unit 1: offer and acceptance
Created @April 26, 2022 12:25 PM
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1. Agreement (Offer and Acceptance)
2. Offer or invitation to treat?
2.1 Self-service and Shop Window Displays
2.2 Advertisements
2.3 Unilateral and bilateral contracts
2.3.1 Auctions
2.3.2 Auctions ‘without reserve’
2.3.3 Tenders
3. Termination of offer
3.1 Revocation
3.1.1 Offer can generally be revoked at any time before acceptance
3.1.2 Revocation must be communicated to the offeree
3.1.3 Revocation may be communicated by a reliable third party
3.1.4 Revocation of offers of unilateral contracts
3.2 Rejection by the Offeree
3.3 Lapse of Time
4. Acceptance
4.1 Certainty in Offer and Acceptance
4.2 Communication of Acceptance
4.3 Acceptance by Post
4.3.1 The postal rule (Adams v Linsell)
4.3.2 Limitations to the postal rule
4.3.3 Retraction of postal acceptance
4.4 Acceptance by Electronic Communication
5. Intention to Create Legal Relations
5.1 Domestic and Social Agreements
5.2 Commercial Agreements
6. Capacity
6.1 Minors
6.2 People with a mental incapacity
6.3 Corporations
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, 6.3.1 Registered companies
6.3.2 Statutory corporations
6.3.3 Limited liability partnerships
6.4 Summary
1. Agreement (Offer and Acceptance)
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, The Law of Contract, 13th edn, p8).
The courts adopt what is primarily an ‘objective’ approach to deciding whether
there was an agreement between the parties (Smith v Hughes).
Although the test is predominantly an objective one, the offeree must believe
that the offeror actually intended to make an offer. This introduces a subjective
element to what is otherwise an objective test of intention (Goff LJ, Allied Marine
Transport v Vale do Rio Doce Navegacao SA (The Leonidas)).
2. Offer or invitation to treat?
2.1 Self-service and Shop Window Displays
Goods on display in supermarkets and self-service shops are generally regarded as
invitations to treat and not offers (Pharmaceutical Society of Great Britain v Boots
Cash Chemists; Fisher v Bell).
If goods on display were held to be an offer, then a customer might be regarded
as accepting that offer as soon as he selected the goods and put them in the
trolley or basket (i.e. the contract would be made at that point, and the customer
would be unable to change his mind and put the goods back).
The customer offers to buy the goods when he presents them at the payment
point, and acceptance takes place when the shop takes payment for the goods.
Fisher v Bell: The court held that the display of the knife was simply an
invitation to treat and acquitted the defendant of the charge.
However, a display of goods may amount to an offer in very limited circumstances
where there is a clear intention to be bound (eg a display of goods in a special sale).
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, Different situations:
The pump on the garage forecourt is the offer; syphoning diesel from it
constitutes the acceptance.
At a car park entrance, the machine constitutes the offer; driving level with it is
the acceptance.
The display of goods on a website will be treated in the same way as goods on
display in a supermarket or shop and so amount to an invitation to treat.
2.2 Advertisements
Advertisements are generally regarded as invitations to treat (Partridge v
Crittenden), but in exceptional cases may be an offer if there is a clear intention to be
bound - see, e.g. Carlill v Carbolic Smoke Ball Co.
If such advertisements were offers, it would be a problem if the advertiser had
run out of stock.
An advertisement of a 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).
The policy reason behind this is that the money has to be paid once the offer is
accepted by the supply of the information. No negotiation is involved.
Carlill v Carbolic Smoke Ball Co
- Carlill is authority for the proposition that an advertisement can constitute
an offer to ‘the world’, and that it may waive the need for communication of
acceptance prior to a claim under it (’an offer of a unilateral contract’).
- Note: The court dismissed the plea that the advertisement was a mere
puff because the defendant have deposited £1,000 with Alliance Bank as
evidence of its sincerity. A reasonable person reading the advertisement
would treat the promise to pay £100 as one that was to be taken seriously
and one which could create a binding obligation. The advertisement was
therefore an offer.
2.3 Unilateral and bilateral contracts
A unilateral contract is effectively a promise in return for an act. The commitment is
one-sided.
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, Examples:
An offer of reward (Williams v Carwardine).
2.3.1 Auctions
Section 57(2) of the Sale of Goods Act 1979:
A sale by auction is complete on the fall of the auctioneer’s hammer, in which
case that is the acceptance.
The bids are offers which can be withdrawn at any time before acceptance.
The call for bids is an invitation to treat.
If the auctioneer accepts a bid then, as the auctioneer is acting as an agent for the
owner, a bilateral contract is formed between the owner and the bidder.
‘Reserve price’ is the lowest price which the auctioneer may accept for the lot
(section 57(3) of the Sale of Goods Act 1979).
2.3.2 Auctions ‘without reserve’
If an auction is ‘without reserve’, there is an offer of a unilateral contract by the
auctioneer which is accepted by the highest bidder. If the auctioneer refuses to
accept the bid, the highest bidder will have a claim in damages against the
auctioneer (Barry v Davies (t/a Heathcote Ball & Co), but will not have a claim
against the owner.
Barry v Davies (t/a Heathcote Ball & Co)
- Mr Barry had accepted the auctioneer’s offer of a unilateral contract by
performing the required act (i.e. making the highest bid).
- Consequently, the auctioneer was held to be in breach of contract and
Mr Barry was awarded damages representing the difference between
the value of both machines and what he bid for them (ie £27,600).
- Note: Mr Barry could not have sued the owner of the machines as he
had no
contract with the owner. At an auction, a contract of sale arises only when
a bid is accepted on the fall of the auctioneer’s hammer (s 57(2) of the
Sale of Goods Act 1979), and here that had not happened.
2.3.3 Tenders
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, When businesses decide to outsource a function they will invite a number of
contractors to submit written tenders for the job.
Request for tenders will generally be invitations to treat.
The tenders will generally be the offers.
However, there may be situations where an invitation to tender does constitute an
offer (Harvela Investments Ltd v Royal Trust Company of Canada Ltd).
Harvela Investments Ltd v Royal Trust Company of Canada Ltd
- ‘We confirm that if any offer made by you is the highest offer received by
us we bind ourselves to accept such offer ...’.
- Held: The telexes were offers of a unilateral contract to sell to the highest
bidder, which would be followed by a bilateral contract for the sale of the
shares.
Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council
- The tenders had been invited from a small number of parties connected
with the airport.
- The invitation had laid down ‘a clear, orderly and familiar procedure’ so
that the tenderers obviously would assume that if they submitted a
conforming tender, they had a right to have their tender considered along
with the rest. The council were bound by the reasonable expectations of
the tenderers.
- As the council had not considered the Club’s tender, it was liable to the
Club in damages for loss of opportunity.
- However, the decision is a controversial one. It is not clear how the case
would have been decided if one of these factors had been absent or
whether there were other factors which influenced the decision (e.g. the
Club was the existing holder of the concession and so had even more
reason for feeling their tender should be considered).
3. Termination of offer
An offer may be terminated in the following ways:
Revocation (ie withdrawal) of the offer by the offeror;
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, Rejection by the offeree;
Lapse of time.
3.1 Revocation
3.1.1 Offer can generally be revoked at any time before
acceptance
An offer can be withdrawn any time before acceptance.
Once an offer has been accepted, it is irrevocable.
A promise to keep an offer open is not binding if they are gratuitous promises (i.e.
the offeree has not given, or promised anything in return for the promise to keep the
offer open) (Routledge v Grant).
However, if the claimant had given consideration for the offeror’s promise to leave
the offer open, the offer is irrevocable (albeit a nominal amount) (Mountford v Scott).
3.1.2 Revocation must be communicated to the offeree
Notice of withdrawal of the offer must be given and must be communicated to the
offeree to be effective (Byrne & Co v Van Tienhoven & Co).
Withdrawal of an offer by telegram was held to take effect only on receipt (Byrne &
Co v Van Tienhoven & Co).
Notice of withdrawal sent to the offeree’s last known address would be effective if he
has moved without notifying the offeror.
A withdrawal which reaches the offeree may be effective if the offeree simply
chooses not to read it (Treitel, The Law of Contract, 13th edn, p 43).
Revocation of offers made to the public
Revocation of offers made to the public can be done by publishing a sufficiently
prominent notice of withdrawal in the relevant newspapers (e.g. by a notice that was
at least as prominent as the original advertisement and in the same section of the
newspapers) (Shuey v United States - as this is a US authority, it is not binding on an
English court, but it seems reasonable that similar principles would be applied).
Notice of revocation sent to a business during normal office hours
If a notice of revocation is sent to a business and arrives during normal office hours,
the notice will be effective on receipt where it is reasonable to expect a member of
staff to be available to read a notice of revocation (The Brimnes).
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