Contract Law: Offer and Acceptance

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.

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.