming it had not signed the “formal contract”. I argued the contract was formed by its acceptance of C’s return of the signed quote.
CofA said the quote was not made “subject to contract”. Both conditions were fulfilled and all substantial terms had been agreed. I’s subsequent email was when a binding contract was formed. The quote returned by C was an offer to I, which Immingham accepted

Question 39

Acceptance must be in response to the offer

Gibbons v Proctor (1891) 64 LT 594

Answer 39

Police officer supplied information. There was a reward but he was not aware of this at the time. He did become aware of the offer by the time the information reached the relevant party. It was held that the officer was entitled to claim the reward.
The case is sometimes wrongly cited as authority for the proposition that acceptance in ignorance of an offer is effective. A closer inspection of the facts of the case reveals that the party claiming the reward possessed full knowledge of the offer at the time when he gave the information.

Question 40

Acceptance must be in response to the offer

Just needs to be on your mind

Answer 40

Williams v Carwardine (1833)
Witness gave information knowing that there was a reward but for the reason that she had been beaten by her husband for not giving more information previously.
Two judges clearly stated that motives were irrelevant. Littledale J said, “If the person knows of the handbill and does the thing, that is quite enough.” Patteson J said “We cannot go into the plaintiff’s motives.”
Need to know of the offer, but don’t need to be motivated by it. Just needs to be a thing on your mind.

Question 41

Acceptance must be in response to the offer

Needs to be the only thing on your mind.

Answer 41

R v Clarke (1927) 40 CLR 227 (N.B. This is an Australian case and is NOT BINDING on English courts, although they can see it as persuasive when considering the arguments of the parties).
Needs to be the only thing on your mind.

Question 42

Appropriate methodto communicate acceptance

Answer 42

An offer must be accepted in a specific way. Either, the offer itself will specify how it is to be accepted e.g. ‘Let me know by email..’ OR, any words or conduct which objectively shows the offeree had an intention to accept the offer is sufficient.

Question 43

Communication of the acceptance

Cases of acceptance by conduct

Answer 43

Brogden v Metropolitan Railway Co

*Day Morris Associates v Voyce

Question 44

Communication of the acceptance

Acceptance by silence case

Answer 44

Felthouse v Bindley (1862) 11 CBNS 869
Uncle said if you don’t respond I’ll take that as acceptance
Not valid, can’t impose an obligation to reject the offer or accept

Question 45

Communication of the acceptance
Acceptance by post
Postal rule first case

Answer 45

*Adams v Lindsell

Established the postal rule

Question 46

Communication of the acceptance
Acceptance by post
Devloping postal rule case

Answer 46

*Henthorn v Frazer
Ratio is that a postal acceptance will only be valid at the time of posting if it is reasonable to expect an acceptance by post. If an offer is brought by hand to a neighbour or sent by fax or telegram, the offeror expects an acceptance by comparable means.

Question 47

Communication of the acceptance
Acceptance by post
Dissent to postal rule

Answer 47

*Household Fire and Carriage v Grant
Bramwell dissents to the postal rule and gives several examples where he believes the postal rule would hinder transactions. Generally the notice of acceptance must reach the offeror before it can be binding. If the postal rule is accepted then it must be adhered to in all instances of notices via mail. For example, if you mail money to someone in an acceptance, then you have paid even if the money never reaches the other party.

Question 48

Communication of the acceptance
Acceptance by post
Excluding the postal rule

Answer 48

*Holwell Securities v Hughes [1974]
By requiring ‘notice in writing’, Dr Hughes had specified that he had to actually receive the communication and had therefore excluded the postal rule.

Question 49

Communication of the acceptance
Acceptance by instantaneous communication
First case

Answer 49

*Entores v Miles Far Eastern Corporation [1955] 2 ALL ER 493
Claimant sent offer from England to Holland. Defendant sent acceptance from Holland to the London office. At what point did the contract came into existence?
To amount to an effective acceptance the acceptance needed to be communicated to the offeree. Therefore the contract was made in England.

Question 50

Communication of the acceptance

Acceptance by instantaneous communication

Answer 50

*Brinkibon Ltd. v Stahag Stahl [1983] AC 34
Acceptance sent from England to Vienna
Case must be decided in Austrian Courts

Question 51

Communication of the acceptance
Problems with modern forms of communication
Requirements for email case

Answer 51

The Eastern Navigator [2005] EWHC 600
Email may be an effective method of service for arbitration proceedings under the Arbitration Act 1996, even when not expressly agreed between the parties and not seen by the recipient. Emails must, however, be to the correct address and request a confirmation of receipt.

Question 52

Communication of the acceptance
Problems with modern forms of communication
Pricing error case

Answer 52

Chwee Kin Keong v Digilandmall.com Pte.ltd [2004] 2 SLR 594 (Hong Kong case)
Pricing error on website
Held that there was constructive knowledge about the mistake in the pricing of the product. Due to this mistake related to the fundamental terms of the contract, the contract was held void under the common law.
Three important judicial inference can be drawn from the judgement of the Court:

1. Goods displayed on websites are ITT. Further, this difference between invitation to treat and offer will be subject to the language used on the website of the company selling the product.
2. Consensus ad idem cannot be claimed by the party(who is aware of such mistake) against the other party (who has committed such a mistake). This is an exception to the general rule which states that a party is bound to the contract even though a mistake may have been committed by it while entering into the contract.
3. The issue of snapping-up, as stated in the case of Tamplin v James, has been distinctively differentiated from the issue of unilateral mistake.

Question 53

Acceptance in unilateral contracts

Acceptance

Answer 53

Per Bowen LJ in Carlill v Carbolic Smoke Ball Co.
“…where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such an offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or impliedly, intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.”

Question 54

Acceptance in unilateral contracts
Time for revocation of the offer
Failure to withdraw case

Answer 54

*Errington v Errington [1952] 1 ALL ER 149
Father purchased a house (in his name) for his son and daughter-in-law to live in. Promised the couple that if they paid the mortgage instalments, he would transfer the house to them. Became ill and died. Mother inherited the house. The son went to live with his mother but the wife refused to live with the mother and continued to pay the mortgage instalments.
Wife was entitled to remain. Father made a unilateral offer. Wife was in course of performing the acceptance by meeting the mortgage payments. Under normal contract principles an offer may be revoked at any time before acceptance takes place, however, with unilateral contracts acceptance takes place only on full performance. Lord Denning held that once performance had commenced the Mother was estopped from revoking the offer since it would be unconscionable for her to do so. Furthermore there was an intention to create legal relations despite it being a family agreement.

Question 55

Acceptance in unilateral contracts
Time for revocation of the offer
Succesful withdrawal case

Answer 55

Luxor v Cooper
Vendor company instructed agents to sell properties on its behalf and agreed to pay commission on completion of the sale. Sale was agreed with a prospective purchaser introduced by the agents. Before completed, the vendor company withdrew from the sale. Later sold to someone who had not been introduced by the agents. The agents claimed their commission.
Held: A property owner was under no implied obligation not to deal with his property in such a way that the estate agent was deprived of the opportunity of earning the agreed commission. Due also to the substantial sum offered for comparatively little effort, shou

Question 56

Acceptance in unilateral contracts
Time for revocation of the offer
*Daulia v Four Millbank Nominees Ltd. [1978] 2 ALL ER 557

Answer 56

Goff LJ stated obiter on the issue of revocation of a unilateral offer:-
Once offeree starts to perform can no longer withdraw offer

Question 57

TERMINATION OF OFFER
Rules for Bilateral Contracts
Rejection

Answer 57

Hyde v Wrench (see earlier)

Rejection must be communicated

Question 58

TERMINATION OF OFFER
Revocation
Can rescind an offer at any point before it’s accepted case

Answer 58

*Routledge v Grant (1828) 4 Bing 653

Can rescind an offer at any point before it’s accepted

Question 59

TERMINATION OF OFFER
Revocation
Acceptance before revocation always valid case

Answer 59

*Byrne v Van Tienhoven
Byrne sent an offer by post which VT accepted by telegraph. Bur before VT recieved first offer, revocation had been sent. This did not arrive until acceptance was already sent.
Revocation of an offer must be received and understood by the offeree before it comes into effect. An acceptance by the offeree before they receive notice of the revocation will be considered valid

Question 60

TERMINATION OF OFFER
Revocation
Third party case

Answer 60

*Dickinson v Dodds
D offered to sell his house to C and promised to keep the offer open until Friday. On the Thursday D accepted an offer from a third party to purchase the house. D then asked a friend to tell C that the offer was withdrawn.
The offer had been effectively revoked. No obligation to keep the offer open until Friday since the claimant had provided no consideration in exchange for the promise.
The offeror or a third party, is free to withdraw the offer at any time before acceptance takes place unless a deposit has been paid.

Question 61

TERMINATION OF OFFER

Lapse of Time case

Answer 61

Ramsgate v Montefiore
D offered to purchase shares in C company at a certain price. Six months later C accepted this offer by which time the value of the shares had fallen. D had not withdrawn the offer but refused to go through with the sale.
Offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time.