Offer and Acceptance

Question 1

Starting authority and definition for an offer

Answer 1

Gibson v Manchester City Council: ‘a clear, unequivocal willingness to be bound’

Also: not looking for further negotiation, and it invites acceptance, having already set the price. This satisfies the requirements of an offer, per Harvey v Facey.

Question 2

Who can the offer be made to?

Answer 2

Normally it is to a specific person, but it can be made to the entire world (Carbolic Smoke Ball Co)

Question 3

Who can accept the offer?

Answer 3

Boulton v Jones: not anyone, only the addressee of the offer (unless it reasonably looks like they are getting an offer).

Question 4

When can an individual accept an invitation to treat?

Answer 4

Crest Nicholson v Akaria investments: the test is whether the other person ought to know or did know it was an invitation to treat.

Question 5

What is the basic authority and rationale for limiting an invitation to treat?

Answer 5

Grainger & Sons v Gough: adverts for stock is only an invitation to treat, otherwise the advertiser might be overwhelmed with acceptances which go beyond his stock.

Question 6

When will an invitation to treat be counted as an offer?

Answer 6

An invitation to treat will be counted as an offer when it includes and intent to be legally bound and objectively looks like one. This might be subject to qualifications, such as the ‘offer’ specifies it is ‘whilst stocks last’, or other limiting devices.

NB Carlill v CSB where the statement £1000 had been put aside demonstrated an intent to be bound.

Lefkowitz v Great Minneapolis Surplus Stores: US case, a clear, unequivocal advertisment could be an offer becasue it left nothing to discuss (price, and ‘first come first served’). Andrews agrees.

Also, note trietal’s argument over providing a set list of product on request.

Question 7

Are good displayed in shop windows open for acceptance?

Answer 7

No, Fisher v Bell. Merely displaying goods in a window is not enough for a valid offer. The offer is made when you take the goods to the desk.

Liron argues in online stores it is only complete once you pay as you can always close the window (‘buy it now?’).

Question 8

Are cross offers valid?

Answer 8

No, Tinn v Hoffmann: cross offers are not valid as there is no acceptance of an offer. Probably to do with the fact that neither of them would know they have created a contract (no response)

Question 9

Does the acceptor need to be aware of the offer when they accept?

Answer 9

yes, Gibbons v Proctor. cf R v Clarke

Question 10

Does the acceptance (usually for unilateral offers accepted by conduct) need to be solely motivated by the offer?

Answer 10

Williams v Cawardine: a women offering information subject to an award did so only out of a desire to ‘increase her chances of going to heaven’. Provided she was aware of the offer it seemed this was enough.

Question 11

Is it possible to complete a contarct subject to toing and froing by performing according to the exact letter of the other’s offer?

Answer 11

Nissan Uk v Nissan Manufacturing (orders for a car coincidentally came through matching the exact schedule of the contract)

Question 12

What happens if the contract specifies that acceptance is possible through conduct?

Answer 12

Acceptance can be specified as possible through specific conduct (Brogden v metro Railway)

Question 13

If there is a system of vertical and horizontal contracts, it is possible to be bound by conduct in the group activity and knowledge of the terms.

Answer 13

The Santanita: in a sailing race, all the boats had bilateral contracts with each other in the event of a crash. Because the claimant deliberately entered a contract in knowledge it would be carried out under Yacht Association Rules, he was bound by them.

Question 14

What kind of structure is required for the Santanita rules?

Answer 14

Bony v Kacou: the saitanita depends on the vertical contracts between the boat owners and yacht co, as well as the knowledge of each member. There were no grounds to reach the same result in the case of football players, agents, and club who could not be said to be impliedly incorporating the FA’s rules.

Question 15

It is usually necessary for the offeror to have received, though not necessarily read, the acceptance.

Answer 15

Entores v Miles far East Corp. When there is near instantaneous communictation there will be no acceptance if the line cuts off or is interrupted (ie, phone call).

If the acceptor (oe) is aware of the failure, or has reason to, then no valid acceptance.

If only the offeror is aware of the failure, but not the acceptor (who reasonably thinks it has gone through), then the offeror is likely bound by estoppel.

If both parties are unaware about the failure then there is no contract either.

If both parties are aware then no contract.

This applies for acceptance, though because revocation requires delivery (Brinkibon) and the work-time caveat (Brimnes) it is likely they are similar.

Question 16

Can the offeror waive the need to be notified?

Answer 16

Manchester Diocesan Council for Education vs Commercial & General Investments: yes. Furthermore, if the method is different but superior then it is equally okay. Likewise, if it is inserted for the benefit of Oe then it can be fairly waived.

Waiver is also presumed in the case of a unilateral contract.

Question 17

When is the acceptance deemed to have arrived? What happens if the offeror isn’t in?

Answer 17

Brinkibon v Stahag Stahl: instantaneous/non first class communication is deemed to have arrived once it arrives at the work place of the offeror during their work hours.

Brimnes: The rationale is that ‘it is the responsibility of the offeror to manage the prompt handling of messages in his workplace’.

Question 18

What happens if the acceptance arrives outside work hours?

Answer 18

Mondial: If the acceptance arrives outside work hours then it is deemed to arrive the moment the work hours recommence.

Question 19

What is the rule for incomplete communications?

Answer 19

The Eastern Navigator: Emails and faxes must still actually be received: hitting send is not enough. An emailor will usually be notified his email has not arrived.

Entores: a fax must actually arrive - if it cuts off halfway through then it isn’t enough.

Bernuth: it doesn’t matter if it reaches the junk email box (ie, prompt handling of messages), provided the email is held out to be good to the rest of the world.

Question 20

What happens if the email/letter arrives at the offeror’s home?

Answer 20

Andrews: argues that it is likely the law will favour Oo, especially if Oo had set out a preferred method of notification.

Gisda v Barratt (there is no principle like Brimnes that the individual is expected to manage efficient reception of notices in his home).

Question 21

Can the offeror receive acceptance by silence, and can he set out silence as a method for acceptance?

Answer 21

Felthouse v Bindley: still authority for the basis that silence is not a valid acceptance. Nor can Oo say ‘I assume you accept without more’.

The Santa Clara: the difficulty is that silence is ambiguous, though it if it is accompanied by conduct (ie, employee getting a severance offer then packing up the next day without a word).

The Leonidas D: silence as to arbitration was equivocal and suggested the parties were okay with the status quo (albeit not that they intended to be bound by it) and had not intended to abandon the contract

Question 22

What if the offeree says ‘assume I accept if you don’t hear from me?’

Answer 22

Re Selectmove, then the offeree will be bound in the event of silence.

Also, Andrews argues the silence rule is designed to protect the offeree (ie to stop them being pressured into responding).

Question 23

Are there any exceptions to the silence rule?

Answer 23

Rust v Abbey Life Assurance Co: if A makes an offer to B, and then B makes a counteroffer, A could be held to this by inaction. Here, A sent a cheque and asked B to open a bond, B replaied with its standard terms. Without hearing from A, B opened the bond. A was bound by this.

Question 24

Basic authority for postal rule.

Answer 24

Household Fire Insurance vs Grant: the second Oe posts the letter, a valid contract is formed even if the letter does not reach Oo, provided it is not Oe’s fault.

Question 25

What if Oo sends a letter before the accpetance notifying Oe he was revoking the offer?

Answer 25

Van Tiehovan: Oo is bound unless Oe was aware of the revocation or should reasonably have been aware. Ie, in brimnes if the letter arrives when Oe is out.

Question 26

When will the postal rule not apply?

Answer 26

(1) When the offeror has specified that he does not want to receive the offer by post. (Holwell);
(2) When acceptance by letter is plainly inappropriate. For instance where there was a dealine by which Oo needed receipt or where it is a competition so Oo needs to read the letters.

Andrews: andrews argues this should be disapplied whenever Oo wanted it by a specific time (need to know) and sealed bids.

Henthorn: here, posting was reasonable as the parties were some distance apart.

Question 27

Can Oe overtake his acceptance with a speedier withdrawal?

Answer 27

Moot.

NZ: no
Andrews and Burrows: yes, supported by obiter in Kitsch v Bullard;
Trietal: yes, but not when he uses it to speculate to his own advantage.

Question 28

How do you distinguish between a counter offer and a mere request for information?

Answer 28

Stevenson, Jaques Case: asking how long the delivery would take was merely a request for information. The tone and level of hostility are relevant here, as well as the fact that the two alternatives (2 months or longer) both were favourable to the other party (rather than a constrained: ‘are you going to deliver in a month or a month and a half).

Question 29

What happens when the offeror refuses the counter-offer. Can the Oe accept the original offer?

Answer 29

No, Hyde v Wrench says that the Oe cannot blow ‘hot and cold’.

Question 30

What happens if the offeror does not respond to the counter-offer?

Answer 30

Unclear. Andrews suggests it is tantamount to a refusal.

Livingstone v Evans (Can): where the offeror says ‘cannot reduce offer’ then it keeps the offer alive. This might just be the wording of the rejection (which is not categorical and implies the non-reduced price is still standing).

Question 31

Who wins the battle of terms?

Answer 31

Whoever presents their terms last and the contract is accepted. (Tekdata; Butler Machine Tool Co v Ex-Cell Co Corportation).

However, a course of dealing might lead to A’s terms being incorporated even if B presented the last terms (Hollier v Rambler motors).

Question 32

What happens when Oe is informed that the deal is off?

Answer 32

Dickinson v Dodds: If he receives direct notice then no acceptance, (brimnes rule applies), likewise, if he receives indirect notice by a third party enough (Trietal - Oe under a duty to see if his source is reliable). It depends whether the Oe is aware or should reasonably have become aware.

Oe cannot accept the offer if he becomes aware it has been revoked or becomes aware of information which is manifestly inconsistent. (Andrews - real and genuine doubt).

Question 33

What happens if the Oe has refused the offer. Can he then accept again?

Answer 33

No, Grant v Bragg - Oe is not allowed to accept again after rejecting, nor can he if there is a set period which has elapsed (unless Oo revokes it).

Question 34

How long is the period open for Oe to accept?

Answer 34

Machester Diocesan Council for Education v Commercial & General Investments Ltd (in the absence of a set period, the offer is only open for a reasonable period)

Question 35

How can a unilateral contract be accepted?

Answer 35

A unilateral contract can be revoked by merely carrying out the conduct (carlill v CBS. Also note how there was ICLR and consideration in encouraging people to buy/use the products).

Atrill v Dresdner Kleinwort: investment bank’s bonus pool was a unilateral offer because it was beneficial and imposed no hardship on Oe; it would not make sense to require acceptance. Also it encouraged him to work.

Question 36

When can a unilateral be revoked?

Answer 36

Unclear: a unilateral contract can sometimes be revoked after performance occurs.

Errington v Errington: sometimes the courts will find an implied condition which prevents the offer being revoked.

Pace Daulia v Four Millbank Nominees: however, as soon as Oe begins there is an impled condition stopping Oo from preventing Oe from finishing/completing it.

Question 37

Can a unilateral contract always be revoked after performance has begun?

Answer 37

Andrews argues this should not arise in every case and only when the merits require it, depending on:

(1) degree of reliance and performance;
(2) Whether Oo may be regarded as unjustly enriched (Errington);
(3) Whether Oe has a strong interest in completing performance, or indeed any alternative (Errington);
(4) Whether Oe should ‘take it on the chin’ as an occupational hazard (Luxor)

Question over whether they should be allowed to complete performance and claim reward or if they would be prevented from doing so.

Best to analyse cases:

Luxor: buyer-seller agent who arranged for the buyer to meet the seller tried to claim commission. However, he failed because the sale had not gone through - even though he had started performance the windfall for his job was huge and it took a relatively small amount of work for a lot of money.

Errington v Errington: Father told son that if he continued to pay the mortgage payments ‘the house would be yours’. The son and his wife both starting living in the house, the promise also including possession, and if they completed the condition they would get the house.

Soulsbury v Soulsbury: ex-husband promised ex-wife £100,000 in his will if she did not enforce a maintenance order against him. He reneged and took it out. Held that once performance began the husband could not revoke - this was on the basis she had ‘started her walk to York’. Albeit note the difficulty of beginning abstention.

Question 38

How does an auction work?

Answer 38

Barry v Davies: the auctioneer is bound to accept the highest bid. This is in the form of a collateral contract with the consideration taking the form of the stimulation of the amount being paid.

If the auctioneer refuses to sell to the highest bidder, this is a breach of the collateral contract. If there is a second bidding then it is probably upheld (engine analysers and loss of bargain awarded).

Question 39

Can the owner of the goods bid in the auction?

Answer 39

No: s 57(4) of the Sale of Goods Act 1979 (and Barry v Davies 2000), the owner cannot lawfully bid. Nor is it lawful for the auctioneer to take bids from the owner. This is true unless the owner’s right to bid has been notified in advance.

Question 40

What are the rules for sealed bid contests?

Answer 40

Harvela: referential bids cannot be snuck in to the bidding to then defeat everyone else. These bids are invalid, though Andrews argues if they include a fixed element (ie, a maximum) this should be allowed.

Question 41

When will a referential bid be allowed?

Answer 41

A referential bid will be allowed when the auction itself specifies that referential bids are permitted. However, they would have to be subject to a cap otherwise the system would break down.

Question 42

Must the invitor in the tendering process accept the lowest or highest tender?

Answer 42

There is no duty on the invitor to accept the lowest or highest tender: Spencer v Harding

Question 43

Does the invitor have carte blanche to choose whichever tender?

Answer 43

Blackpool Aero Club: he must consider each valid tender, excluding any ones outside the time; he must ignore invalid tenders (Fairclough Building Club v Port Talbot, refusing a tender from a spouse of a member of the tender committee); must not ‘jump the gun’ and award the tender too early.

The damages for breaching this is loss of chance (Blackpool).

Question 44

Does the tender process have to be carried out in good faith?

Answer 44

Hughes v Aircraft (this needs to be distinguished from a requirement for the tenders to be considered fairly or strictly in good faith. Allowing individuals with preconceptions was necessary on the basis that this was natural if they had experience. Albeit not clear how biased they could be - may be implicit in the idea of ‘must be considered’.)

Question 45

Basic authority for the objective principle?

Answer 45

Hannah Blumenthal: no need for actual reliance, Oe can be taken to have assumed the objective appearance.

Question 46

If there is a representation which objectively looks like it was addressed to Oe, can they accept it?

Answer 46

Yes. Moran v University College Salford (No2) (accidental clerical error leading to Moran being offered a position as a physiotherapist. He missed an academic year because the place was denied, and he had quit his job and accommodation in London. Moran paid damages for detrimental reliance)

Question 47

Can you take advantage of mistaken terms you were actually aware of or should have been aware of?

Answer 47

Centrovincial Estates: no. This might be on the basis that an objectively mistaken offer is not an offer.

Atrill Kleinwort: you cannot take advantage of offers which you actually know are not offers.

Centro: It is unlcear what happens when you should have been aware A was not making an offer (ie, mistake as to offer, but unreasonably).

Question 48

Does the objective principle operate for mistakes as to quality?

Answer 48

Smith v Hughes. No. Oe can only rely on the mistake to escape if it was a term. He might also be able to affirm the contract, if the mistake was reasonable and the other knew of it, on his terms.

Sale of Goods Act (B is liable in a sampling case if the goods were not those sampled, or if there was a defect inherent in the sample - though no defect in Smith v Hughes, simply the wrong type of oats)

Bell v Lever Bros (where B knows of a mistake as to terms, then A can rely on the terms. In essence, B is accepting the contract on A’s terms)

Question 49

Can you rely on a guarantee which objectively looks like an assurance?

Answer 49

No, Thake v Maurice, no reliance where the assurance (‘bound to succeed’) could not be reasonably interpreted as a guarantee.

Question 50

Can you still be bound if you acquiesce in another’s mistake?

Answer 50

Maybe: ING Bank v Ros Roca: estoppel by convention when a party stayed silent knowing the other was mistaken as to the level of an additional fee.

Question 51

Before contract, what fetters are there on negotiators?

Answer 51

None! Walford v Miles (Lord Ackner).

Question 52

Why are parties given so much freedom in the pre-contractual phase.

Answer 52

1) The parties decide when they are to be bound (freedom of contract);
(2) they can agree to be bound contractually even if there are further terms to be agreed;
(3) the question is whether the agreement is too uncertain or is unworkable;
(4) the courts are reluctant to do so when the parties have agreed to enter said agreement.

(Barbudev)

Question 53

What happens if one party relies on a contract when in reality it has not been concluded?

Answer 53

British Steel: they could claim for lost services/profit in performance, but could not claim their expectation interest.

This is a bit rough for the client, who had suffered loss as a result of later delivery (loss far exceeded value of steel). So a deduction (as Burrows argues) might be fair but wouldn’t really solve the issue.

Question 54

How is the restitution calculated?

Answer 54

Restitution is awarded on the basis of the normal market value of the goods or services. Not the negotiated amount.

It is possible for the defendant to show that the services provided him less net benefit than the market value. Only in exceptional cases can P argue for a higher subjective value. Benedetti v Sawaris

Question 55

What happens if the parties agree subject to contarct but the agreement is never concluded and they proceed with performance anyway?

Answer 55

RTS Flexible Systems: in the event that the parties fail to sign but have agreed all the major elements of the contract (pace British Steel) then if performance occurs the courts might find the subject to contract requirement has been waived.

Question 56

When will an agreement to agree be valid?

Answer 56

Watford v Miles: no agreements to agree, nor agreements to negotiate. Nor are agreements to negotiate in good faith or reasonably as they could not be policed properly.

Main issue is less their inability to judge reasonableness and their dislike of uncertainty in trapping parties in commercial negotiation.

Question 57

When is there an exception to the invalidity of agreements to agree?

Answer 57

MRI Trading AG v Erdenet Mining Corp: there is an exception for agreements to agree when the main contract has already been negotiated and the matters are purely around the rim of the central contract; where there has been extensive performance or where it would be highly inconvenient not to agree; it is helpful though not necessary for a dispute mechanism to be agreed.

Here, two shipments of copper were agreed but the last one was not. The court found the final delivery had been negotiated under a wider supply contract and it would be perverse, in light of the arbitration set out, not to enforce the agreement to agree.

Question 58

Are lock-out terms valid?

Answer 58

Yes, Watford v Miles, provided they are for a defined period or they have a clear moment which they end in.

Question 59

An agreement to use best endeavours can be valid if it hinges on an external and measurable event.

Answer 59

Little v Courage: for example, trying to get a government permit.

Question 60

When will an agreement to agree under the MRI Trading exception be invalid?

Answer 60

BJ Aviation Ltd v Pool Aviation: When the relevant issue is a condition precedent to the contract, requiring agreement by a set date, and there is no provision for an external mechanism to establish such a term)

Question 61

What is the difference between reasonable endeavours and best endeavours?

Answer 61

Rhoadia: the former involves taking every reasonable option, whilst the latter probably only requires some of them to be pursued.

Chelsea Barracks: ‘all reasonable endeavours’ does not always require the individual to sacrifice their commercial interests, though this depends on the rest of the contract. In any case, all reasonable but commercially prudent endeavours is not the same as ‘best endeavours’.

Question 62

Along with the MRI trading exception, when will agreements to negotiate be valid?

Answer 62

Petromec v Petroleo: when the main contract has been negotiated then an agreement to negotiate subsequent, ancillary matters will be valid provided it is capable of objective determination.

Didymi Corporation v Atlantic Line: a hire variation, subsequent to a main contract which had been in operation for a while, which should be ‘agreed’ according to what was ‘equitable’ was acceptable. However, part of this reason was that ‘equitable’ had a clear meaning in the commercial context.

Queensland Electricity Generating Board: renewal of a five year contract which involved a term ‘the base price shall be agreed’ was valid because it was (a) a renewal of an already effective contract; (b) there was an arbitration clause; (c) it could be carried out objectively because of the other provisions and framework of the treaty.

Phillips Petroleum (upheld previous two cases on the basis that they contained objective criteria, whereas the current agreement to agree a gas supply date was not sufficient

Question 63

When is a contractual duty of good faith always valid?

Answer 63

Berkeley Villages: when it covers contracts to perform an obligation in good faith because this can be objectively determined.

Question 64

What happens when Oo makes a statement, not intended to be an offer, which objectively looks like one, but Oe has no belief as to whether it was an offer or not.

Answer 64

The Antclizo: it seems as if it needs to be objectively clear Oe is being represented to and that Oe has the belief. Chitty agrees and cannot see why Oe should be protected in this instance by the objective principle.