Topic 1: Offer and Acceptance

Question 1

Define the term ‘offer’

Answer 1

An expression, by words or conduct, of a willingness to be bound by specified terms as soon as there is acceptance by the person to whom the offer is made

Question 2

Which two cases demonstrate the need for an intention of the parties to be bound by the terms of a contract?

Answer 2

Carlill v Carbolic Smoke Ball Co (1893)

Blue v Ashley (2017)

Question 3

Briefly outline the facts of Carlill v Carbolic Smoke Ball Co (1893)

Answer 3

CSBC issued an advert for its smoke ball that guaranteed that if anyone used it according to instructions and still caught the flu, the company would pay them £100

They deposited £1,000 with a bank to show their sincerity

Mrs Carlill bought the smoke ball, used it according to instructions, and caught the flu

The Court of Appeal held that the terms of the offer were clear and very specific and that by depositing the money with their bank, there was serious contractual intent

Question 4

Briefly outline the facts of Blue v Ashley (2017)

Answer 4

Blue worked for Sports Direct (owned by Ashley) to give company strategic adive

One night, after much drinking, Blue, Ashley and other specialists discussed Sports Direct’s share price and suggested that Blue be offered an incentive to work on the company’s image and growth

Jokey banter led to Ashley suggesting £15m if the price got to £8 within three years

Blue took this seriously and sued when Ashley failed to pay him £15m when the share price reached £8

The High Court held that there was no contract because there was no contractual intention

This is because the purpose of the occasion was not to form a contract, it was a social occasion, the terms were too vague, an amount was fixed arbitrarily, and there was no commercial sense to the offer

Question 5

Are adverts in magazines, newspapers, etc., normally interpreted as contractual offers?

Answer 5

No

Question 6

Does a request for information (along with its subsequent response) have any legal effect?

Answer 6

No

Question 7

What is the case to show request for information?

Answer 7

Harvey v Facey (1893)

Question 8

Briefly outline the facts of Harvey v Facey (1893)

Answer 8

Harvey asked for the lowest price Facey would accept for land

Facey responded with the price and Harvey replied, ‘agreeing’ to buy the land

The court held that Facey had not made an offer that showed a serious intention to be bound to sell the land to Harvey; he was merely responding to a request for information

Because Facey had made no offer, Harvey’s final response could not be legal acceptance; there was no offer and acceptance, so there was no valid contract

Question 9

Define the term ‘invitation to treat’

Answer 9

An invitation to others to make an offer

Question 10

Can an invitation to treat be accepted?

Answer 10

No, because it’s not an offer

Question 11

Are adverts to the public usually held to be invitations to treat or offers?

Give the two cases for adverts to the public

Answer 11

Invitations to treat

Partridge v Crittenden (1968)

Lefkowitz v Great Minneapolis Surplus Store Inc (1957)

Question 12

Briefly outline the facts of Partridge v Crittenden (1968)

Answer 12

An advert in a magazine for the sale of birds was held to be an invitation to treat because had it been an offer, there could have been large numbers of people ‘accepting’ it

This would have been commercially unworkable

Question 13

Briefly outline the facts of Lefkowitz v Great Minneapolis Surplus Store Inc (1957)

Answer 13

The advert stated that three fur coats were available for $1 each: first come, first served

This was held to be an offer because the terms were certain and potential acceptances were limited to the first three customers

Question 14

Are displays in shops generally held to be offers or invitations to treat?

What is the name of the case that shows this?

Answer 14

Invitations to treat

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952)

Question 15

Briefly outline the facts of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952)

Answer 15

Items displayed on shop shelves are invitations to treat

The offer is when the customer presents the item at the till, as the cashier can refuse sale at this point

The offer is accepted when the cashier rings through the sale

Question 16

What are the three responses to an offer?

Answer 16

Rejection, counteroffer, acceptance

Question 17

Define rejection

Answer 17

A refusal of an offer by the offeree

Question 18

What is the legal consequence of the rejection of an offer?

Answer 18

The offer can no longer be accepted

Question 19

Define counteroffer

Answer 19

A response to an offer that seeks to introduce a new term or alter an existing term

Question 20

What is the legal effect of a counteroffer?

Answer 20

The same as rejection: the original offer can no longer be accepted

Question 21

What is the case demonstrating a counteroffer?

Answer 21

Hyde v Wrench (1840)

Question 22

Briefly outline the facts of Hyde v Wrench (1840)

Answer 22

Wrench offered to sell his farm to Hyde for £1,000; Hyde responded to this by offering to pay £950

The original offer could not be accepted once the counteroffer had been made

Question 23

Define acceptance

Answer 23

An absolute, unconditional and unequivocal assent to the terms of the offer

Question 24

What are the four principal rules for acceptance to be valid?

Answer 24

(i) It must take place whilst the offer is still in force
(ii) It must be on the same terms as the offer
(iii) It must be unconditional
(iv) It must be communicated to the offeror

Question 25

What case demonstrates acceptance?

Answer 25

Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (1979)

Question 26

Briefly outline Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (1979)

Answer 26

The seller offered to sell a machine tool on their standard terms and conditions

The buyer said they accepted on their standard terms and conditions; they sent a form with their terms and conditions with included a tear-off slip for the sellers to return which stated that they accept the buyer’s order on their terms and conditions

The seller returned the tear-off slip

It was held that the seller made an offer and the buyer a counteroffer. The seller accepted this by returning the tear-off slip

Question 27

What’s the rule for instantaneous communication of acceptance?

Answer 27

Acceptance occurs at the point it is received by the offeror

Question 28

What are the three cases demonstrating instantaneous communication of acceptance?

Answer 28

Entores Ltd v Miles Far East Corporation (1955)

The Brimnes (1975)

Thomas v BPE Solicitors (a firm) (2010)

Question 29

Briefly outline Entores Ltd v Miles Far East Corporation (1955)

Answer 29

Established the rule that communication of acceptance occurs at the time it is received

If it was the offeror’s fault that he did not hear the words of the acceptance, and the offeree reasonably believed that he did, then acceptance is communicated

This applies to electronic communications, e.g. email, fax

Question 30

Briefly outline The Brimnes (1975)

Answer 30

Acceptance was sent by telex and printed out on the defendant’s machine at 17:45

It was held that acceptance was communicated effectively at 17:45; it was the defendant’s fault that they left the office early without checking the machine

The acceptance just has tone received, not read

Question 31

Briefly outline Thomas v BPE Solicitors (a firm) (2010)

Answer 31

An email communicating acceptance was received in the inbox at 18:00, which was still within working hours

The email was an effective communication of acceptance, even though it had not been read

Question 32

What’s the rule for non-instantaneous communication of acceptance?

Answer 32

The postal rule: acceptance is communicated at the point it is sent

Question 33

What are the three cases demonstrating non-instantaneous communication?

Answer 33

Adams v Lindsell (1818)

Household Fire & Carriage Accident Insurance Co Ltd v Grant (1879)

Holwell Securities Ltd v Hughes (1974)

Question 34

What was established in Adams v Lindsell (1818)?

Answer 34

Acceptance is communicated at the point of posting the letter

The offeror does not have to receive the letter or read it

Question 35

What was established in Household Fire & Carriage Accident Insurance Co Ltd v Grant (1879)?

Answer 35

Acceptance is still made even when the post is delayed or the letter is lost

Question 36

What was established in Holwell Securities Ltd v Hughes (1974)?

Answer 36

The offeror may exclude the postal acceptance rule and require acceptance to be notified

The postal rule will not apply where it would lead to ‘manifest inconvenience or absurdity’

Question 37

What is the case demonstrating acceptance by conduct?

Answer 37

Brogden v Metropolitan Railway Co (1877)

Question 38

Briefly outline Brogden v Metropolitan Railway Co (1877)

Answer 38

There was no formal acceptance of the offer for the sale of coal

However, the coal was ordered and delivered in accordance with the terms of the agreement, so acceptance was implied by this course of conduct of the parties

Question 39

What are the cases demonstrating acceptance by silence?

Answer 39

Felthouse v Bindley (1862)

Re Selectmove Ltd (1995)

Question 40

What was established in Felthouse v Bindley (1862)

Answer 40

An offeror cannot impose a contract by saying that silence is acceptance

Question 41

What was established in Re Selectmove Ltd (1995)?

Answer 41

Silence may exceptionally amount to an acceptance where there is an agreement to that effect or established practice between the parties

It may be possible for the offeree to use silence, e.g. “If you don’t hear from me by Friday, assume I accept”

Question 42

What are the three ways in which an offer can come to an end?

Answer 42

Revocation, time lapse, rejection

Question 43

What case demonstrates revocation of an offer?

Answer 43

Dickinson v Dodds (1876)

Question 44

What was established in Dickinson v Dodds (1876)?

Answer 44

An offer can be revoked at any time before it has been accepted, meaning no contract is entered into

If an offeror attempts to revoke an offer after it has been accepted, the revocation is ineffective; a contract has already been formed

Like acceptance, revocation must be communicated, although these can be via a third party

A promise to keep an offer open is not enforceable in the absence of a deed or consideration, so the offer can be revoked

Question 45

What was established in Henthorn v Fraser (1892)?

Answer 45

The postal rule does not apply to revocation of an offer

Question 46

What is the time lapse rule for the death of an offer?

Answer 46

If an offer prescribes a time limit for acceptance, the offer lapses if not accepted by the time period stipulated

Question 47

What was established in Ramsgate Victoria Hotel v Montefiore (1866)?

Answer 47

If there is no time limit set, the offer lapses after a reasonable time

Question 48

What happens when an offer is rejected?

Answer 48

It comes to an end and can no longer be accepted

Question 49

Define the term ‘bilateral contract’

Answer 49

A contract that creates mutual obligations, i.e. both parties undertake to do or refrain from doing something in exchange for the other party’s undertakings

Question 50

Define the term ‘unilateral contract’

Answer 50

A contract that creates obligations for only one party, i.e. one party (the promisor) undertakes to do or refrain from doing something if the other party (the promisee) does or refrains from doing something, but the promisee does not undertake to do or refrain from doing that thing

Question 51

Why is the situation in Carlill v Carbolic Smoke Ball Company (1893) an example of a unilateral contract?

Answer 51

Mrs Carlill was under no obligation to use the smoke ball and made no promise to do so

However, as soon as she had done so, and when she caught the flu, the company became obligated to make the payment

Mrs Carlill did not have to communicate her acceptance in the ordinary way; the company were taken as having ‘waived’ this requirement

Question 52

Define there term ‘consensus ad idem’

Answer 52

The agreement by contracting parties to identical terms that is necessary for the formation of a legally binding contract

Question 53

What is the case that demonstrates ‘consensus ad idem’?

Answer 53

Smith v Hughes (1871)

Question 54

Briefly outline Smith v Hughes (1871)

Answer 54

Seller was negotiating for the sale of oats with a buyer (a racehorse trainer)

Seller gave a sample of the oats to the buyer, which were ‘new oats’

However, the buyer didn’t look at the sample and made the assumption he was buying ‘old oats’

There was agreement on the price and the oats were delivered

Buyer refused to pay because he said he was contracting to buy old oats

Seller wanted to get the contract price on the basis that the contract was for new oats

Held: a sample had been given and the reasonable person who observed this would conclude the agreement had been for new oats – contract upheld

Question 55

In which case was the objective test to determine whether there is ‘consensus ad idem’ established?

Answer 55

Centrovincial Estates plc v Merchant Investors Assurance Co Ltd (1983)

Question 56

Briefly outline Centrovincial Estates plc v Merchant Investors Assurance Co Ltd (1983)

Answer 56

Landlord of a commercial lease mistakenly entered a significantly lower figure on the contract for the rest: £65,000 instead of £126,000

The tenant accepted and the landlord tried to get out of the contract

Objective test was applied, i.e. what a reasonable bystander would have seen

No evidence that the tenants were aware, or ought reasonably to have been aware, that this was a mistake

Question 57

In which cases will ‘consensus ad idem’ generally not be found?

Give the cases that established these

Answer 57

(i) One party is aware, or ought reasonably to have been aware, that the other party has made a mistake – Hartog v Colin and Shields (1939)
(ii) The seller cares the buyer to make a mistake – Scriven Brothers & Co v Hindley & Co (1913)