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Summary SQE2 - Black Letter Law Contract
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AGREEMENT (OFFER & ACCEPTANCE)Is there a Contract?
For a contract to exist three elements need to be present - agreement (offer and acceptance),
intention to create legal relations and consideration.
Needs to be shown albeit briefly that consideration has been satisfied as it will not be the issue in
an agreement question.
To gauge whether the parties intended to enter into legal relations there are rebuttable
presumptions which will prevail so long as no evidence is shown to the contrary.
In domestic arrangements it is presumed there is no intention to create legal relations (Balfour v
Balfour). This can be rebutted when the relationship is not a close one (Merritt v Merritt).
In commercial situations there is always a strong presumption that the parties intend to create legal
relations (Edwards v Skyways). However, if there is specific wording in the contract to rebut this
intention will not be satisfied (Rose and Fran Co).
As both consideration and intention to create legal relations have been satisfied the problem here
is an issue of agreement. For agreement to be satisfied there must be valid offer and acceptance.
Without certainty in the offer and acceptance the court may not uphold the contract (Scammell), an
example is ‘timer of fair specification’ which was held to be too vague (Hillas).
Offer?
An offer is ‘an expression of willingness to contract on certain terms, made with the intention that it
shall become binding as soon as it is accepted by the person to whom it is addressed (Treitel;
Allied Marine Transport).
The existence of an offer is objectively assessed (Smith v Hughes) but the offeree must believe
that the offeror intend to make the offer (The Leonidas). As such, an offer can be made even if the
offeror did not intend to make said offer, so long as the offeree thought there was intention.
Invitation to Treat
An offer should not be confused with an invitation to treat. An invitation to treat will commence
negotiations but is made without an intention to be bound by specific terms, examples include self-
service display in a shop (Boots Case) and goods on display (Fisher).
Advertisements are usually deemed to be invitations to treat (Partridge) but can be offers in certain
circumstances i.e. offering rewards (Williams) and unilateral contracts (Carlill v Carbolic Smoke
Ball). Additionally, requests for tenders are considered invitations to treat (Spencer) unless it was
specifically stated that they would accept the highest offer (Harvela Investments) or it is a unilateral
contract (Blackpool & Fylde). Though the response to requests for tenders will normally be offers.
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,Unilateral & Bilateral Contracts
A unilateral contract is a promise in return for an act of which constitutes acceptance. Where as a
bilateral contract is an exchange of promises.
Auctions
Contracts at auctions are governed by special rules. Asking for bids amounts to an invitation to
treat not an offer. The bid itself is the offer and it can be withdrawn up until the hammer falls. The
auctioneer may accepted or rejected bids (s.57(2) SGA 1979). Acceptance is normally when the
hammer falls. If the auctioneer accepts the bid then there will be a bilateral contract between the
bidder and the owner.
Auctioneers are permitted to set reserve prices (s.57(3) SGA 1979). However, if an auction is
advertised ‘without reserve’ special rules will apply to it. In these cases the auctioneer is offering a
unilateral contract (to accept the highest bid) for a bilateral contract with the seller. The auctioneer
will have to accept the highest bid and can be sued by the bidder if they refuse to do so (Barry v
Davies).
Damages for a breach of a unilateral contract will be the difference between the amount bid and
the market value of the product bid for.
Revocation of Offer
An offer is typically revocable by the offeror up until the point where it is accepted (Routledge).
There are exceptions to this rule though for example if the offeree had provided extra consideration
to keep it open it cannot be revoked (Mountford) and in cases of unilateral contracts where
revocation is not possible once the act of acceptance has begun (Errington).
For revocation to be valid it must be communicated to the offeree (Bryne). If revocation has been
received but not read and it could be reasonably assumed that staff were at work then revocation
will have been communicated clearly (The Brimnes). The postal rule does not apply to revocation
of offers (Bryne).
If the offer is one to the world (Carbolic Smoke Ball) it can probably be revoked by placing another
advert that has a similar level of exposure to the offer (US case of Shuey).
Revocation can be communicated by a reliable third party e.g. auctioneer (Dickinson).
For unilateral contracts revocation will not be possible once the act of acceptance has begun
(Errington).
Offers can also lapse. This occurs if there is an express condition within the contract or if enough
time has passed. What constitutes a reasonable amount of time will depend on the facts.
Rejection of Offer
Once an offer is rejected it no longer exists and cannot later be accepted.
A counteroffer will be constituted as an attempt to accept an offer on new terms and will
subsequently be a rejection (Hyde).
If the claimant is simply asking questions about the offer then this will not be a rejection (Stevenson
v McLean). This is because it amounts to a request for extra information on the current offer.
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, Acceptance
IF YOU SEE - YES 4K IS GREAT BUT I NEED TO HEAR FROM YOU BY FRIDAY - THEN NOT
ACCEPTANCE AND PROBS A COUNTER OFF AS IT IS A CONDITION THAT NEEDS TO BE
MET TO MOVE FORWARD WITH THE CONTRACT.
Acceptance is ‘the unconditional expression of assent to the terms of an offer’. It must be accepted
on the same terms as the offer (Hyde).
The claimant must be aware of the offer to accept it (R v Clarke (Australian Persuasive)). Their
motives for accepting the offer are inconsequential (Williams v Carwardine).
Acceptance must be communicated by either the offeree (Entores) or an authorised agent
(Powell). In some cases acceptance by conduct is possible e.g. delivery (Brogden).
Returning a ‘tear off slip’ as directed amounted to acceptance (Butler Machine Tool).
There are exceptions to the communication rule which include unilateral contracts where only the
performance of the act is necessary (Carbolic Smoke Ball) and cases where the contract states
silence amounts to acceptance. Normally silence cannot constitute acceptance (Felthouse)
however the offeree can bind themselves with silence e.g. ‘if you do not hear from me then I accept
the offer’ (Re Selectmove Obiter).
If a contract is not clear on it’s terms the courts will generally refuse to enforce it (Scammell). The
courts will however, give meaning to unclear phrasing in some circumstances for example if the
parties have dealt with each other before (Hillas).
If the parties commence trading without being able to agree on terms then the Sales of Goods Act
1979 or Sale of Goods and Services Act 1982 will apply.
The Postal Rule
Under the postal rule an acceptance is valid upon posting (Adams v Lindsell), this is the case even
if the offeror is unaware a response has been posted and means the offeror cannot revoke their
offer (Bryne).
The post rule can only be relied on (Household Fire v Grant):
- For acceptance
- If the acceptance letter is properly stamped, addressed and posted.
- When it is reasonable for the acceptance to be sent by post (e.g. the offer was sent by post)
- If the offeror has not excluded it e.g if reply by is stated implying communication needs to be
reviewed (Holwell - ‘by notice in writing’).
The acceptance by post is still valid even if it is lost in the post (Household Fire v Grant).
There is no authority on whether an acceptance can be revoked once posted (Countess of
Dunmore).
Acceptance by other communications
For instantaneous communications acceptance occurs when the communication is received
(Entores).
When the offeror does not receive the acceptance and the offeree is aware of this, the
responsibility falls on the offeree to resend their acceptance (Entores). However, if the offeree is
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