Week 1- Offer & acceptance, certainty of intention: Flashcards
What is the difference between an offer and an invitation to treat?
- Offer= statement by one party of a willingness to enter into a contract on state terms, so long as these terms are accepted by the parties; there is no general requirements on the type of contract eg could be written, oral or by conduct.
- An invitation to treat= an expression of willingness to enter into negotiations which hopefully will result in an eventual contract being made.
-The difference between the above is intention; did the statement maker intent to enter into a contract, or simply attempt to procure its existence.
Facts and significance of Gibson v Manchester CC 1979 regarding the difference between offers and invitations to treat?
Facts- the Manchester CC (defendants) prepared a brochure explain how a council tenant could purchase his council house and sent it to the tenants who had shown interest previously in doing so. The claimant completed the form and returned it, asking to be told the price of the house. He completed the form, leaving the price blank to see whether they would detract the value of his path which needed repair, which they had. The claimant accepted this and asked to continue the application, with the council taking the house off the listed houses for sale. From here, the labour party took over the council, and ended the scheme of selling council houses off, unless a binding contract had already been made, prior to their arrival. The council refused to sell the house to the claimant as they contended that no contract for the sale of the house had actually been made.
Significance- Whilst the Court of Appeal and trial judge held that a contract had been made, the House of Lords disagreed. They argued that the actions of the council, expressing some willingness to sell the house and that they may be willing to sell the house was not an offer to sell the house. Further to this, they asked the claimant to make a ‘formal application’ to purchase the house, which was yet to be made; only the form of registering interest/ enquiring about house prices having been completed.
-Difficult to ascertain difference between invitation to treat and an actual offer, must look at all correspondence to identify what the intentions of the parties must have been from what they said, and the language used.
Facts and significance of PSGB v Boots 1952 regarding offers/ invitations to treat?
Facts- defendants organised pharmacy on a self-service basis, and was charged for a breach of the Pharmacy and poisons act, which required that the sale for drugs was done under the supervision of a registered pharmacist. No pharmacist at the shelves, but there was supervision of the transaction at the till, allowing the potential customer to be rejected at the discretion of the pharmacist.
Significance- the goods were treated only as being displayed as an invitation to treat rather than an offer, and therefore the contract was not made until the customer was at the till with the goods, where the pharmacist was present.
What is the general rule regarding the effect of the advertisement of products and how does Partridge v Crittenden 1968 show this?
Newspaper advertisements are invitations to treat rather than offers, and when not inside a newspaper, court expected to take into consideration what is said and to whom it is addressed to eg in an auction setting.
Facts- defendant advertised cocks and hens at a stated price in a newspaper, and was charged with ‘offering for sale’ wild live birds contrary to the protection of birds act 1954.
significance- Held that advertisement was invitation to treat, not an offer, and he was acquitted.
-Lord Parker CJ- ‘business sense’ in treating advertisements only as invitations to treat, as understanding them as offers may see a vendor unable to carry out his contractual obligation to sell the birds, if more people accept the offer than he has stock available. May be said that the advertisement has an implied term of ‘whilst stocks last’ if it was to be treated as an offer.
What are the rules applicable to invitations to treat/ offers in an auction?
What are the rules applicable to tender for a particular project?
If there is a minimum reserve price, all bids made below this price are merely offers to treat by the customer. No offer is accepted until the auctioneer strikes his hammer.
-Where a person invites tenders for a particular project, the general rule is that the invitation to tender is simply an invitation to treat. The offer gets made by the person submitting the tender, and the acceptance is made when the person inviting tender accepts one. It is sometimes the case that the invitation to tender constitutes an offer.
Harvey investments ltd v Royal trust co of Canada 1986 AC facts and significance regarding intentions for invitations to tender?
Facts- defendants sell shares by sealed competitive tender. Invited both parties most likely to be interest to submit a single sealed offer for their shares, and state that they would accept the highest offer received by them which complied with the terms of invitation. Claimant one bid $2,175,000 whilst the second defendant bid $2,100,000 or $101,000 in excess of any other offer, whichever is higher. The second bid was accepted, and claimant sought an injunction for selling to the second defendant, on the basis that the intention of the company was to provide a confidential and fixed-bidding process to acquire the shares, whilst this referential bid (101,000 more than any other offer) was an auction-style sale, which created an invalid contract upon acceptance by the defendants.
Significance- The second bid was invalid and did not comply with the invitation to tender, which was for an offer of a unilateral contract to sell the shares to the highest fixed and confidential bidder, despite the invitation asking them to submit an ‘offer’. Allowing the referential bid would defeat the purpose of the invitation to tender, and the vendors invitation was to determine the highest amount each party would pay, and to then accept the highest fixed bid. Evidence of this invitation to treat included Their undertaking to accept the highest offer, the fact that the same invitation had been given to both, and their insistence on confidentiality showed that they wished to obtain the best price on a fixed bidding scale. The use of the word “offer” did not displace that presumed intention.
Facts and significance of Blackpool and Fylde Aero Club v Blackpool BC 1990 regarding implied terms in invitations to tender?
Facts- B council were the defendants, who invited tenders for a concession to operate pleasure flights from Blackpool airport. The form of tender stated that: ‘the council do not bind themselves to accept all or any part of the tender. No tender which is received after the last date and time specified shall be admitted for consideration.’ Tenders had to be received by the Town Clerk ‘not later than 12 o’clock noon on Thursday 17 March 1983’. The claimants posted their bid in the Town Hall letter box at about 11 am on 17 March. A notice on the letter box stated that it was emptied each day at 12 o’clock noon. Unfortunately, on this particular day, the letter box was not emptied at 12 o’clock and so the claimants’ bid remained in the letter box until the morning of 18 March. The claimants’ bid was not considered by the council because they considered it to be a late submission, and the concession was awarded to another party.
Significance- The claimants brought an action for damages for, inter alia, breach of contract. The obvious difficulty which they faced was that they did not appear to be in a contractual relationship with the defendants because an invitation to tender is only an invitation to treat. The claimants had therefore simply submitted an offer which the defendants had not accepted. But the Court of Appeal took a different approach. They held that the defendants were contractually obliged to at least consider the claimants’ tender, and, for breach of that obligation, they were liable in damages. The court appeared to adopt a two-contract analysis. A contract was concluded with the party whose tender was accepted, but the invitation to tender also constituted a unilateral offer to ‘consider’ any conforming tender which was submitted, and that offer was accepted by any party who submitted such a tender.
What policy reasons does Lord Bingham make for the decision in Blackpool flight club?
The fact that the defendant was a local authority, the potential for onerous and time-consuming/ expensive process of preparing tenders, the clear and familiar process by which tenders are invited by the inviter, the discretion of the inviter to decide whether or not accept any tender at all, the fact that the whole tendering process lies heavily in favour of the inviter as a result of this discretion.
All of the above comes with the implied term that they at least consider all of those tenders which are made within the prescribed time, by the prescribed means; damages may be payable upon failure to do so.
Lord Bingham- “A tendering procedure of this kind is, in many respects, heavily weighted in favour of the invitor. He can invite tenders from as many or as few parties as he chooses. He need not tell any of them who else, or how many others, he has invited. The invitee may often, although not here, be put to considerable labour and expense in preparing a tender, ordinarily without recompense if he is unsuccessful. The invitation to tender may itself, in a complex case, although again not here, involve time and expense to prepare, but the invitor does not commit himself to proceed with the project, whatever it is; he need not accept the highest tender; he need not accept any tender; he need not give reasons to justify his acceptance or rejection of any tender received
What is an acceptance?
What impact does a counter-offer have on acceptance?
Acceptance= an unqualified expression of assent to the terms proposed by the offeror, whether by words, or conduct, or written agreement. This can lead to difficulty, eg in conduct it may be hard to ascertain the exact point of acceptance, as some conduct may be only in the furtherance of providing the acceptance. The requisite intention must also be considered.
- A counter-offer does not provide an acceptance of the offer, rather it is treated as a new offer which must be accepted or rejected.
Following Entores v Miles Far East corp 1955, at what point does a contract come into existence?
How does this work in conjunction with the postal rule?
Once the acceptance is effectively communicated to the offeror.
Facts- The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from the defendants in Holland. The defendant sent back a telex from Holland to the London office accepting that offer. The question for the court was at what point the contract came into existence. If the acceptance was effective from the time the telex was sent the contract was made in Holland and Dutch law would apply. If the acceptance took place when the telex was received in London then the contract would be governed by English law.
Significance- the contract was in existence upon the knowing acceptance of the offer, not merely the sending of the telex- the postal rule therefore could not apply to instantaneous methods of communication. This was not the case until the English company was aware of the Dutch acceptance, and therefore English law applied.
Denning LJ also explained “that if an oral acceptance is drowned out by an overflying aircraft, such that the offeror cannot hear the acceptance, then there is no contract unless the acceptor repeats his acceptance once the aircraft has passed over. Similarly, where two people make a contract by telephone, and the line goes ‘dead’ so that the acceptance is incomplete, then the acceptor must telephone the offeror to make sure that he has heard the acceptance. Where, however, the acceptance is made clearly and audibly, but the offeror does not hear what is said, a contract is nevertheless concluded unless the offeror makes clear to the acceptor that he has not heard what was said. In the case of instantaneous communication, such as telephone and telex, the acceptance takes place at the moment the acceptance is received by the offeror and at the place at which the offeror happens to be”.
What is the courts approach to acceptance in a prescribed way, following Manchester Diocesan council for education v Commercial and general investments 1969?
The contracting party inviting tenders should explicitly show an intention that acceptance be made in a prescribed way- where the parties are not disadvantaged by the method of acceptance, even where it does not comply with the prescribed method, it is still likely to be valid, so long as it is effectively communicated to the other party, following Entores v Miles:
Facts- the claimant was selling property by tender, and inserted a clause stating that the person whose bid was accepted would be informed by means of a letter sent to the address given in the tender. The defendant completed the form of tender and sent it to the claimant, who accepted the tender and sent a letter of acceptance to Ds surveyor rather than the address on the tender, which he had dictated would be done.
Significance- defendant was not disadvantaged in any way by being notified by his surveyor rather than a letter to his address. It was not the sole permitted means of communication of acceptance, and the contract was valid.
Facts and significance of Felthouse v Bindley 1862 regarding silence in place of explicit acceptance?
Facts- the claimant and his nephew entered into negotiations for the sale of the nephews horse, and said that if he heard nothing further from his nephew then he considered that he could buy the horse from the nephew for £30 15 s. The nephew didn’t respond but decided to accept the offer and told the auctioneer not to sell the horse. The auctioneer mistakenly sold the horse, and the prospective buyer brought proceedings against the nephew. The auctioneer argued that the uncle had no title to sue because he was not the owner of the horse as the offer had not been accepted by the nephew.
Significance- appeal dismissed, the auctioneer won with his argument, as the silence on behalf of the nephew did not constitute an acceptance to sell the horse to his uncle, even if the nephew had already engaged in other measures ie telling the auctioneer not to sell the horse.
Facts and significance of Brogden v Met Railway 1877 regarding acceptance by conduct?
Facts- Brogden was a colliery owner who supplied the Met railway company, and they decided that they should enter into a contract to dictate supply. Brogden returned the draft contract sent to him with an amendment, which he said constituted a counter-offer, and eventually ceased to trade with the Met co, who brought an action against B for breach of contract. B argued that the lack of acknowledgement of his ‘counter-offer’ prevented a valid contract coming into existence.
Significance- HL said that it wasn’t technically a counter offer as the arbitrators name had to be completed, but nevertheless as they had continued to trade under the terms of the contract, it could not have been argued that no contract existed, as both parties had acted as though bound by it.
How is the postal rule an exception to the rule in Entores v Miles Far East corp?
What is the postal rule and which part of the formation or revocation of contracts does it apply to?
What are some of the requirements for the postal rule to apply?
- not an absolute rule that the offeror is made aware of acceptance; the most controversial exception is those acceptance made through the post.
- The postal rule says that acceptance is made at the point at which the letter is posted, rather than the time at which the offeror is made aware of the acceptance by receiving the letter.
Must be remembered that the postal rule (if it applies at all) applies to acceptances only and not to the revocation of an offer by post. Therefore, upon posting revocation, this is not valid until reaching the offeror, rather than being valid upon posting. Where D posts an acceptance and then V posts a revocation of his offer after the offer is accepted in the post, but before he receives it, the offer would be accepted.
Conditions required:
1) Acceptance must have been requested by the offeror, or acceptance by post must be a reasonable and anticipated means of communication. This was shown in Henthorn v Fraser 1892 2 Ch 27 which said “The court held that the offer was valid and an order for specific performance made for £750 to purchase the property. The postal rule in Adam v Lindsell would apply, which stated that it would be reasonable for acceptance of an offer to take place by post. However, this rule would not apply to the revocation of an offer. Post was a way of communicating offer acceptance, but the acceptance itself is completed as soon as it is posted. This was reasonable to expect since both parties lived in different towns.”
2) The letter of acceptance must be properly stamped and addressed
3) It must be in the control of the post office, who are capable of delivering.
4) The postal rule must not have been expressly excluded in the offer eg a provision that says acceptance must be ‘notice in writing’
5) Can’t create manifest inconvenience or absurdity.
6) The rule applies to post only, not other forms of communication, as we see in Entores v miles far east corp. only applies to non-instantaneous forms of communication.
Facts and significance of Henthorn v Fraser 1892 2 Ch 27 regarding the postal rule?
1) Acceptance must have been requested by the offeror, or acceptance by post must be a reasonable and anticipated means of communication. This was shown in Henthorn v Fraser 1892 2 Ch 27 which said “The court held that the offer was valid and an order for specific performance made for £750 to purchase the property. The postal rule in Adam v Lindsell would apply, which stated that it would be reasonable for acceptance of an offer to take place by post. However, this rule would not apply to the revocation of an offer. Post was a way of communicating offer acceptance, but the acceptance itself is completed as soon as it is posted. This was reasonable to expect since both parties lived in different towns.”
The contract was for the purchase of some houses, which the defendant had offered, before attempting to revoke his offer by post. Meanwhile, an unconditional acceptance by the plaintiff had been posted before the revocation of the offer had been received by him.
The Court of Appeal ordered that the claimant was entitled to specific performance. Lord Herschell argued: “Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usage of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.
