Contract Law: Offer and Acceptance

Questions and Answers

What is an invitation to treat in the context of displaying goods?

An agreement that goods will be sold to the first customer

A definite offer to sell the displayed goods

A misleading advertisement of goods for sale

An invitation for customers to make offers to purchase (correct)

Which case established that advertising with definitive language can constitute an offer rather than an invitation to treat?

Pharmaceutical Society of Great Britain v Boots Cash Chemists

Harvey v Facey

Partridge v Crittenden

Carlill v Carbolic Smoke Ball Co (correct)

In Pharmaceutical Society of Great Britain v Boots Cash Chemists, what was the critical legal issue?

Whether the selected products were considered sold before checkout (correct)

Whether a valid contract was formed at the time of selection

Whether customers were properly supervised during their purchases

Whether the displayed goods were sold at the advertisement price

What characterizes an offer in an advertisement?

Promissory language indicating a commitment Signup and view all the answers

What was Boots' argument in the Pharmaceutical Society of Great Britain case regarding the sale of non-prescription drugs?

The sale was completed when the cashier processed the transaction Signup and view all the answers

What defines the time of receipt under the Electronic Transactions (Victoria) Act 2000?

When the electronic communication reaches the designated address. Signup and view all the answers

What must a contract express to meet the formation requirement of certainty?

It must be expressed in clear and precise terms. Signup and view all the answers

Under what condition does uncertainty raise a formation problem in contracts?

When the language used is meaningless. Signup and view all the answers

In which scenario does receipt occur when the offeror becomes aware of the electronic communication?

When the offeror has designated a communication address. Signup and view all the answers

Which statement about the place of receipt is accurate according to the Electronic Transactions (Victoria) Act 2000?

It is defined as where the contract was formed. Signup and view all the answers

What was M's argument regarding the contract with C?

M argued there was no binding contract. Signup and view all the answers

How did the court categorize the agreement between M and C?

As a non-binding preliminary agreement. Signup and view all the answers

In which category does an agreement fall when parties intend no binding agreement until a formal contract is executed?

Subject to condition and not binding. Signup and view all the answers

According to common law, when does an offer expire if no period has been specified?

It expires after a reasonable period. Signup and view all the answers

What must acceptance of an offer occur while?

While the offer is still in existence. Signup and view all the answers

What is true regarding the execution of agreements that are 'subject to contract'?

They must eventually be restated in a formal contract. Signup and view all the answers

What happens if an offeror withdraws an offer before it is accepted?

The offeror may withdraw it at any time unless a commitment was made. Signup and view all the answers

What was the main legal issue presented in the case discussed?

Whether the signed memorandum constituted a binding contract. Signup and view all the answers

What is the main characteristic of an offer in contract law?

It must involve a promissory commitment. Signup and view all the answers

What was Wendy's counter-offer to Trevor regarding the price of tomatoes?

$14 a kilo Signup and view all the answers

Which case demonstrated that an offer must not be illusory to be enforceable?

Placer Development Ltd v Commonwealth Signup and view all the answers

What was the outcome for the Commonwealth's promise in Placer Development Ltd v Commonwealth?

It was ruled not contractually enforceable. Signup and view all the answers

What must be true about the terms of an offer for it to be valid?

They must be intended to result in a contract if accepted. Signup and view all the answers

Why was the Commonwealth's subsidy promise not contractually enforceable?

The amount was left entirely to the Commonwealth's discretion. Signup and view all the answers

What are the contractual obligations once Trevor accepts Wendy's counter-offer?

Wendy must pay $14 a kilo for 100 kg of tomatoes. Signup and view all the answers

Which of the following statements about invitations to treat is true?

They do not intend to create a contractual obligation. Signup and view all the answers

What is required for a promise to keep an offer open to be enforceable?

The promisee must provide consideration. Signup and view all the answers

Which of the following represents the correct condition for acceptance of an offer?

Acceptance must comply with the specified terms of the offer. Signup and view all the answers

When is acceptance effective according to the general rule?

When the offeree communicates acceptance to the offeror. Signup and view all the answers

In what situation does the postal acceptance rule apply?

When acceptance occurs via post, and the offeror intended postal acceptance. Signup and view all the answers

In the case of Henthorn v Fraser, what determined the effectiveness of acceptance?

The moment the offeree posted the letter of acceptance. Signup and view all the answers

What would constitute ineffective communication of acceptance?

Emailing the acceptance when the terms require in-person acceptance. Signup and view all the answers

What could affect the ability of an offeree to withdraw their acceptance?

Withdrawing prior to communicating acceptance. Signup and view all the answers

Which of these statements about unilateral contracts is true?

They can be accepted by performing the action specified in the offer. Signup and view all the answers

What is required for a promise to be deemed valid consideration in a contract?

The promise must be of some value, regardless of size. Signup and view all the answers

Why can past consideration not be enforced in a contract?

It must be made before the contract was formed. Signup and view all the answers

In the example provided, why cannot A enforce B's promise for a warranty?

A did not provide consideration for the warranty. Signup and view all the answers

Which statement accurately reflects the existing legal duty rule?

Performance of a legal duty cannot constitute consideration. Signup and view all the answers

How does the Stilk v Myrick case illustrate a principle of consideration?

The sailors received extra pay for performing their usual duties. Signup and view all the answers

What principle prevents a party from enforcing a promise based solely on prior consideration?

Consideration cannot be based on past actions. Signup and view all the answers

What makes a promise to complete a task that is already legally required non-enforceable?

There is no additional value beyond the duty. Signup and view all the answers

What can be concluded about the validity of a new promise made after a contract exists?

It must involve new consideration. Signup and view all the answers

What is a requirement for a promise to be enforceable under contract law if it is not recorded as a deed?

It must be supported by consideration. Signup and view all the answers

What characterizes a deed in contract law?

It must be signed, sealed, and delivered. Signup and view all the answers

Which principle states that consideration must be present but its adequacy is not assessed?

Peppercorn principle. Signup and view all the answers

In the case of Thomas v Thomas, what was the central issue regarding the lease agreement?

Whether consideration was provided by Mrs. T. Signup and view all the answers

What type of contract allows for enforceability without consideration as long as it is in deed form?

Deed contracts. Signup and view all the answers

How can a party provide consideration in a unilateral contract?

By doing or refraining from doing an act. Signup and view all the answers

What is true regarding the witnesses of a deed?

They must not be a party to the agreement. Signup and view all the answers

Which of the following statements about consideration in contracts is correct?

Consideration does not require a tangible benefit. Signup and view all the answers

What was the primary issue in the case of Stilk v Myrick?

Whether the crew's existing duties constituted consideration for additional pay Signup and view all the answers

Under what condition does the practical benefit exception apply?

When the promisor receives a practical benefit from the promisee's performance of an existing duty Signup and view all the answers

What consideration did M provide in Musumeci v Winadell to support W's promise to reduce rent?

Agreeing to pay a reduced rent while still being a tenant Signup and view all the answers

What is required for a contract to have contractual force according to the principle of intention?

There must be a voluntary assumption of a legally enforceable duty Signup and view all the answers

In Stilk v Myrick, what obligation did the crew have that influenced the court's decision?

They were required to ensure the safe return of the ship Signup and view all the answers

What was the practical benefit that W obtained from M's continued tenancy?

Consistent rental income amidst a struggling rental market Signup and view all the answers

How did the court view W's claim for the full amount of rent after promising a reduction?

It was dismissed because of the practical benefit received Signup and view all the answers

What must parties provide to demonstrate their intention for an agreement to have contractual force?

Inferred intentions based on conduct Signup and view all the answers

What factor should NOT be considered to determine if two parties intended their agreement to be binding?

The external political environment Signup and view all the answers

In Ermogenous v Greek Orthodox Community of SA, what was the core issue regarding the agreement between E and GOCoSA?

Whether the agreement was a valid employment contract Signup and view all the answers

What assumption did courts traditionally make regarding commercial agreements?

They are assumed to be intended as binding Signup and view all the answers

What aspect of the Esso Petroleum Ltd case was central to determining the intention of the parties?

The description of coins as a 'gift' Signup and view all the answers

What type of contract was established in the Carlill v Carbolic Smoke Ball Co case?

Unilateral contract Signup and view all the answers

In the context of determining intention, which relationship type between parties typically leads to different presumptions?

Employees vs. employers Signup and view all the answers

What was the outcome of Ermogenous v Greek Orthodox Community of SA regarding E's claim for leave payments?

E was fully entitled to the leave payments Signup and view all the answers

What was the significance of the deposit made by the Carbolic Smoke Ball Company?

It demonstrated sincerity in fulfilling their promise. Signup and view all the answers

In Esso Petroleum v Commissioner of Customs & Excise, what inferred the intention of the parties?

The commercial nature of the agreement. Signup and view all the answers

What did CCE argue regarding the coins provided in Esso's marketing promotion?

They should not be considered a gift for contract purposes Signup and view all the answers

What was the primary legal issue with the advertisement made by the Carbolic Smoke Ball Company?

Whether it established a legally binding contract. Signup and view all the answers

If a contractual agreement is deemed to lack intention, what is likely to be the consequence?

The contract is rendered unenforceable Signup and view all the answers

What circumstance is highlighted in the outcome of Esso Petroleum v Commissioner of Customs & Excise?

The relationship between the parties involved. Signup and view all the answers

What led to Mrs. Carlill's claim against the Carbolic Smoke Ball Company?

She experienced illness after using the product as directed. Signup and view all the answers

What key factor differentiates a unilateral contract from other types of contracts?

Only one party makes a promise in exchange for performance. Signup and view all the answers

What principle about acceptance of offers can be derived from the Carlill case?

Acceptance can occur through actions instead of direct communication. Signup and view all the answers

Study Notes

Agreement: Offer and Acceptance

Wendy rejects Trevor’s offer of 15akilofortomatoesandcounterswithanofferof15 a kilo for tomatoes and counters with an offer of 15akilofortomatoesandcounterswithanofferof14 a kilo.
Trevor accepts Wendy’s counter-offer, forming an executory contract with obligations for both parties.
Wendy agrees to purchase 100 kg of tomatoes at $14 a kilo while Trevor agrees to supply the tomatoes.

Formation Requirements: Offer

An offer must be promissory, meaning it requires an undertaking to do or refrain from doing something.
An offer must be sufficiently certain and intended to form a contract upon acceptance, distinguishing it from an invitation to treat.

Promissory Requirement Case: Placer Development Ltd v Commonwealth

The Commonwealth promised a subsidy to Placer Development Ltd, but the amount determined was discretionary.
The High Court concluded that the promise was not legally enforceable as it was deemed an illusory promise.

Invitation to Treat

Advertising goods typically involves an invitation to treat, inviting others to make offers.
Displaying goods in a store is considered an invitation to treat, not an offer to sell.

Case Examples: Invitation to Treat

Carlill v Carbolic Smoke Ball Co: An advertisement with definite language constituted an offer.
Partridge v Crittenden: Lack of detail and promissory language indicated an invitation to treat.

Display for Sale Case: Pharmaceutical Society of Great Britain v Boots Cash Chemists

Boots’ self-service model raises legal questions about the sale of non-prescription drugs.
The court determined that the sale is finalized when the cashier processes the transaction, not when customers select items.

Acceptance Conditions: Masters v Cameron

Acceptance must be unconditional to form a binding agreement.
The court categorized agreements 'subject to contract' into three types:
- Binding when all terms are settled but require formal restatement.
- Binding when terms are agreed but execution of formal document is conditioned.
- Not binding if parties intend to execute a formal contract before binding.

Expiry or Withdrawal of Offers

Acceptance must occur while the offer remains valid.
Offers expire once a stated time has lapsed or after a reasonable period if no time is specified.
Offerors can withdraw offers at any time before acceptance unless a commitment is made to keep the offer open.

Acceptance Compliance

Acceptance must follow any specified method in the offer (e.g., in person).
General rule states a contract is formed only upon communication of acceptance to the offeror.

Postal Acceptance Rule

Acceptance via post is valid when the acceptance letter is posted, assuming the offer allows postal acceptance.
Case Example: Henthorn v Fraser: Acceptance was effective immediately upon posting.

Electronic Acceptance: Electronic Transactions (Victoria) Act 2000

Defines the timing and acknowledgment of an electronic acceptance.
Receipt of acceptance occurs when it reaches the designated electronic address if provided by the offeror.

Formation Requirement: Certainty

Contracts must be expressed in clear and precise terms; ambiguity can lead to issues in enforcement.
The judicial interpretation of ambiguous terms hinges on context and intent, resolving any potential for multiple meanings.

Formation Requirements Overview

A contract requires four formation components: agreement, certainty, consideration/deed, and intention.

Consideration/Deed

A promise must be supported by consideration unless recorded as a deed.
Consideration entails an exchange between parties and prohibits one-sided promises.
A deed is enforceable without mutual consideration and must be executed (signed, sealed, delivered) and witnessed by an independent party.

Providing Consideration

Consideration can be given by promising to perform or refrain from an act (bilateral or unilateral contracts) or by actually performing an act.
Adequate consideration is not necessary; it must be sufficient, establishing the peppercorn principle (minimal identifiable benefit/detriment).

Thomas v Thomas Case

Mr. T allowed his wife, Mrs. T, to stay in their family home promising to charge her £1 per year for the lease.
Wife's payment was deemed sufficient consideration regardless of its minimal amount.

Past Consideration

Past consideration is non-enforceable; promises made after contract formation lack mutual exchange and therefore cannot be enforced.
Example: A cannot enforce an additional warranty after purchasing goods if the payment was made prior to the warranty being offered.

Existing Legal Duty Rule

Only performing a legal duty is not sufficient consideration.
In Stilk v Myrick, sailors' promise for extra pay was unenforceable as they were already obligated to perform during emergencies.

Practical Benefit Exception

The existing legal duty rule does not apply if the promisee receives a practical benefit from the performance of an existing duty (i.e., mutual benefit).

Musumeci v Winadell Case

Landlord agreed to reduce rent due to tenant’s decreased business.
Tenant provided consideration despite less payment since maintaining the tenant was beneficial for the landlord.

Intention in Contracts

Legally binding agreements arise from voluntary acceptance of duties.
Determining intention involves analyzing mutual conduct, relationships, and context, uncoupled from assumptions about relationship types.

Modern Approach to Intention

Courts evaluate the intention based on the agreement’s subject, the relationship between parties, and surrounding circumstances.
In Ermogenous v Greek Orthodox Community, the Archbishop was deemed an employee entitled to leave payments based on intent inferred from the parties’ actions.

Intention in Commercial Agreements

Historically, agreements in business contexts are presumed to hold binding intent.
In Esso Petroleum v CCE, the promotion's gift aspect led the court to rule that it was a contractual relationship, liable for taxation.

Carlill v Carbolic Smoke Ball Co Case

Manufacturer advertised a reward for avoiding influenza with their product, demonstrating intention to form a contractual agreement by publicly depositing £1,000.
Ms. Carlill accepted the unilateral offer by using the product as instructed and contracting influenza, leading to a breach of contract suit when the reward was denied.

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Description

This quiz examines the principles of offer and acceptance in contract law through a practical example involving a sale of tomatoes. It highlights the distinction between an initial offer, rejection, and counter-offer, showcasing how negotiations can evolve. Test your understanding of these fundamental legal concepts.