Week 2 Offer and Acceptance PDF

OFFER AND ACCEPTANCE Week 2 Lectures 3 – 4 LAW1023 – Law of Contract  1. OFFER Definition: ‘An offer is an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it...

OFFER AND ACCEPTANCE Week 2 Lectures 3 – 4 LAW1023 – Law of Contract  1. OFFER Definition: ‘An offer is an expression of willingness to contract on specified 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.’ - G Treitel, The Law of Contract 11th edn (Sweet & Maxwell, London, 2003), 8. Offers are interpreted objectively; that is, they are interpreted from the perspective of the reasonable promisee and do not depend on purported subjective states of mind The courts have developed certain ‘presumptions’ for typical contracting situations as to whether words or conduct amount to an offer to constitute merely an invitation to making an offer (invitation to treat/invitation to negotiate)  C ASE IN FOCUS: THE REASONABLE PROMISEE Carlill v Carbolic Smoke Ball 1 QB 256  Displays of Advertisements goods ‘PRESUMPTIONS’: TYPIC AL CONTRACTING SITUATIONS Quotations Auctions In all these situations, there is a presumption that they do not amount to offers But like all presumptions they are capable of being rebutted if, when viewed objectively, it appears that an offer has been made Tenders  C ASE IN FOCUS Pharmaceutical Society of Great Britain v Boots Cash Chemists 1 QB 401  WHAT MIGHT LEAD TO REBUTTING THE PRESUMPTION? The courts will look closely at party intention => their words, whether oral or in writing, may very well indicate that although normally advertisements, displays of goods, quotations, etc, are an invitation to treat, the person intended to make an offer  C ASE IN FOCUS Lefkowitz v Great Minneapolis Surplus Store (1957) 86 NW 2d 689 TERMINATION OF AN OFFER PRIOR TO ITS ACCEPTANCE (i) Rejection (ii) Revocation (iii) Lapse of time (iv) Death  (I) REJECTION If the party to whom an offer is made rejects the offer, it is treated as terminated That party (the offeree) who has rejected the offer cannot then decide to accept it Classic case: Hyde v Wrench (1840) 3 Bean 334: where the party attempts to vary the terms of an offer, this is treated as a counter-offer Courts distinguish ‘counter-offers’ from requests for information, Stevenson v McClean (1880) 5 QB 346  (II) REVOCATION The offeror can simply withdraw the offer prior to its acceptance Classic case: Dickinson v Dodds (1876) 2 Ch.D 463 Communication of revocation does not have to be direct so long as offeree learns of revocation However, if an offer is bargained for (consideration requirement), then it cannot be revoked, e.g. if I pay you to keep an offer open for a certain period, then I cannot revoke that offer within the terms of this ‘firm offer’ (Mountfort v Scott 1 WLR 114)  (III) LAPSE OF TIME This is where no time limit has been placed on the offer; however, the courts will look at the surrounding circumstances to determine the reasonable duration of the offer For example, if the subject matter of the transaction is land, the time period of the offer will be longer than if it relates to company shares Ramsgate Victoria Hotel Co v Montefiore (1860) LR 1 Exch 109 See, Commane v Walsh (unrep. High Court, May 3, 1983) (O’Hanlon J.) Where the parties have a pre-existing relationship, it may be longer too Lynch v Gov. Of St.Vincent’s Hospital (unrep. HC, 31 July 1987). These are all ceteris paribus statements; party intention is the ultimate guide, e.g. if the contract says time is of the essence, then this will influence a court even in the absence of a specified period  (IV) DEATH If the offeror dies, traditionally he (his estate) remains bound to the offer so long as the offeree does not know of his death Recent case in point: Smith v Woods VSC 646. If the offeree dies before acceptance is communicated he is not bound in any circumstances per Re Irvine 3 DLR 268  C ASE IN FOCUS Smith v Woods VSC 646. This Photo by Unknown Author is licensed under CC BY-NC-ND  2. ACCEPTANCE Definition: ‘An acceptance is an unqualified expression of assent to the terms proposed by the offeror’. (McKendrick, 2017) Without an acceptance on terms, there is no valid contract (agreement) In most cases, acceptance of all terms must be explicitly communicated. The main exception is where the offer is in the form of a unilateral offer; no communication of acceptance is required; instead performance of some task constitutes acceptance  EXCEPTION: UNILATERAL V BILATERAL OFFERS A bilateral offer = a promise in exchange for a promise e.g. Michael promises to give €4,500 for Karen’s car, in return Karen accepts €4,500 in return for promising her car ie A (offers) promises to pay €4,500 in exchange for B’s car. B accepts the offer including a promise to furnish the car. A unilateral offer = a promise in exchange for the performance of some act eg If you find my trusty dog, Rex, I will give you a reward of €300 ie there is no return promise required; instead you must undertake an act for acceptance to occur When in doubt, courts characterise offers as bilateral  1. UNILATERAL OFFERS Carlill v Carbolic Smoke Ball 1 QB 256 – by conduct (unilateral contract). It must be clear that the performance of the act was done with the intention of accepting the offer, R v Clarke (1927), 40 CLR 227. Full performance of act required, so technically until full performance occurs, the offer may be revoked Errington v Errington 1 KB 290, but courts may imply into the offer, objectively assessed, that acceptance occurs once performance begins  C ASE IN FOCUS Errington v Errington 1 KB 290  2. BILATERAL OFFERS The normal rule is that communication of acceptance is required; in other words, silence in the face of an offer directed to you does not amount to acceptance (Felthouse v Bindley (1862) 11 CB (NS) 869) E.g. If I don’t hear back from you by 6pm, I will take it that you have accepted my offer ≠ acceptance Exceptions? A prior course of dealing (Brogden v Metropolitan Railway Co (1877) 2 AC 666) Where both parties have agreed that silence is acceptable (Re Selectmove Ltd 2 All ER 531) Where a service is rendered that cannot be returned  C ASE IN FOCUS Brogden v Metropolitan Railway Co (1877) 2 AC 666  THE BATTLE OF THE FORMS The law presents offer and acceptance in terms of an orderly series of statements, ie ‘A: I will sell you this hat for €10. B. I am happy to buy at that price’. This is a very simple scenario. But commercial parties are often negotiating over not just price, but a whole series of terms Sometimes, they agree in principle, but do not clearly reach agreement on other terms, but nonetheless commence performance Q: should courts fully insist on agreement on all terms in these scenarios, or should they require only agreement on key terms, or should where it is clear that there is substantial disagreement just write some reasonable terms for them?  C ASE IN FOCUS Butler Machine Tool Co v Ex-Cell-O Corp 1 WLR 401  THE POSTAL RULE An acceptance sent by post is valid/binding from the moment it is posted (Adams v Lindsell (1818) 1 B&Ald. 681). A revocation of an offer by post must, however, be received (Byrne v Van Tienhoven (1880) 5 C.P.D. 344) There are two other exceptions to the postal rule (i) Where receipt prescribed or where necessary implication that receipt required: Holwell v Hughes 1 WLR 155 (ii) Manifest inconvenience or absurdity, eg sent during a postal strike, but does not include merely ‘lost in the post’ , per Russell LJ in Holwell v Hughes Consider: An offer made by post on Monday, acceptance sent on Tuesday morning, telephone to the effect that I withdraw the offer on Tuesday afternoon. See, also, PTE Ltd v EQ Insurance Co Ltd SGHC 242 [‘rule’ is a presumption only]  DOES THE POSTAL RULE APPLY TO INSTANTANEOUS COMMUNICATION? Traditionally, oral contracts and contracts via telephone the ‘receipt rule’ applies What about modern forms of non-instantaneous communication? Key case: Entores v Miles Far East 2 QB 327 See also Brinkibon Ltd v Stahag Stahl 2 AC 34.  C ASE IN FOCUS Entores v Miles Far East 2 QB 327  ABILITY TO ACCESS THEM The Brimnes 1 W.L.R. 386 (office hours & receipt) (communication of acceptance is valid from the point at which it could be read, rather than when it was actually read) => if communication received during ordinary business hours, then deemed ‘accepted’, if nothing to indicate not received (Entores) There is no case in point in respect of internet contracts; it is up for grabs. See McDermott, ch 6 for further detail. So far, though, it does not seem to be a lex specialis.