Offer and Acceptance: Chapter 1 & 2 PDF

OFFER AND MR.NATHAN ACCEPTANCE  ORIGINS AND FUNCTIONS OF CONTRACT LAW Contract is associated with the laissez faire doctrine/economics. According to Prof. Attiyah, there is no such thing as a typical contract. Too many variations Examples :- - Club membership - Landlord Tenant agreement...

OFFER AND MR.NATHAN ACCEPTANCE  ORIGINS AND FUNCTIONS OF CONTRACT LAW Contract is associated with the laissez faire doctrine/economics. According to Prof. Attiyah, there is no such thing as a typical contract. Too many variations Examples :- - Club membership - Landlord Tenant agreement - Sale and Purchase agreement The laissez faire doctrine basically means the freedom to contract The driving principle behind laissez-faire, a French term that translates as "leave alone" (literally, "let you do"), is that the less the government is involved in the economy, the better off business will be—and by extension, society as a whole One can have the freedom to contract without the intention of Parliament or the courts. The general principle however of forming a contract has more than just an offer. According to Lord Wilberforce in The Eurymedon, a contract should have - A valid offer - An equivocal acceptance - An intention to create a legal relationship - Consideration A contract is an agreement based on the promises of two parties. To be enforceable a contractual agreement must be based on mutuality of intent. (NO MUTUALITY – NO CONTRACT)  WHY CONTRACTS ARE ENFORCED? - Contract law is important as it is a way of regulating relationships - We can safely make arrangements with other people if we know those agreements have the force of law - Contractual agreements are enforced for 3 specific reasons - Because they create legitimate expectations in both parties that their undertakings will be carried out - Because it is quite common for a party to a contract to incur further expenditure on reliance on the promise made; - Because if one party actually does perform his/ her side of the bargain it would be unconscionable to allow the other party to avoid paying the price.  BILATERAL CONTRACT UNILATERAL CONTRACT ▪ It is a contract between two or more parties ▪ Contract between one party and the world at large ▪ An obligation by promising the other for something ▪ An obligation assumed by one party under the contract ▪ Almost every contract on a daily basis is a bilateral contract ▪ Normally contract which promises a sum of reward in return for performing a certain act - Northern Railway Co v Witham - Carlil v Carbolic Smoke Ball  OFFER ▪According to Treitel in The Law of Contract, an offer is defined as “an expression of willingness to contract on certain terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.” ▪ In order for the courts to construe for the existence of an offer and acceptance, the objective test will be Person making the offer = OFFEROR used to infer parties intention. Person to whom offer is made = OFFEREE Offers can be made to : ▪ A specific person ▪ A group of people ▪ To the world at large / general public Carlil v Carbolic Smoke Ball Co. D advertised about the smoke ball and claimed it could prevent flu Promised through ad that anyone who used it for a specified time and still caught flu will be paid 100 pounds Mrs. Carlil used it and still got the flu Smokeball Co. didn’t want to pay CoA held that based on the terms of the They argued that the advert was just a ‘mere puff’ agreement, the ad was a contract and not a contract  INVITATION TO TREAT Invitation to treat is a preliminary stage before an offer is made. It basically invites the other party ‘to make an offer’ Negotiations to enter into a contract can amount to an invitation to treat Therefore confusion can sometimes arise as to whether statements are an ‘offer’ or an ‘invitation to treat’ Compare the cases of Gibson v Manchester City Council (1979) Storer v Manchester City Council (1974) Gibson v Manchester City Council (1979) Storer v Manchester City Council (1974) Council tenant wanted to buy council house. The scenario was rather similar with the case of Gibson. Completed application form and received letter from council stating price and that the council However, in this case Mr. Storer received a letter ‘may be prepared to sell’ the house. that stated ‘we are willing to sell’. The price was asserted. Mr. Gibson sent in his application. The Courts ruled that this amounted to an ‘offer’ Due to a political change, the council was now in control by a different party. They decided to stop selling council houses. Mr.Gibson brought argued that the letter was an offer to which he had already accepted House of Lords ruled that Council did not make an offer The letter which stated the price was merely a negotiation ; an invitation to treat. SITUATIONS THAT CAN BE AN ‘ITT’ Advertisements Display of Goods A request for tender An auctioneer request for bids ADVERTISMENTS Advertisements are generally an ‘ITT’. However a distinction must be made between ‘a unilateral contract and a bilateral contract Bilateral Contract Unilateral Contract Types of adverts that advertise specific goods at a Offers for rewards such as : lost specified price property, information leading to the Such as those found at the back of magazine and arrest or conviction of a criminal newspapers. These are generally treated as offers. These are generally ‘invitation to treat’. Person making the advertisements Partridge v Crittenden intends to be bound by it Advert in a magazine stated ‘Bramble finch cocks and hens for 25 s’ D was charged for offering to sell endangered species Courts held that advert was not offer but invitation to treat DISPLAY OF GOODS Display of goods with a ‘marked price’ is generally an ‘ITT’ rather than offer. Fisher v Bell (1960) Pharmaceutical Society of Great Britain v Boots Cash Chemist D displayed flick knives at his shop window Display of such weapons for sale was an D was charged for offering a medicine for offence contrary to s. 1 (1) of the Restriction sale of Offensive Weapons Act 1959. The medicines were displayed on a self- Lord Parker CJ stated the display of an service shelf article with a price on it was only an Court ruled that shelf display was like an invitation to treat advertisement for a bilateral contract and hence it was only an ‘ITT’. Offer was made by customer who took the medicine to the cashier and was accepted by the cashier. TIMETABLE AND TICKETS FOR TRANSPORT With regards to timetable and tickets for transport – there is an uncertain or grey area as to whether they are ‘offers’ or ‘invitation to treat’. Does the bus pulling up at a stop constitute and offer to carry you, which you accept by boarding the bus? Or is the stage of invitation to treat so that the offer is actually made by you getting on the bus or by handing over the money for the ticket? There are many cases in this area but there is no single reliable rule It seems that the exact point at which a contract is made depends in each case bsed on the particular facts. HOW LONG DOES AN OFFER LAST? An offer too has a lifeline There are various ways on how an offer can cease to exist. REASONABLE FAILURE OF A SPECIFIED TIME LENGTH OF REJECTION PRE-CONDITION TIME DEATH OF AN COUNTER – OFFEROR/ WITHDRAWAL/ OFFER DEATH OF AN REVOCATION OFFEREE ▪ Specified Time ▪ Counter – Offer - When offeror states that the offer will - Terminates the original offer only be up for a specific length of time ▪ Request for information ▪ Reasonable Length of Time - Does not amount to a counter offer - Ramsgate Victoria Hotel Ltd v Montefiore - Stevenson Jacques & Co v McLean ▪ Failure of a pre-condition ▪ Death of the offeror / offeree - Financing Ltd v Stimson - Bradbury v Morgan (1862) - No case in point for death of offeree but it ▪ Rejection offer will probably lapse if the offeree dies - An offer lapses if the offeree rejects it WITHDRAWAL OF AN OFFER (REVOCATION) GR : An offer can be withdrawn at anytime before an acceptance is made - Payne v Cave (1789) - Routledge v Grant ( 1828) – D had the right to withdraw offer at anytime before the 6 weeks were up When withdrawing an offer a few rules have to abided by WITHDRAWAL MUST BE WITHDRAWAL CAN BE CANNOT WITHDRAW FOR COMMUNICATED COMMUNICATED BY 3RD PARTY OFFER UNILATERAL CONTRACT ▪ Withdrawal must be communicated ▪ Withdrawal can be communicated by 3rd party -Offeror must notify offeree that ‘offer’ is -Dickinson v Dodds (1876) being withdrawn - C knew D had already sold the house by 4th -Byrne v Leon Van Tien Hoven (1880) person 1st Oct – D posted offer - C still sent his acceptance 8th Oct – D posted revocation - Courts held that revocation was effectively communicated. 11th Oct – Offer received and C posted acceptance 20th Oct – C received revocation -Court held ctt already formed -Revocation was only communicated after acceptance ▪ Exception to that Communication Rule - If offeree moves to a new address without notifying offeror, withdrawal sent to the last known address will be effective on delivery to that address - Withdrawal is effective even if it reaches offeree even if he fails to read it (The Brimnes) - However this would only apply if a withdrawal is sent by telex or fax (instantaneous mode of communication) during normal business hours. In reality, sometimes quite difficult to pinpoint when withdrawal takes place - If offeror sends one offer first and subsequently sends a modified one later, the first offer is said to have been (Pickfords v Celestica (2003) Judge held that “something more than mere submission if the second quotation is required to indicated that Pickfords has withdrawn the offer. ▪ Cannot withdraw offer in Unilateral Contract GR : Revocation for unilateral ctt cannot take place once offeree has commenced performance Errington v Errington & Woods (1952) - son and daughter in-law continued making payments - after father died, his executors tried withdrawing the offer - court held, cannot withdraw offer once offeree commenced performance Daulia Ltd v Four Milbank Nominees Ltd ( 1978) -Once offeree commenced performance, too late for offeror to revoke EXCEPTION : Luxor (Eastborne Ltd v Cooper (1941) - Shuey v United States (1875) : effective revocation can be made for unilateral ctt  WHAT TO LOOK OUT FOR WHEN DEALING WITH OFFER AND ACCEPTANCE? - Courts will use the objective test to infer the intention of the parties to reach an agreement based on the facts -One has to not only identify the offer and acceptance but also to ascertain whether there in fact an objective assessment of an intention to reach an agreement. - An objective assessment refers to what ‘ a reasonable man’ can discern from the actions of the parties/ terms of the agreement. -Where a case involves facts not falling into the general idea of the rules of ‘offer and acceptance’, courts will focus on the intention of the parties.  ACCEPTANCE For a contract to be formed, there must be a corresponding acceptance to the terms of the offer. An acceptance is defined by Treitel as “a final and unqualified expression of assent to the terms of an offer It is sometimes said that acceptance must be a ‘mirror image’ of the offer.  HOW and WHEN acceptance can be made orally (through in writing by conduct words) (through post) ▪ Acceptance through conduct – Brogden v Metropolitan Railway Co (1862) -The House of Lords held that acceptance by conduct could be inferred from the parties behaviour. ▪ Acceptance of an offer to enter into a unilateral contract -There is no acceptance until the act is completely performed. ▪ An acceptance must be conditional - Acceptance must be precise to the offer – Tinn v Hoffman ▪Silence cannot amount to an acceptance – Felthouse v Bindley (1877) - Merely remaining silent cannot amount to an acceptance, unless it was clear that acceptance was intended -Uncle wrote to nephew offering to buy his horse at 30 p and 15 s -Nephew did not reply - He was about to sell some property but told the IMPORTANT TIP : auctioneer to keep the horse ‘out of sale’ -Auctioneer accidentally sold it ACCEPTANCE - His intention of keeping horse out of sale cannot MUST BE be implied meant to say he accepted uncle’s offer. COMMUNICATED ▪NEGOTIATIONS AND BATTLE OF THE ▪ British Road Services v Arthur V Crutchley (1968) FORMS -C delivered some whiskey to D for storage -Many business contract on standard terms - C (BRS driver) handed the D a delivery note on and do not negotiate terms each time they their ‘conditions’ enter into a contract - D’s employees stamped the note as “received - A ‘battle of the forms’ occur when one party under our conditions” and gave it back to driver sends their form stating the contract is on - Hence the ‘last shot’ was made by Crutchley their standard terms of business, which the other party returns stating contract is on their terms ▪Butler v Machine Tool v Ex –Cell O Corp ( 1979) - The ‘last shot doctrine’ here applies. The last -Last shot doctrine does not always work document (counter-offers) that is exchanged between parties is made to be the offer - Have to observe the totality of the agreement - First party that performs the obligation -Because many things could have missed in required – would have made the acceptance between documents of that offer SPECIFIED METHODS OF ACCEPTANCE - If offeror states that an offer must be accepted in a particular way – only that way is deemed as acceptance - If offeror says reply of acceptance can be made by post – any other way faster than that still works - If offeror requests for a specific method for the offeree’s benefit, then offeree no need to oblige – Yates Building v RJ Pulleyen & Sons - Offeror cannot stipulate that silence can amount to an acceptance – Felthouse v Bindley - If offeror states that a performance by offeree would amount to an acceptance – acceptance is only valid if offeree is aware of the terms and if offeree objectively intended the act to amount to an acceptance – Inland Revenue Comissioners v Fry (2001) GENERAL RULE OF ACCEPTANCE When it comes to acceptance – IT MUST BE COMMUNICATED TO THE OFFEROR! ▪ Lord Denning in the case of Entores Ltd v Miles Far East Corporation (1955) “Suppose, for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he says. Not until I have his answer am I bound.” EXCEPTIONS TO THE COMMUNICATION RULE ▪ Terms of the offer - The Brimnes, the telex communicating - offer may state or imply acceptance need not be acceptance was sent during office hours, communicated but no one read it. Cannot rely on the rule. -Unilateral contract does not require communication of acceptance – complete performance is enough Dei, you can hear ▪ Conduct of the offeror me or not lah ?!?! -If offeror fails to receive an acceptance through his own fault, he cannot claim that ‘acceptance wasn’t communicated to him’ - Entores v Miles Far East Corporation – Offer was accepted by telephone. Offeror failed to catch the words of acceptance and failed to ask them to be repeated. Court ruled offeror was at fault. ▪THE POSTAL RULE - Adams v Lindsell (1818) - On 2nd Sept, D wrote to C (wool processors) offering to sell sheep fleeces - The terms of their letter stated “answer in course of post” - D did not address letter properly and only reached C 5th September -C posted acceptance same evening and reached D on 9th September - Argument : If original letter correctly posted, D would received acceptance on 7th September - Since they ‘never received acceptance’ – wool was sold to 3rd party on 8th September - Courts held contract concluded soon as letter was posted - D were bound from 5th September and therefore breached the contract - Court ruled that acceptance takes place when letter was posted and not necessarily when it was communicated – i.e. : read by the offeror ▪Court ruled that acceptance takes place when letter was posted and not necessarily when it was communicated – i.e. : read by the offeror - The letter sent by post however is subject to conditions : correctly addressed, stamped and sent by registered post - The postal rule was extended its use in other methods of non-instantaneous communication as well like telegram – Cowan v O’Connor - Acceptance came into effect when telegram was placed with post office - Post office is a reliable agent of the offeror and if letters are posted it is quite certain then letters would reach the offeror. Thus it is logical for acceptance to commence via postal rule JUSTIFICATION OF POSTAL RULE 1. Post Office is agent of the offeror - So if a letter is received by the P.O, it is deemed to be received by the offeror (However, this justification is open to criticisms) 2. Offeror chose to start negotiations through post, so risk of delay or lost imposed on him -(Not necessarily offeror started the negotiations first sometimes, it is the offeree) 3. However, if one uses post, it must reasonable to do so – Henthorn v Fraser - Offeree shouldn’t have ‘since I posted – I accepted’ kind of attitude. ▪ Use of the postal service must be reasonable When is it reasonable? (Have to be based on facts of case) If there is a postal strike – not reasonable If offer made by post – then reasonable to expect the same if it was a verbal offer, you can respond by post - Hentorn V Fraser – Acceptance was made by post because D was in Liverpool and C in Birkenhead. D gave the C a doc containing offer in person, but acceptance was made through post. Courts held acceptance was reasonable However this rule is rather criticized especially with the advent of modern technology ▪ Ewan McKendrick said compared to the instant modes of communication, the postal rule seems like a ‘museum piece’ that continues to exist. DIFFICULTIES OF THE POSTAL RULE 1. What if the letter gets lost after posting? 2. What if offeree posts acceptance and then sends a rejection by a quicker method? GR : Contract concluded because acceptance takes effect when it is posted and not when it GR : Contract would have been concluded when reaches the offeror acceptance posted, so sending rejection would amount to a breach of contract which may be -Household Fire Insurance v Grant (1879) accepted or rejected by offeror. Scottish case decided other wise – Mason v Benhar Coal (no contract when acceptance posted but never reached the offeror) There are 2 views English courts can take (not binding but merely persuasive authorities) However if offeree wrongly addressed it , then it is his fault and the offeror will not bear -A to Z Bazaars v Minister of Agriculture – that cost. revocation not possible -Countess of Dunmore v Alexander – revocation was possible 3. The use of instantaneous method of communication As modern communication such as fax or email became instantaneous, courts have shown marked reluctance to extend the postal rule However in early cases using telegram , postal rule was applied In later cases using telex machines, postal rule was not applied. -Entores v Miles Far East Corporation (1955) -Brinkibon Ltd v Stahag Stahl (1982)  EXCEPTIONS TO THE POSTAL RULE ▪ Offeror makes it a term of the offer that ‘acceptance will take place only when it is communicated to him’ -In the case of Holwell Securities v Hughes – the offeror stated that the acceptance had to be by ‘notice in writing’. -Courts held that ‘notice’ meant that acceptance only valid when communicated ▪ Instantaneous method of communication -When acceptance made by instant method of communication such as telephone or telex – postal rule does not apply -Acceptor will know that have not communicated acceptance and will need to try again - Entores v Miles Far East Corporation (1955) – acceptance did not take effect until reached C - Brinkinbon v Stahag Stahl (1983) – if acceptance sent during working hours, then it would be received Lord Wilberforce stated that telex message sent outside working hours would not be instantaneous. But courts will consider when did the contract take place by considering - Intention of parties - standard business practice - in some cases, analyzing where the risk should fairly lie ▪ Misdirected acceptance -If letter of acceptance lost or delayed because offeree wrongly or incompletely addressed, postal rule WILL NOT apply - If it all a badly addressed letter of acceptance takes effect, it should do so at the cost of the party who is responsible for the misdirection. Can THE POSTAL RULE be applied to the withdrawal of an offer be made by post? WHY?  IGNORANCE OF THE OFFER An offer is only effective when it is communicated Cases from other jurisdiction to the offeree. That is how a valid binding agreement is made. Williams v Cawardine (1833) – subjective intention of parties not necessary What if a person accepts an offer when he wasn’t aware of such an offer in the first place? Does his Fitch v Snedaker (1868) – Person who gives acceptance create a valid binding contract? information without knowledge of offer of a reward cannot claim reward Knowledge of the offer is not necessary in reward type cases – however it is necessary in bilateral R v Clarke (1927) – If offeree knew about agreements. offer in the past but then forgot about it, he is still treated as not knowing of the offer The rule adopted in English courts is if a person makes his ‘acceptance’ in ignorance of the offer, he cannot sue the offeror for breach of contract Gibbins v Proctor (1891) AUCTIONS  ▪British Car Auctions v Wright (1972) In an auction sale situation – the parties involved are -Any bids amount to offers thus enabling the auctioneer to either accept or reject them - the ‘bidder’ ▪ Harris vs. Nickerson - the ‘ owner’ of goods ( the auctioneer acts on behalf of him) -where a plaintiff claimed damages for travelling relying on the advertisement , due to the cancellation of the auction, he was failed to recover as it was an GR : Auctions inviting bids and ‘ITT’ advertisements for it are ITT Auctioneer inviting bids – ITT Bidder placing bids – Offer Auctioneer striking the hammer – Acceptance EXCEPTIONS : Auctions Without reserve EXCEPTIONS : Auctions With reserve ▪ Warlow v Harrison (1859) ▪ If there is a reserve price and there is no sale of that good – no contract formed if bidding failed Auctioneer – making the offer to reach reserve price Bidder – accepting the offer ▪ Academics argue that – if bidding price reached - The auctioneer regardless how low the bid is will sell to and later auctioneer withdraw – follow Barry – it whoever makes the bidding will be a B.O.C - If auctioneer refuses to sell after acceptance – then it is B.O.C ▪ Barry v Davies ( 2000) -A were instructed to sell two machines – mentioned it was ‘without reserve’ - New machine would cost 14k p -C only bid 200 p each - A refused to accept and withdrew - C sued for damages – court duly awarded TENDERS ▪ GR : Request for tenders are actually ITT - Spencer v Harding (1870) - It is a form of bidding process - Gov bodies, large organisations and companies use tender process to find contractors for projects or procurements - Tenders are evaluated on the basis of certain predetermined criteria : price, quality and value for money - Firms which offer highest quality product or service at lower price would win the contract ▪ EXCEPTIONS : Some invitation to tenders can amount to an offer – submission for tender then becomes acceptance. - Harvela Investments Ltd. v Royal Trust Co. of Canada – court ruled this is a unilateral offer. It contained conclusive criteria for selection.