Unit 1: Offer and Acceptance Flashcards
James put an advertisement in a newspaper saying he will give £100 reward to anyone who returns his lost wallet.
this is an offer?
TRUE or FALSE.
FALSE - Although most advertisements are invitations to treat, an advert of reward has traditionally been treated as an offer as there is an intention to be bound as soon as the information is given - Williams v Carwardine (1833).
Sally attends an auction to be held without reserve. She makes the highest bid for a grandfather clock but the auctioneer refuses to knock the clock down to her.
Which one of the following statements is CORRECT?
A) As the auction was without reserve and Sally was the highest bidder she has a contract for the clock and could sue the owner for damages.
B) As the auction was without reserve and Sally was the highest bidder the auctioneer should have accepted her bid. As he did not, he may be liable to Sally in damages.
C) As the auction was without reserve and Sally was the highest bidder she has a contract for the clock and could obtain the remedy of specific performance.
D)
Sally’s bid was not accepted and therefore she has no remedy against either the auctioneer or the owner of the clock.
CORRECT ANSWER IS B
Authority for this is the case of Barry v Davies (2000).
A and C are incorrect as Sally’s offer to buy the clock was not accepted and so there can be no contract with the owner. D is incorrect because although Sally has no remedy against the owner of the clock she may have a remedy against the auctioneer.
TRUE OR FALSE
The postal rule will not apply if the offeror stipulates that he needs to be notified of acceptance
TRUE - Authority for this is Holwell Securities v Hughes in which the offeror required “notice in writing”
Kamla sends an e-mail to Tony offering to sell him her computer for £500. Tony sends an e-mail back saying that he is only prepared to pay £450. Later that day, not having received a reply from Kamla, Tony changes his mind and sends her an e-mail saying ‘ I’ll buy the computer for £500. Can you deliver it to me or should I collect?’. Kamla no longer wants to sell the computer.
Which one of the following is CORRECT?
A)Tony has a contract with Kamla to buy the computer for £450.
B)
Tony has a contract with Kamla to buy the computer for £500.
C) There is no contract between Tony and Kamla.
D) There is a contract with Kamla to buy the computer but the court will fix a reasonable price.
CORRECT ANSWER IS C
Tony’s first e-mail is a counter offer. This has the effect of destroying Kamla’s offer which can no longer be accepted.
The authority for this is the case of Hyde v Wrench (1840).
Kerry offered to buy Rafiq’s car for £5,000. She said that she would keep her offer open until 1 June. On 14 May, Rafiq posted a letter accepting Kerry’s offer. This letter was lost in the post. In the meantime on 13 May Kerry posted a letter revoking her offer which Rafiq received on 18 May.
Which one of the following statements is CORRECT?
A) As the postal rule applies Rafiq’s acceptance is effective on 14 May.
B) If the postal rule applies Rafiq’s acceptance is effective when the letter of acceptance is posted.
C) The postal rule cannot apply here, as Rafiq’s acceptance was lost in the post.
D) Kerry cannot revoke her offer as she said she would keep it open until 1 June.
E) Kerry has validly revoked her offer on 13 May.
CORRECT ANSWER IS B
A is wrong as the postal rule may not apply.
C is wrong because the postal rule can still apply even if the acceptance is lost in the post - Household Fire Insurance v Grant (1879).
D is incorrect as Kerry can still revoke even though she said she would leave the offer open - Routledge v Grant (1828).
E is incorrect as a revocation is only effective when communicated and not when it is posted - Byrne v Van Tienhoven (1880).
Faro sent a letter to Paul asking if Paul would like to buy her exercise bike for £200. Before Paul replied he met Faro’s brother who told him that Faro had sold the bike to someone else.
TRUE OR FALSE: Faro’s offer has not been revoked because revocation must be by the offeror or the offeror’s agent.
FALSE
The offer is revoked as revocation can be by any reliable source. The authority for this is Dickinson v Dodds (1876). (Contrast an acceptance, which must be communicated by the offeree or the offeree’s agent).
Max sent an e mail to Gareth offering to sell his plasma TV for £150. Gareth immediately sent an e mail to Max asking if Max would be able to deliver the TV to his home. Max did not reply and sold the TV to his neighbour for £200. The next day, not realising that the TV had been sold, Gareth e mailed Max and said he would buy it for the £150 asked.
TRUE OR FALSE:
There is not a contract between Max and Gareth as Max revoked his offer when he sold the item to his neighbour.
FALSE: Revocation of an offer must be communicated and so selling the item to his neighbour would not amount to revocation. Gareth’s first e mail was a request for information. which does not detroy the offer ( Stephenson v McLean ) and therefore Gareth’s second e mail was an acceptance.
TRUE OR FALSE : Minors do not have legal capacity to enter contracts and so will never be liable for breach of contract.
FALSE: general rule minors are not bound by contracts they have entered but, as with all general principles, there are exceptions e.g. contracts for necessary goods and services bind minors.
Which one or more of the following statements is/are CORRECT?
A) An unincorporated association is not a separate legal entity with capacity to enter a contract.
B) Limited liability partnerships have limited legal capacity to enter contracts.
C) A person suffering from a nervous breakdown does not have capacity to enter contracts and so will never be bound by them.
D) A registered company can be bound by a contract outside its stated range of activities provided the other party acted in good faith.
CORRECT ANSWERS: A AND D
Limited liability partnerships have unlimited capacity. Contracts made by persons suffering from a mental impairment will be valid unless when the contract was made they were incapable of understanding the nature of the deal and the other party knew that to be the case.
On 8 March a company made an offer by email to sell goods to a client for £500. It said it would keep the offer open but needed to hear from the client before 15 March. The next day the client posted a letter to the company accepting the offer. The letter never arrived. On 16 March the company sold the goods elsewhere.
Which one of the following statements best explains whether the company is in breach of contract by not selling the goods to the client?
A) Yes, because the letter of acceptance would be deemed effective when posted.
B) Yes, because the company should have checked with the client before selling the goods elsewhere.
C) No, the company needed ‘to hear’ from the client and so the client should have communicated acceptance by phone or in person.
D) No: the offer was made by email and so should have been accepted by email or other instantaneous form.
E)No, because the postal rule had been impliedly excluded or otherwise may not apply.
CORRECT ANSWER E:
The offeror said he needed ‘to hear’ by a certain date. This may have impliedly excluded the postal rule in the sense that if acceptance is made by post it must be received in order to be effective. Also, the letter may not have been properly stamped, addressed and posted- query why it did not arrive.
This also explains why Statement A is wrong.
There is no obligation on an offeror to check whether an offeree intends to accept: hence why B is wrong.
C is wrong. If an offeror wants a particular mode of acceptance the offeror needs to make that very clear.
As the offer is being held open for a number of days there is no need for an instantaneous form of communication. This explains why Statement D is wrong.
A client bought a house and promised his son and daughter-in-law that if they occupied the house and made all the mortgage repayments on the house he would transfer the house to them. The couple duly started to make the mortgage repayments but then there was a dispute. The client told the couple he had changed his mind and sought to repossess the house.
Which one of following statements best describes the legal position?
A) The client was entitled to renege on his promise as the couple had promised nothing in return for it.
B) The client could revoke his offer as the couple had not completed the required act of repaying the mortgage.
C) The client would be in breach of an implied promise not to revoke his offer once the act had started.
D) There was no contract between the client and the couple as there would have been no intention to create legal relations.
E) The client would be in breach of contract because the couple had accepted the offer and provided consideration by starting to repay the mortgage.
CORRECT ANSWER C:
As well as the express offer of a unilateral contract there would be an implied promise not to revoke the offer once the act had started- Errington v Errington.
This also explains why B is wrong.
Bearing in mind the subject matter of the agreement the normal presumption in relation to family members not intending legal relations would be rebutted. So Statement D is wrong.
With unilateral contracts completion of the act is generally regarded as both the acceptance and consideration for the promise. This explains why E is wrong.
Statement A is wrong because with unilateral contracts the offeror makes a promise in return for an act (not a promise). A promise in return for a promise is a bilateral contract.
A company decided to contract out the cleaning work of its premises. Three parties, including a client, were invited to submit tenders by post using a prescribed form. The invitation stipulated tenders had to be submitted to the Facilities Director of the company by 10.00am on Friday 26 May and that conforming tenders would be considered at the directors’ meeting on 29 May. The client submitted a conforming tender, but it was not considered and the cleaning work was awarded to one of the other two parties.
If the client sues the company for breach of contract which one of the following best describes the likely outcome?
A) The claim will fail as the company was not obliged to consider or accept any particular tender.
B) The claim will fail as there was no guarantee that the client’s tender would have been accepted even if it had been considered.
C) The claim will fail because the invitation to tender was an invitation to treat and the client’s offer had not been accepted.
D) The client will be awarded damages for breach of a unilateral contract.
E) The client will be awarded nominal damages as damages for loss of opportunity are too speculative.
CORRECT ANSWER D :
he facts are similar to those of Blackpool and Fylde Aero Club. In that case there was held to be an implied offer of a unilateral contract ie an implied promise to consider all conforming tenders. On the facts here there is an express promise to do so.
This also explains why statements A and C are wrong.
Statements B and E are wrong as damages can be awarded for loss opportunity even though they may be difficult to assess- Blackpool and Fylde Aero Club.
A client attended an auction advertised as being ‘without reserve’. When it came to the lot comprising a Persian rug, the auctioneer said it had been valued at £300. He invited bids of £100, then £80. When nobody responded, the auctioneer asked how much anyone would be prepared to pay for the rug and the client bid £20. No further bids were made but the auctioneer withdrew the rug from the sale. The auctioneer later sold it privately for £150.
Which of the following statements best sums up the legal position of the client?
A) The client could sue the owner of the rug for breach of a contract.
B) The client could sue the auctioneer for breach of contract and the measure of damages would be £130.
C) The client could sue the auctioneer for breach of a unilateral contract.
D) The client would not have an action for breach of contract as the bid was far too low.
E) The client could sue the auctioneer for breach of a bilateral contract and the measure of damages would be £280.
CORRECT ANSWER C :
Normally at an auction the bids are the offers and the fall of the auctioneer’s hammer is the acceptance (s57 SGA).
So the client had no contract to buy the rug from the seller as the auctioneer did not accept the bid. Hence A is wrong.
Here the auctioneer made an offer of a unilateral contract when he said that the rug would ‘be sold that day whatever price it fetched’. This is why E is wrong.
He was promising to sell to whoever made the highest bid (Barry v Davies). So as he did not sell to the highest bidder he will be in breach of contract.
The amount of the bid is irrelevant and that is why D is wrong.
The auctioneer will be liable in damages to the client for £280 ie the difference between the value of the rug (£300) and the amount of the client’s bid (£20) – so B is wrong.
at 9am a car dealer emailed a client offering to sell him a vintage car for £60,000. The client received the email shortly afterwards and emailed an acceptance of the offer at 12.55pm. The client knew that the car dealership closes for lunch each day between 1pm and 2pm.After lunch the car dealer did not check his email account. At 2.30pm the car dealer received an offer for £62,000 for the vintage car which he accepted. At 4pm the client phoned the car dealer to enquire about the car and was told the car was no longer for sale. The client has been reliably informed it will cost £65,000 to buy a similar car elsewhere.
Which of the following statements best sums up the legal position of the client?
A) The client has a contract with the dealer to buy the car and can sue the dealer for £2,000 representing the profit the dealer made on selling the car elsewhere.
B) The dealer revoked his offer before acceptance was communicated and so there would be no contract of sale with the client.
C) The client’s acceptance would be deemed communicated before 2.30pm and so the dealer would be liable to pay the client damages of £5,000.
D) By virtue of the postal rule acceptance was communicated at 12.55pm and so the dealer would be liable to the client for breach.
E) When the dealer sold the car elsewhere he effectively revoked the offer to the client and so would not be liable for breach.
CORRECT ANSWER C :
Acceptance would be deemed communicated when it would be reasonable for the client to expect it to be read. With businesses it is reasonable to expect communications to be read during normal office hours (so here not between 1pm and 2pm) but certainly before 2.30pm.Also the aim of contractual damages is to compensate the innocent party for loss of bargain. Here it will cost the client an extra £5,000 of buy a similar car elsewhere. This is why A is wrong.
B is wrong as it is likely acceptance would be deemed communicated before the offer was revoked at 4pm.
D is wrong as the postal rule only applies to letters of acceptance.
E is wrong as revocation must be communicated (by the offeror or a reliable third party).
A client wanted to hire a van to move some surplus furniture and so contacted a van hire company. The company posted a quotation for £90 and said that if the client wanted to accept the company needed to know by Friday 19 April.
On Tuesday 16 April the client posted a letter accepting the quotation and asking when would be the earliest the company could supply a van . By 22 April the client had not heard back from the company. The client rang the company. It said it had not received the letter and had no vans available for hire now or in the near future.
If the client sued the company for breach of contract which of the following best describes the most likely outcome?
A) The company would be liable for breach because a contract was formed when the client posted the letter on 16 April.
B) The company would not be liable for breach of contract because the client’s letter on 16 April amounted to a counter offer.
C) The company would be liable for breach because a contract was formed when the client posted the letter on 16 April.The company would not be liable for breach of contract as it had no more vans available.
D) The company would be liable for breach of contract as the client accepted its offer when the client rang on 22 April.
E)
The company would not be liable for breach of contract as the postal rule would not apply
CORRECT ANSWER E:
An offer was made by the company to hire out a van for £90. The client purported to accept on Tuesday 16 April. The letter was not a counter offer as the client was only asking a question and not imposing a condition (so B is wrong). Acceptance must be communicated. On that basis the client has no contract with the company, because by the time the client actually contacted the company (ie on 22 April) its offer had lapsed (19 April) – hence why D is wrong.
There will only be a contract if the postal rule applied. Under the postal rule a letter of acceptance is binding as soon as it is posted. For the rule to apply the post must have been a reasonable means of communication. On the facts it may have been reasonable to reply by post on 16 April as the offer did not lapse until 19 April and also the quote had been sent by post. Query though whether the letter was sent first or second class and at what time (eg was it posted after the last postal collection on 16 April?).
In any event the postal rule will only apply where a letter was properly addressed and posted etc. Query why here the client’s letter was lost in the post? For example, had it been properly addressed? Also the postal rule may have been impliedly excluded as the company said it needed to “know” by 19 April. Only in the unlikely event of the postal rule applying would there be a contract. This is why A is wrong.
C is wrong because even if the company had no more vans it could be in breach and liable to pay damages.
