Offer and Acceptance Flashcards
Smith v Hughes (1871)
FACTS: C had purchased a quantity of what he thought was old oats having been shown a sample. In fact the oats were new oats. C wanted the oats for horse feed and new oats were of no use to him. The seller was aware of C’s mistake but said nothing. C brought an action against the seller based on mistake and misrepresentation.
JUDGEMENT: Both actions failed. Principle of caveat emptor applied.
PRINCIPLE: An objective test is applied, taking account of what the parties said or did.
‘if whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms’
RTS Flexible Systems v Molkerei Alois Muller (UK Production) [2010]
FACTS: C was a supplier of automated machines and agreed to manufacture an automated system in D’s factory. Work began on the basis of a letter of intent with a long form contract to follow. The letter of intent expired whilst negotiations on the long form contract continued. A dispute arose as to whether D’s performance requirements were satisfied by the machines delivered by C.
JUDGEMENT: D successfully appealed to the Supreme Court. The Court considered the communication between the parties in terms of words and conduct and whether it could be objectively concluded that honest sensible businessmen in the position of the parties intended to enter legally binding relations. In the circumstances, the idea that there was no contract was unconvincing. Where a contract is negotiated “subject to contract” and work begins before the final contract is executed, it depends on the circumstances whether the parties had waived the subject to contract term. In the instance case, the unequivocal conduct of the parties led to the conclusion that they had made a binding agreement to waive the “subject to contract” provision.
Centrovincial Estates v Merchant Investors Assurance [1983]
FACTS: C had agreed to let the premises in question to the defendants. A letter was written to D stating that the ‘current market rental value’ of the property was £65,000 and this was agreed to constitute an offer which D then went on to accept. This offer was made by the C’s solicitors and was based upon a mistake, the actual price that they had meant to feature in the offer was actually £126,000. C then telephoned D and pointed out their mistake, this was followed by a letter from the C’s solicitors who pointed out that the price they had provided was an accident. D, however, asserted that the contract had already been made and that they were not to know that the price offered had been a mistake.
JUDGEMENT: Held that the contract was not rendered void by the mistake, as an objective approach was taken.
PRINCIPLE: Reinstates the importance of the objective test. if the law were to take into consideration whether promises were relied upon, then this would serve to deprive contractual agreements of stability until they are relied upon. This would subvert the elements of predictability, contractual stability and certainty which are developed by the objective approach in its current format..
Hartog v Colin and Shields [1939]
FACTS: D mistakenly offered a large quantity of hare skins at a certain price per pound whereas they meant to offer them at that price per piece. This meant that the price was roughly one third of what it should have been. C accepted the offer.
JUDGEMENT: The court held that the contract was void for mistake. Hare skins were generally sold per piece and given the price the claimant must have realised the mistake.
PRINCIPLE: The effectiveness of an objective approach is that an agreement may be treated as binding in law, even though a party had mistakenly said something they had not intended. The principles of mistake might be of assistance in some instances, however.
Carlill v Carbolic Smoke Ball Co [1893]
FACTS: A newspaper advert placed by D stated:-
“£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, shewing our sincerity in the matter.”
Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought to claim the stated £100 reward.
D raised the following arguments to demonstrate the advertisement was a mere invitation to treat rather than an offer -
- The advert was a sales puff and lacked intent to be an offer.
- It is not possible to make an offer to the world.
- There was no notification of acceptance.
- The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu.
- There was no consideration provided since the ‘offer’ did not specify that the user of the balls must have purchased them.
JUDGEMENT: CA held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer.
PRINCIPLE: The court rejected all the arguments put forward by the defendants for the following reasons -
- The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff.
- It is quite possible to make an offer to the world.
- In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance.
- Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls.
- The defendants would have value in people using the balls even if they had not been purchased by them directly.
Storer v Manchester City Council [1974]
FACTS: D (MCC) refused to proceed with the sale of a council property to C under an arrangement which had been agreed with its predecessor. All of the terms of the contract had been agreed but for the date on which the lease was to end and the mortgage payments were to begin, which had been left blank on the form returned to the defendant by the claimant. C alleged that the contract was completely concluded and sought specific performance of the agreement.
JUDGEMENT: CA held that the contract was complete despite the absence of this term. In distinguishing between an offer and an invitation to treat, it is necessary to look. not to the subjective intentions or beliefs of the parties, but rather on what their words and conduct might reasonably and objectively be understood to mean. In this case D had made clear by their conduct and language that they intended to be bound upon the acceptance of the offer despite the fact that some terms remained to be agreed.
Gibson v Manchester City Council [1979]
FACTS: D (MCC) had adopted a policy of selling council houses to its tenants. C was a tenant of such a council house, who had applied for details of the house he was renting and applicable mortgage terms, using the printed form designated and supplied by the defendant for this purpose. In February 1971, the city treasurer responded to this application stating that ‘The [council] may be prepared to sell you the house at the purchase price…’, and providing details of the mortgage. This letter also stated that it did not amount to a ‘firm offer’ of a mortgage, and invited the claimant to make a formal application using an enclosed form. In March 1971, C returned the completed form to D.
Following local elections in May of the same year, control of the Council passed from the Conservatives to Labour. The new Labour Council policy was that council houses would not be sold under the previous Conservative policy unless a legally binding contract was already in place. D refused to sell to C, who brought an action against them in breach of contract.
JUDGEMENT: HoL held that there was no concluded contract and D was not legally bound to sell the property, as the council’s letter did not state the price and was not an offer but an invitation to treat.
Pharmaceutical Soc v Boots [1952]
FACTS: B introduced the then new self service system into their shops whereby customers would pick up goods from the shelf put them in their basket and then take them to the cash till to pay. PS of Great Britain brought an action to determine the legality of the system with regard to the sale of pharmaceutical products which were required by law to be sold in the presence of a pharmacist. The court thus needed to determine where the contract came into existence.
JUDGEMENT/PRINCIPLE: Goods on the shelf constitute an invitation to treat, not an offer. A customer takes the goods to the till and makes an offer to purchase. The shop assistant then chooses whether to accept the offer. The contract is therefore concluded at the till in the presence of a pharmacist.
Fisher v Bell [1961]
FACTS: The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to ‘offer’ such flick knives for sale.
JUDGEMENT/PRINCIPLE: His conviction was quashed as goods on display in shops are not ‘offers’ in the technical sense but an invitation to treat. The court applied the literal rule of statutory interpretation.
Partridge v Crittenden [1968]
FACTS: D placed an advert in a classified section of a magazine offering some bramble finches for sale. S.6 of the Protection of Birds Act 1954 made it an offence to offer such birds for sale. He was charged and convicted of the offence and appealed against his conviction.
JUDGEMENT/PRINCIPLE: The defendant’s conviction was quashed. The advert was an invitation to treat not an offer. The literal rule of statutory interpretation was applied.
Harris v Nickerson (1873)
Auctions
FACTS: D was an auctioneer who had advertised in the London papers that certain brewing materials, plant, and office furniture would be sold by him by auction at Bury St. Edmunds over a period of three specified days. C was a commission broker in London, who attended the sale on the final day (on which it had been advertised that the office furniture, which he had commission to purchase, would be sold). However, on that day, all the lots of furniture were withdrawn by D.
C sought to recover his expenses and the time which he had wasted in attending the auction from D, arguing that the withdrawal of the lots was a breach of contract which had been formed by the offer made by D in the advertisement, and accepted by C in attending the auction.
JUDGEMENT: The court held, dismissing C’s case, that the advertisement was merely a declaration to inform potential purchasers that the sale was taking place. It was not an offer to contract with anyone who might act upon it by attending the auction, nor was it a warranty that all the articles advertised would be put or sale. As such, it did not legally bind D to auction the items in question on any particular day.
Barry v Davies [2001]
Exception to general rule for auctions
FACTS: Two brand new engine analyser machines owned by Customs and Exise were put up for auction by D (auctioneer). Each could be procured from the manufacturer for £14,521 but despite this were listed without a reserve price. The auctioneer failed to obtain bids of £5000 and £3000, upon which C bid £200 for each machine, but the auctioneer refused to accept these bids and withdrew the machines from auction. A few days later the machines were sold for £750 each through an advert in a magazine.
C brought proceedings against D, contending that in an auction without a reserve price the auctioneer was bound to deliver the goods to the highest bidder.
JUDGEMENT: The Court held that the holding of an auction for sale without reserve is an offer by the auctioneer to sell to the highest bidder, so D was contractually obliged to sell to C. The reasoning behind this was that the auctioneer acted as agent of the owner in the formation of the contract with the highest bidder, and this gave rise to a collateral contract with the auctioneer himself. There was consideration in the form of detriment to the bidder, as his bid could be accepted unless and until it was withdrawn, and benefit to the auctioneer as the price was driven up (and also that attendance at the auction is likely to increase if it is said that there is no reserve).
C was awarded damages reflecting the difference between the value of the machines and the price he had bid.
PRINCIPLE: Auctioneer calls for bids with no reserve price (offer); highest bidder (acceptance)
Spencer v Harding (1980)
General rule for tenders
FACTS: D advertised a sale by tender of the stock in trade belonging Eilbeck & co. The advertisement specified where the goods could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No reserve was stated. C submitted the highest tender but D refused to sell to him.
JUDGEMENT: Unless the advertisement specifies that the highest tender would be accepted there was no obligation to sell to the person submitting the highest tender. The advert amounted to an invitation to treat, the tender was an offer, D could choose whether to accept the offer or not.
PRINCIPLE: General rule: call for tenders to be submitted (invitation to treat); tenders are submitted (offer); one of the tenders is accepted (acceptance).
Harvela Investments v Canada Royal Trust Co [1985]
Exception to general rule for tenders
FACTS: D1 held shares in company. By means of a telex communication they invited C and D2 to make an offer to purchase shares by sealed tender. They stated in this invitation that they bound themselves to accept the highest offer. C made a bid for a fixed sum; D2 made a bid for a fixed sum or alternatively for ‘$101,000 in excess of any other offer’, whichever was to be higher. D1 accepted the bid made by the D2, despite the fact that the fixed sum which they offered was lower than that offered by C.
JUDGEMENT: HoL held that the referential bid was invalid, and as such, the D1 was bound to accept the C’s offer.
PRINCIPLE: It reasoned that to allow a referential bid would create the possibility of conflicting obligations for D1 (had both parties made a bid offering a certain sum in excess of any other offer), in which case the offeror would be bound by the terms of its own promise to accept both offers. This would therefore be an unreasonable construction of the invitation to tender. It would also undermine the purpose of a sealed tender, which is to prevent a bid being made based on the sum offered by the competitor.
Blackpool Aero Club v Blackpool BC [1990]
FACTS: D were a local authority that managed the local airport as its owners. They had granted C, who were a flight club, a concession to operate casual flights out of the airport. The concession came up for renewal and the tender invitation was released to C and six other companies. The tender had a clause stating that tenders would not be considered if they missed the time and date deadline stipulated. The town’s clerk failed to empty the letterbox on time and as such, the C’s tender missed the deadline and D accepted a lower proposal. C brought an action for damages against D for negligence and for breaching their contract. At an initial hearing, the judge held that the request for tenders by D required them to consider all the tenders received and on this basis, they were liable to C. D appealed this decision.
JUDGEMENT: The court dismissed D’s appeal. They found that the invitation to submit a tender was usually no more than an offer to receive bids but in this circumstance, examining the behaviour of the parties created clear intention to create a contract and therefore the failure to consider the plaintiff’s application made them liable.
