Offer And Acceptance: Principles And Evidence – Offers; Invitation To Treat; Counter Offers; Requests For Information; Termination; Acceptance; Application Of The Rules To Standard Form Contracts, Auction Sales, Contracts By Tender

Introduction To Offer And Acceptance

Importance Of Offer And Acceptance

• Offer and acceptance form the basis of contractual agreement
• First stage in formation of a valid contract
• Courts of England and Wales use offer and acceptance rules to determine:
  • Whether agreement exists
  • When agreement was formed
  • Who made the offer
  • Whether acceptance was valid
  • Whether contractual obligations arose
• Main purpose
  • Promote certainty
  • Facilitate commercial transactions
  • Protect reasonable expectations

Objective Approach

• English law adopts an objective test
• Courts ask:
  • What would a reasonable person understand from the parties’ words and conduct?
• Courts generally ignore:
  • Hidden intentions
  • Secret reservations
  • Undisclosed misunderstandings

Case: Smith v Hughes

Facts

• Seller offered oats
• Buyer believed oats were old
• Oats were actually new

Decision

• Contract valid

Principle

• Objective appearance of agreement determines contractual liability

Significance

• Fundamental authority for objective agreement

Offers

Definition Of An Offer

• Offer
  • A clear and definite promise
  • Made with intention to be legally bound upon acceptance
  • Contains sufficiently certain terms
• Offer must demonstrate willingness to contract

Judicial Definition

Case: Storer v Manchester City Council

Principle

• Offer exists where language demonstrates willingness to be bound immediately upon acceptance

Requirements Of A Valid Offer

Clear

• Terms must be understandable

Definite

• Must not be vague

Communicated

• Must be brought to attention of offeree

Intention To Be Bound

• Offeror must be willing to contract upon acceptance

Types Of Offer

Express Offer

• Made orally
• Made in writing

Implied Offer

• Arises through conduct

Case: Brogden v Metropolitan Railway Co

Principle

• Conduct may indicate contractual offer and acceptance

Unilateral Offers

Definition

• Promise made in exchange for an act

Example

• Reward advertisements

Case: Carlill v Carbolic Smoke Ball Co

Facts

• Company promised £100 reward
• Product used correctly
• Influenza contracted

Decision

• Offer existed
• Contract formed

Principle

• Advertisement may constitute unilateral offer

Invitation To Treat

Definition

• Invitation to treat
  • Invitation to negotiate
  • Invitation to make offers
  • Not itself capable of acceptance
• Purpose
  • Protect sellers from being bound unintentionally
  • Allow negotiation

Advertisements

General Rule

• Advertisements are invitations to treat

Case: Partridge v Crittenden

Facts

• Advertisement offering birds for sale

Decision

• Advertisement was invitation to treat

Principle

• Ordinary advertisements usually invite offers

Exception

Unilateral Advertisements

• May constitute offers

Case: Carlill v Carbolic Smoke Ball Co

Principle

• Specific reward advertisement constituted offer

Goods Displayed In Shops

General Rule

• Display of goods is invitation to treat

Case: Pharmaceutical Society of Great Britain v Boots Cash Chemists

Facts

• Self-service pharmacy

Decision

• Goods on shelves were invitations to treat

Principle

• Customer makes offer at checkout
• Shop accepts or rejects

Significance

• Extremely important retail contract case

Case: Fisher v Bell

Facts

• Flick knife displayed in shop window

Decision

• Display was invitation to treat

Principle

• Window displays are invitations to treat

Catalogues

General Rule

• Catalogues are invitations to treat

Case: Grainger & Son v Gough

Principle

• Catalogue listing goods not an offer

Websites And Online Stores

General Rule

• Product listings usually invitations to treat

Reason

• Allows correction of pricing mistakes
• Prevents automatic contractual liability

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Counter Offers

Definition

• Counter offer
  • Rejection of original offer
  • Simultaneous creation of new offer

Legal Effect

• Original offer terminated
• Cannot later be accepted unless renewed

Leading Case: Hyde v Wrench

Facts

• Offer to sell farm
• Lower price proposed
• Original offer later accepted

Decision

• No contract

Principle

• Counter offer destroys original offer

Significance

• Leading authority on counter offers

Examples Of Counter Offers

Example 1

• Offer
  • Sell car for £10,000
• Response
  • Will buy for £8,000
• Result
  • Counter offer

Example 2

• Offer
  • Sell laptop for £500
• Response
  • Will buy if warranty included
• Result
  • Counter offer

Battle Of Forms

Meaning

• Parties exchange standard terms
• Different contractual documents used

General Rule

• Last shot doctrine applies

Case: Butler Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd

Facts

• Seller and buyer exchanged differing standard terms

Decision

• Contract governed by final accepted terms

Principle

• Last set of accepted terms generally prevails

Significance

• Leading authority on battle of forms

Requests For Information

Definition

• Request for information
  • Seeks clarification
  • Does not reject offer

Legal Effect

• Original offer remains open

Leading Case: Stevenson Jacques & Co v McLean

Facts

• Buyer asked whether delivery terms could be varied

Decision

• Request merely sought information

Principle

• Clarification request does not terminate offer

Comparison

Termination Of Offers

Overview

• Offer may terminate through:
  • Revocation
  • Rejection
  • Counter offer
  • Lapse of time
  • Death
  • Failure of condition

Revocation

Meaning

• Withdrawal of offer before acceptance

General Rule

• Offer may be revoked any time before acceptance

Case: Payne v Cave

Principle

• Offer may be withdrawn before acceptance

Communication Requirement

• Revocation must be communicated

Case: Byrne v Van Tienhoven

Facts

• Revocation posted after offer
• Acceptance occurred before revocation received

Decision

• Revocation ineffective

Principle

• Revocation effective only when communicated

Indirect Revocation

Case: Dickinson v Dodds

Principle

• Reliable third-party communication sufficient

Rejection

Effect

• Immediately terminates offer
• Offer cannot later be accepted

Lapse Of Time

Express Time Limit

• Offer expires at stated time

Reasonable Time

Case: Ramsgate Victoria Hotel Co v Montefiore

Principle

• Offer lapses after reasonable time

Death

Death Of Offeror

General Rule

• Depends on circumstances

Case: Bradbury v Morgan

Principle

• Contract may survive death in some circumstances

Failure Of Condition

• Offer may terminate where specified condition not satisfied

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Acceptance

Definition

• Final and unqualified assent to offer

Requirements For Valid Acceptance

Must Correspond Exactly To Offer

• Mirror image rule applies

Must Be Unconditional

• No alterations
• No qualifications

Must Be Communicated

• Acceptance generally ineffective until communicated

Case: Entores Ltd v Miles Far East Corporation

Principle

• Instantaneous communication effective upon receipt

Silence Cannot Amount To Acceptance

Case: Felthouse v Bindley

Facts

• Uncle attempted to impose acceptance through silence

Decision

• No contract

Principle

• Silence does not constitute acceptance

Postal Rule

General Rule

• Acceptance effective when posted

Leading Case: Adams v Lindsell

Principle

• Postal acceptance effective upon posting

Additional Authority

Case: Household Fire Insurance Co Ltd v Grant

Principle

• Acceptance effective even if letter lost

Limits Of Postal Rule

Case: Holwell Securities Ltd v Hughes

Principle

• Postal rule excluded where actual notice required

Instantaneous Communications

Includes

• Telephone
• Fax
• Email
• Telex

Case: Brinkibon Ltd v Stahag Stahl

Principle

• Acceptance effective upon receipt

Standard Form Contracts

Meaning

• Pre-prepared contractual terms
• Used repeatedly in business transactions

Characteristics

• One party drafts terms
• Other party generally accepts or rejects
• Limited negotiation

Battle Of Forms

Problem

• Both parties use different standard terms

Case: Butler Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd

Principle

• Last accepted terms generally prevail

Evaluation

Advantages

• Efficiency
• Certainty
• Reduced transaction costs

Disadvantages

• Unequal bargaining power
• Complex terms
• Potential unfairness

Auction Sales

General Rule

• Auctioneer invites bids
• Bid
  • Offer
• Hammer fall
  • Acceptance

Case: Payne v Cave

Principle

• Bid may be withdrawn before hammer falls

Auctions Without Reserve

Meaning

• No minimum price

Case: Barry v Davies

Principle

• Auctioneer obliged to sell to highest genuine bidder

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Contracts By Tender

Meaning

• Invitation issued requesting bids
• Common in construction and procurement

General Rule

Invitation To Tender

• Usually invitation to treat

Tender Submission

• Usually offer

Acceptance

• Creates contract

Case: Spencer v Harding

Principle

• Invitation for tenders usually invitation to treat

Exception

Unilateral Tender Process

• Promise to consider conforming tenders

Case: Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council

Facts

• Tender submitted correctly
• Council failed to consider it

Decision

• Collateral contract existed

Principle

• Invitation may create obligation to consider compliant tenders

Significance

• Major exception to Spencer v Harding

Fixed Process Tenders

Case: Harvela Investments Ltd v Royal Trust Co of Canada

Facts

• Invitation sought highest bid

Decision

• Highest compliant bid entitled to acceptance

Principle

• Fixed tender procedures must be followed

Examination Comparison Table

Key Cases To Memorise

• Smith v Hughes (1871)
• Storer v Manchester City Council (1974)
• Carlill v Carbolic Smoke Ball Co (1893)
• Partridge v Crittenden (1968)
• Pharmaceutical Society v Boots (1953)
• Fisher v Bell (1961)
• Grainger v Gough (1896)
• Hyde v Wrench (1840)
• Stevenson Jacques v McLean (1880)
• Byrne v Van Tienhoven (1880)
• Dickinson v Dodds (1876)
• Ramsgate Victoria Hotel v Montefiore (1866)
• Felthouse v Bindley (1862)
• Adams v Lindsell (1818)
• Household Fire Insurance v Grant (1879)
• Entores v Miles Far East (1955)
• Brinkibon v Stahag Stahl (1983)
• Butler Machine Tool v Ex-Cell-O (1979)
• Payne v Cave (1789)
• Barry v Davies (2000)
• Spencer v Harding (1870)
• Blackpool and Fylde Aero Club v Blackpool Borough Council (1990)
• Harvela Investments v Royal Trust (1986)

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course