Contract Law: Offer and Acceptance

• This chapter introduces the fundamental principles of contract formation, including offer and acceptance, certainty, consideration, promissory estoppel, intention to create legal relations, capacity, privity of contract, and rights of third parties.

What is a Contract?

• Contracts can be simple (oral or written) or by deed (written).
• Simple contracts are more common and can be bilateral (exchange of promises) or unilateral (promise for performance of an act).
• Core elements of a contract: offer, acceptance, intention to create legal relations, and consideration.
• Negotiation often occurs, distinguishing offers from statements made during negotiations.

Offer

• An offer must be specific, comprehensive, and capable of acceptance.
• The offeror makes the offer, and the offeree receives it.
• There can be multiple offerors and offerees depending on the offers involved.

Opening Negotiations

• Determine if an actual offer has been made; otherwise, no contract exists.
• A simple statement of price in response to an inquiry is not an offer.
• The wording used indicates whether it is an offer or an invitation to treat.
• "Prepared to sell" is an invitation to treat, not an offer.

Invitation to Treat

• An invitation to treat invites offers and cannot be accepted.
• Examples include adverts and displays of goods in a shop.
• Adverts can sometimes be unilateral offers accepted by performance.

Offers and Adverts

• Adverts are generally invitations to treat.
• Occasionally, adverts are unilateral offers that can form a binding agreement if all other elements are present.
• A unilateral offer to all the world can be accepted by anyone.
• Communication of acceptance is not required for unilateral offers.

Auctions

• An advert for an auction is an invitation to treat.
• Bidders make offers to buy.
• Acceptance occurs when the auctioneer's gavel falls.

Tenders

• A tender is a formal invitation to supply goods or services.
• The person responding to the tender makes the offer.
• A statement of selling via tender is not an offer, and there's no obligation to sell to the highest bidder.
• The tender's terms may specify selling to the highest or "best" bid.
• Referential bids (e.g., offering £5,000 more than any other bid) are not allowed.
• All bids submitted according to the tender procedure will be considered.

Counter-Offers

• A counter-offer responds to the original offer.
• A counter-offer destroys the original offer, making it unavailable for acceptance.

Request for Information

• Requests for information should not be mistaken for counter-offers.
• Asking about the terms of the offer is a request for information, not a counter-offer.

Acceptance

• Acceptance must mirror the offer exactly ("mirror image" rule).
• Acceptance occurs upon communication, except when using the post.
• Receipt of acceptance does not automatically mean it has been communicated.

Acceptance by Words or Conduct

• Contracts can be formed by conduct, even with a written document.
• The issue is to determine the terms on which the contract has been formed.

Battle of the Forms

• A "battle of the forms" occurs when businesses try to contract on their own terms.
• The "last shot wins" principle applies, meaning the last terms put forward and agreed to govern the contract.

Postal Rule

• The postal rule is an exception where acceptance happens when a correctly addressed letter is posted.
• The postal rule applies even if the letter does not arrive, given it was correctly addressed and posted.

Communication of Acceptance

• The method of acceptance can be specified, but an equally efficient method may be used.
• The postal rule is displaced if "notice in writing" is required, meaning acceptance must be communicated to form a contract.

Silence as Acceptance

• Silence cannot constitute acceptance where notice in writing of acceptance is required, because acceptance must be communicated.

When is Acceptance Communicated?

• There can be a difference between when acceptance is communicated and when it is received.
• Acceptance received outside office hours may not be "communicated" until someone reads it.
• There is no clear authority on when an email is considered communicated.
• Communication of acceptance can determine the jurisdiction under which a contract is made.

Revocation of Offer

• Revocation is effective when communicated.
• An offer can be revoked before the stated end date, as long as the revocation is communicated.
• A reliable third party can communicate revocation.
• If revocation is received during normal office hours, it is effective from that time.
• Revocation can be made with the "same notoriety" as the offer.
• A unilateral offer cannot be revoked once the offeree has started performance.

Lapse of Time

• If there is no time limit, an offer must be accepted within a reasonable time.
• What is "reasonable" depends on the subject matter of the contract.

Death of the Offeree or Offeror

• If the offeree dies before acceptance, the offer ceases to exist.
• If the offeror dies, the offer does not necessarily terminate if the offeree is unaware of the death; the estate executors may still perform the contract.