Contract Law: Offer and Acceptance (PDF)

Chapter 3 Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. Offer and acceptance We noted in Chapter 2 that the courts adopt the ‘mirror image’ rule of contractual formation; that is to say they must find a clear and unequivocal offer which is matched by an equally clear and unequi...

Chapter 3 Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. Offer and acceptance We noted in Chapter 2 that the courts adopt the ‘mirror image’ rule of contractual formation; that is to say they must find a clear and unequivocal offer which is matched by an equally clear and unequivocal acceptance. In this chapter we shall give more detailed consideration to the constituent elements of an offer and an acceptance. However, three points should be noted at the outset of our discussion. The first point is that most of the cases which we shall discuss in this chapter are cases which came to court because one party was alleging that the other had broken the contract between them. This can be seen in Butler v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 (see Section 2.4), where the discussion of the rules of offer and acceptance was crucial because the court had to find the existence of a contract and ascertain its terms before it could decide whether the buyers were in breach of contract or not. Thus, the context of most of these cases is an allegation of breach of contract. The second point which should be borne in mind relates to the way in which the courts use the requirements of offer and acceptance in deciding cases. Professor Atiyah has argued (2006, 41) that the courts could either ‘reason forwards’ or they could ‘reason backwards’. By ‘reasoning forwards’, Professor Atiyah means that the courts reason from the legal concepts of offer and acceptance towards the solution to the dispute. This is the traditional approach which has been adopted by the courts; they ‘find’ the existence of an offer and an acceptance, and only then do they reason towards their conclusion. On the other hand, the courts could ‘reason backwards’; that is to say they could reason from the appropriate solution back to the legal concepts of offer and acceptance. On such a model, the court can decide which solution it wishes to adopt and then fit the negotiations within the offer and acceptance framework in order to justify the decision which they have already reached. The distinction which Professor Atiyah is seeking to draw is a difficult one to grasp in the abstract but it is one to which we shall return when discussing some of the cases. The third point is that, on a number of occasions, we shall note that great difficulty is experienced in accommodating many everyday transactions within the offer and acceptance framework. This point will lead us to conclude by discussing the utility of the offer and acceptance model. With these preliminary points in mind, let us examine the detailed rules of law relating to offer and acceptance. 3.1 Offer and invitation to treat An offer is a statement by one party of a willingness to enter into a contract on stated terms, provided that these terms are, in turn, accepted by the party or parties to whom the offer is addressed. There is generally no requirement that the offer be made in any particular form; it may be made orally, in writing or by conduct. Care must be taken, however, in distinguishing between an offer and an invitation to treat. An invitation to treat is simply an expression of willingness to enter 29 McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 30 Contract Law into negotiations which, it is hoped, will lead to the conclusion of a contract at a later date. The distinction between the two is said to be primarily one of intention; that is, did the maker of the statement intend to be bound by an acceptance of his terms without further negotiation, or did he only intend his statement to be part of the continuing negotiation process? Although the dichotomy is easy to state at the level of theory, it is not so easy to apply in practice, as can be seen from the case of Gibson v Manchester City Council [1978] 1 WLR 520 (CA); [1979] 1 WLR 294 (HL). In 1970 the defendant council prepared a brochure explaining how a council tenant could purchase his council house, and sent a copy to those tenants who had previously expressed an interest in purchasing their council house. Mr Gibson completed the form contained in the brochure and sent it to the council, together with a request that he be told the purchase price of the house. The treasurer of the council wrote to inform him that the ‘council may be prepared to sell the house’ to him at a stated price and that if he wished to make a ‘formal application’ to purchase the house he should complete a further form. Mr Gibson completed the form, but he left the purchase price blank because he wished to know whether the council would repair the path to his house or whether he could deduct the cost from the purchase price. The council replied that the price had been fixed according to the condition of the property, and so allowance had been made in the price for the condition of the path. Mr Gibson accepted this and asked the council to continue with his application. The council took the house off the list of houses for which they were responsible for maintenance, and Mr Gibson carried out maintenance to the house. At this point, the Labour Party gained control of the council after the local elections and promptly discontinued the policy of selling off council houses, unless a legally binding contract had already been concluded. The council refused to sell the house to Mr Gibson because they claimed that no contract had been concluded for the sale of the house. The trial judge and the Court of Appeal held that a contract had been concluded between the parties. Lord Denning, in a broad and sweeping judgment, held that a contract had been concluded because there was agreement between the parties on all material points, even though the precise formalities had not been gone through. The House of Lords took a different view and held that no contract had been concluded. It was held that the letter written by the treasurer, which stated that the council may be prepared to sell, was not an offer as it did not finally commit the council to selling the house. It was simply an expression of their willingness to enter into negotiations for the sale of the house and was not an offer which was capable of being accepted. This was further evidenced by the fact that Mr Gibson was invited to make a ‘formal application’ to purchase the house and not to signify his agreement to the stated terms. The difficulty in a case such as Gibson arises from the fact that it is not easy to ascertain when the preliminary negotiations end and a definite offer is made. The court must examine carefully the correspondence which has passed between the parties and seek to identify from the language used and from the actions of the parties whether, in its opinion, either party objectively intended to make an offer which was capable of acceptance. Gibson shows that judges can and do differ in the results which they reach in this interpretative exercise and that each decision must McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Offer and acceptance 31 ultimately rest on its own facts (contrast the decision of the Court of Appeal in Storer v Manchester City Council [1974] 1 WLR 1403, where the court held that a contract had been concluded where the negotiations had advanced beyond the stage reached in Gibson but had not resulted in an exchange of contracts). In a case such as Gibson the court is clearly engaged in trying to ascertain the intention of the parties from the documents which have passed between them (although it should be noted that, even in Gibson, the case was seen as a test case for 350 other similarly placed prospective purchasers, and these purchasers would be presumed to have the same intention as Mr Gibson). There is, however, another group of cases, which concern certain standard transactions, such as advertisements and shop-window displays, where the courts are less concerned with the intention of the parties and are more concerned to establish clear rules of law to govern the particular transaction. Treitel has stated (2020, para 2-007) that: it may be possible to displace these rules by evidence of contrary intention, but in the absence of such evidence [these rules of law] will determine the distinction between offer and invitation to treat, and they will do so without reference to the intention (actual or even objectively ascertained) of the maker of the statement. These situations are discussed in Sections 3.2 to 3.6. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.2 Display of goods for sale As a matter of principle, there are at least three different approaches which could be adopted to the display of goods for sale in a shop or supermarket. The first is to hold that the display of goods is an offer which is accepted when the goods are picked up by the prospective purchaser and put into his shopping basket. However, such a conclusion would have the undesirable consequence that a purchaser would be bound as soon as he picked up the goods and he could not change his mind and return them to the shelves without being in breach of contract. The second approach is to hold that the display of goods is an offer which is accepted when the purchaser takes the goods to the cash desk. This solution avoids the weakness of the first approach, but it has been argued that it too is undesirable. Three criticisms have been levelled against this solution. The first is that it has been argued that a shop is a place for bargaining and not for compulsory sales, and that to hold that the display of goods is an offer will take away the shopkeeper’s freedom to bargain (Winfield, 1939). This argument can be countered by pointing out that, apart from second-hand shops, bargaining is not a reality in the shops of today. Goods are displayed on a ‘take it or leave it’ basis. If the customer is not prepared to comply with the stated terms, he can go elsewhere. Secondly, it has been argued that this conclusion is undesirable because it takes away the freedom of the shopkeeper to decide whether or not to deal with a particular customer. It would compel the shopkeeper to trade with his worst enemy. However, it is submitted that, in an era when shopping in vast superstores has become commonplace, such an argument can no longer be regarded as conclusive. Thirdly, it has been argued that to treat a display of goods as an offer might result in the vendor being bound to a series of contracts which he would be unable to fulfil (see Partridge v Crittenden [1968] 1 WLR 1204, discussed in Section 3.3). This objection can be countered by holding that the McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 32 Contract Law shopkeeper’s offer is subject to the limitation that it is only capable of acceptance ‘while stocks last’. The third possible conclusion is that the display of goods constitutes an invitation to treat and that the offer is made by the customer when he presents the goods at the cash desk, where the offer may be accepted by the shopkeeper. This conclusion preserves the freedom of the shopkeeper to decide whether or not to deal with a particular customer, but it can fail adequately to protect the interests of the customer. For example, a customer who takes the goods to the cash desk may be told that the goods are in fact on sale at a higher price than the display price. In such a case the shopkeeper may be subject to criminal sanctions under the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) if it has provided the consumer with misleading information as to the price or the manner in which the price is calculated. The consumer may also have a right of redress under Part 4A of the 2008 Regulations (in the form of an action for damages) but he or she is not given the right to insist that the shopkeeper sell the goods at the advertised price. In this simple everyday situation, the rules of offer and acceptance simply do not demand that a particular conclusion be reached. Nor can the intention of the parties provide a useful guideline because, in truth, the parties often have no discernible intention one way or the other. The general rule which the courts have, in fact, adopted is that the display of goods in a shop window is an invitation to treat rather than an offer (Fisher v Bell [1961] 1 QB 394). The application of this rule can be seen in the case of Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 QB 401 (see Montrose, 1954). The defendants organised their shop on a self-service basis. They were charged with a breach of section 18(1) of the Pharmacy and Poisons Act 1933, which required that a sale of drugs take place under the supervision of a registered pharmacist. There was no pharmacist present close to the shelves, but a pharmacist supervised the transaction at the cash desk and was authorised to prevent a customer from purchasing any drug if he thought fit to do so. It was held that the sale took place at the cash desk and not when the goods were taken from the shelves; the display of the goods was simply an invitation to treat and therefore there had been no breach of the Act. However, a rigid application of the rule established in Boots could lead to injustice in certain cases. An instructive example of a factual situation in which the application of the Boots rule may lead to injustice is provided by the American case of Lefkowitz v Great Minneapolis Surplus Stores 86 NW 2d 689 (1957). On two occasions the defendants placed an advertisement in a newspaper. The first advertisement stated ‘Saturday 9 am sharp; 3 Brand new fur coats, worth $100; First come first served, $1 each’, and the second stated ‘Saturday 9 am … 1 Black Lapin Stole … worth $139.50 … $1.00; First Come, First Served’. On each of the Saturdays following publication of the advertisement the claimant was the first person in the store at 9 am, but on both occasions the defendants refused to sell the goods to him. On the first occasion the reason given was a ‘house rule’ that the offer was intended for women only, and on the second occasion he was informed that he knew the ‘house rules’. The claimant brought a claim for damages for breach of contract. His claim in relation to the first advertisement was dismissed on the ground that the value of the fur coats was too speculative and uncertain to found a claim. But his claim for McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Offer and acceptance 33 damages succeeded in relation to the second advertisement, and he was awarded damages of $138.50. The Supreme Court of Minnesota held that the advertisement was an offer and not an invitation to treat and that the defendants were not entitled to confine their offer to women only because no such restriction was explicit in the offer itself. But would an English court conclude that these advertisements constituted an offer? Some authority can be adduced for treating a display of goods as an offer; in Chapleton v Barry UDC [1940] 1 KB 532, it was held that the display of deck chairs for hire on a beach was an offer which was accepted by a customer taking a chair from the stack (see too Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, discussed in Section 3.3). But if a court were to rely on the authority of Chapleton would it not be because the court thought that it was unfair to leave the claimant without a remedy? Would this not be an example of what Professor Atiyah calls ‘reasoning backwards’; that the court feels that the claimant ought to have a remedy and it justifies that conclusion by treating the advertisement as an offer rather than an invitation to treat? Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.3 Advertisements The general rule is that a newspaper advertisement is an invitation to treat rather than an offer. In Partridge v Crittenden [1968] 1 WLR 1204, the appellant advertised Bramblefinch cocks and hens for sale at a stated price. He was charged with the offence of ‘offering for sale’ wild live birds contrary to the Protection of Birds Act 1954. It was held that the advertisement was an invitation to treat and not an offer, and so the appellant was acquitted. Lord Parker CJ stated that there was ‘business sense’ in treating such advertisements as invitations to treat because if they were treated as offers the advertiser might find himself contractually obliged to sell more goods than he in fact owned. However, as we have seen, this argument is not conclusive because it could be implied that the offer is only capable of acceptance ‘while stocks last’. Nevertheless, there are certain cases where an advertisement may be interpreted as an offer rather than an invitation to treat. The classic example is the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The defendants, who were the manufacturers of the carbolic smoke ball, issued an advertisement in which they offered to pay £100 to any person who caught influenza after having used one of their smoke balls in the specified manner, and they deposited £1,000 in the bank to show their good faith. The claimant caught influenza after using the smoke ball in the specified manner. She sued for the £100. It was held that the advertisement was not an invitation to treat but was an offer to the whole world and that a contract was made with those persons who performed the condition ‘on the faith of the advertisement’. The claimant was therefore entitled to recover £100 (for a more modern application of the rule see Bowerman v Association of British Travel Agents Ltd [1996] CLC 451). 3.4 Auction sales The general rule is that an auctioneer, by inviting bids to be made, makes an invitation to treat. The offer is made by the bidder which, in turn, is accepted when the McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 34 Contract Law auctioneer strikes the table with his hammer (British Car Auctions Ltd v Wright [1972] 1 WLR 1519). The advertisement of an auction sale is generally only an invitation to treat (Harris v Nickerson (1873) LR 8 QB 286). For many years, there was some uncertainty as to the effect of the addition of the words ‘without reserve’, that is that the auction is to take place without a reserve price. In Warlow v Harrison (1859) 1 E & E 309, Martin B stated obiter that in such a case the auctioneer makes an offer that the sale will be without reserve and that that offer is accepted by the highest bidder at the auction. It should be noted that the offer is made by the auctioneer and not the owner of the goods, so that there is no concluded contract of sale with the owner of the goods (unless, perhaps, the auctioneer is the agent of the vendor). This analysis was affirmed by the Court of Appeal in Barry v Davies (Trading as Heathcote Ball & Co) [2000] 1 WLR 1962. The contract that comes into existence between the auctioneer and the highest bidder is a collateral contract; that is to say, it is collateral to, or separate from, the contract for the sale of the auctioned goods. The judge at first instance in Barry, whose decision was upheld by the Court of Appeal, analysed the nature of the relationship between the parties as follows: ‘there was a collateral contract between the auctioneer and the highest bidder constituted by an offer by the auctioneer to sell to the highest bidder which was accepted when the bid was made’. While the essential nature of the contractual relationship between the auctioneer and the highest bidder has been established, a number of issues of detail remain to be resolved. First, at what point in time is the offer made by the auctioneer? Is it when the advertisement of the auction without a reserve price is issued, or is it when the goods are actually put up for sale? This point has not been resolved by authority, and academic opinion is divided (see Gower, 1952; Slade, 1952, 1953; Scott, 2001), albeit that the balance of opinion appears to support the proposition that the offer is made when the advertisement is issued. Second, on what basis is the highest bidder to be identified if the auctioneer never brings down his hammer? The courts are likely to take a pragmatic approach to this issue and conclude that the highest bidder is the person who made the last bid before the lot was withdrawn from the sale. Third, it has been argued (Scott, 2001) that a similar analysis to that adopted in Barry should be employed in the case where an auction is held with a reserve price and that price is exceeded during the bidding process. In other words, once the reserve price has been reached, the auctioneer cannot withdraw the lot from the sale without incurring a liability for breach of a collateral contract to the highest bidder at the point in time at which the lot was withdrawn. This point remains to be resolved, but there is much to be said for this view. Barry and Warlow may be examples of the courts reasoning backwards in that they decide that in such a case the bidder ought to have a remedy, and they then accommodate that conclusion within the offer and acceptance framework, even though the fit is somewhat uneasy. 3.5 Tenders Where a person invites tenders for a particular project, the general rule is that the invitation to tender is simply an invitation to treat. The offer is made by the person McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. Offer and acceptance 35 who submits the tender, and the acceptance is made when the person inviting the tenders accepts one of them. However, in an appropriate case a court may hold that the invitation to tender was, in fact, an offer. Two cases are relevant here. The first is Harvela Investments Ltd v Royal Trust Co of Canada [1986] AC 207. The first defendants decided to sell their shares by sealed competitive tender. They invited the two parties most likely to be interested in the shares each to submit a single sealed offer for their shares and stated that they would accept the highest ‘offer’ received by them which complied with the terms of their invitation. The claimants tendered a fixed bid of $2,175,000. The second defendant tendered a ‘referential’ bid of ‘$2,100,000 or … $101,000 in excess of any other offer … whichever is the higher’. The first defendants accepted the second defendant’s bid, treating it as a bid of $2,276,000. But the House of Lords held that the first defendants were bound to accept the claimants’ bid. It was held that the invitation to tender was an offer of a unilateral contract to sell the shares to the highest bidder, despite the fact that the invitation asked the claimants and the second defendant to submit an ‘offer’. The bid submitted by the second defendant was held to be invalid because the object of the vendors’ invitation was to ascertain the highest amount which each party was prepared to pay, and this purpose would be frustrated by a referential bid. The second case is Blackpool and Fylde Aero Club Ltd v Blackpool BC [1990] 1 WLR 1195 and it provides us with a very good example of the flexibility which the courts have in applying the rules relating to offer and acceptance. In 1983 the defendant local authority invited tenders for a concession to operate pleasure flights from Blackpool airport. The form of tender stated that: ‘the council do not bind themselves to accept all or any part of the tender. No tender which is received after the last date and time specified shall be admitted for consideration’. Tenders had to be received by the Town Clerk ‘not later than 12 o’clock noon on Thursday 17 March 1983’. The claimants posted their bid in the Town Hall letter box at about 11 am on 17 March. A notice on the letter box stated that it was emptied each day at 12 o’clock noon. Unfortunately, on this particular day, the letter box was not emptied at 12 o’clock and so the claimants’ bid remained in the letter box until the morning of 18 March. The claimants’ bid was not considered by the council because they considered it to be a late submission, and the concession was awarded to another party. The claimants brought an action for damages for, inter alia, breach of contract. The obvious difficulty which they faced was that they did not appear to be in a contractual relationship with the defendants because an invitation to tender is only an invitation to treat. The claimants had therefore simply submitted an offer which the defendants had not accepted. But the Court of Appeal took a different approach. They held that the defendants were contractually obliged to consider the claimants’ tender and, for breach of that obligation, they were liable in damages. The court appeared to adopt a two-contract analysis. A contract was concluded with the party whose tender was accepted, but the invitation to tender also constituted a unilateral offer to ‘consider’ any conforming tender which was submitted, and that offer was accepted by any party who submitted such a tender. It is suggested that there are two problems with this approach. The first lies in ascertaining the circumstances in which a court will see fit to imply an offer to consider all tenders submitted. The council did not expressly McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 36 Contract Law accept an obligation to consider conforming tenders, yet the court saw fit to imply such a duty. Indeed, the court had to imply both a contract and its terms because the parties were not otherwise in a contractual relationship. The Court of Appeal relied upon a number of factors, none of which appear to be conclusive. The first was that the invitation to tender was directed to a small number of interested parties; the second was that the duty to consider was alleged to be consistent with the intention of the parties; finally, the court stated that the tender procedure was ‘clear, orderly and familiar’ and, the greater the precision, the easier it is for a court to spell out an offer which is capable of acceptance. But were there other factors of importance? Was there any significance in the fact that the defendants were a local authority (and so owed a fiduciary duty to ratepayers to act with reasonable prudence in their financial affairs) or in the fact that the claimants were the existing holders of the concession and so may be said to have had a legitimate expectation of being considered? The answer to these questions remains unclear. In each case, the court must decide whether the parties intended to initiate contractual relations by the submission of a bid in response to the invitation to tender. There is no automatic rule that an invitation to tender triggers a contractual obligation to consider bids submitted, although the courts may be relatively willing to imply such an obligation where there is a formal tendering process involving complex documentation and terms which must be complied with by the tenderers (see MJB Enterprises Ltd v Defence Construction (1951) Ltd (1999) 170 DLR (4th) 577). In Pratt Contractors Ltd v Transit NZ [2003] UKPC 33 the preliminary contract imposed on the party inviting the tenders an implied duty to act fairly and in good faith. The latter duty required the party inviting the tenders to express views honestly and to treat all parties who submit a tender equally, but it did not require that party to act judicially by, for example, giving a hearing to parties who submitted a tender. A party issuing an invitation to tender who does not want to be subject to an obligation to consider bids made or to act fairly and in good faith would be well advised to say so expressly in the invitation to tender. The second difficulty lies in determining the scope of this ‘duty to consider’. Bingham LJ stated that the duty would have been breached had the defendants ‘opened and thereupon accepted the first tender received, even though the deadline had not expired and other invitees had not yet responded’ or if they ‘had considered and accepted a tender admittedly received well after the deadline’. Could the defendants have rejected all the tenders? It would appear so. Stocker LJ stated that the obligation to consider ‘would not preclude or inhibit the council from deciding not to accept any tender or to award the concession, provided the decision was bona fide and honest, to any tenderer’. So the obligation to consider tenders submitted does not preclude a local authority from removing a contractor from the tendering process when it discovers that there is a conflict of interest between a senior council employee and one of the tenderers (see Fairclough Building Ltd v Port Talbot BC (1993) 62 Build LR 82). Finally, this two-contract analysis may have implications for those who submit tenders, as can be seen from the Canadian case of R in Right of Ontario v Ron Engineering & Construction Eastern Ltd (1981) 119 DLR (3d) 267. The defendants invited tenders on the basis that tenders had to be accompanied by a deposit which was to be forfeited if the tender was withdrawn or if the tenderer otherwise refused to McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Offer and acceptance 37 proceed. The claimants discovered, shortly after the tenders were opened, that they had made a mistake in the submission of their tender and they refused to proceed with the execution of the contract documents. They sued to recover their deposit of $150,000. It was held that they were not entitled to recover because the invitation to tender followed by the submission of a tender created a contract, the terms of which were that the claimants were not entitled to recover their deposit if they refused to proceed with the contract. There is, as yet, no English case on this point, but it is suggested that, in the light of the Blackpool case, an English court might reach the same conclusion. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.6 Time-tables and vending machines It is remarkable how difficult it is to distinguish between an offer and an invitation to treat in many everyday transactions. One simple example is boarding a bus. One could say that the bus time-table and the running of the bus are an offer by the bus company which is accepted by boarding the bus (although it should be noted that most time-tables contain express disclaimers of any obligation to provide the services contained in the time-table). Such was the view of Lord Greene in Wilkie v London Transport Board [1947] 1 All ER 258, when he stated that the offer was made by the bus company and that it was accepted when a passenger ‘puts himself either on the platform or inside the bus’. Alternatively, it could be said that the acceptance takes place when the passenger asks for a ticket and pays the fare. A further possibility is to say that the bus time-table is an invitation to treat, the offer is made by the passenger in boarding the bus, and the acceptance takes place when the bus driver accepts the money and issues a ticket. Finally, it could be said that the bus driver makes the offer when he issues the ticket, and this offer is accepted by paying the fare and retaining the ticket. In many ways the issue may seem to be an academic one, devoid of any practical consequence. But this is not the case. It has serious consequences if, for example, there is an exclusion clause contained on the back of the ticket (see further Chapter 11). If the first analysis is adopted, then the exclusion clause is not part of the contract because the contract is concluded before the ticket is handed over. On the other hand, if the final alternative is adopted, then the exclusion clause is part of the contract because it is contained in the offer made by the driver. A court might adopt the first of these alternatives in our exclusion clause example in order to protect the passenger, but would it also apply where the same passenger boards the bus by mistake and wishes to get off the bus before it moves from the stop without paying for his fare? As Treitel has stated (2020, para 2-012), the cases ‘yield no single rule’ and all that can be said is that ‘the exact time of contracting depends in each case on the wording of the relevant document and on the circumstances in which it was issued’. Other everyday examples could be provided which defy simple classification. What is the status of a menu outside a restaurant? What about a vending machine selling tea and coffee? The former is probably an invitation to treat but, in Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, Lord Denning stated that an automatic machine which issued tickets outside a car park made a standing offer which was accepted by a motorist driving so far into the car park that the machine issued him with a ticket. McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. 38 Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.7 Contract Law Acceptance An acceptance is an unqualified expression of assent to the terms proposed by the offeror. There is no rule that acceptance must be made by words; it can be made by conduct, as was the case in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (see Section 3.3). While it is clear that conduct can, in an appropriate case, amount to acceptance, it may be difficult to pinpoint the precise point in time at which the conduct is sufficient to evidence the existence of a contract. This difficulty tends not to arise where the contract is formed by an exchange of promises (in which case the point of entry into the contract can usually be identified with some precision). But, in the case where acceptance is said to take the form of conduct, some steps may be said to be preparatory to the conclusion of the contract rather than evidence of its existence. In all cases the courts must examine the evidence with care to determine whether the conduct relied upon does amount to an acceptance such as to create a contract between the parties (Reveille Independent LLC v Anotech International (UK) Ltd [2016] EWCA Civ 443; 116 Con LR 79, [46]). Conduct will only amount to an acceptance if it is clear that the offeree did the act in question with the intention, objectively assessed, of accepting the offer (Day Morris Associates v Voyce [2003] EWCA Civ 189; [2003] All ER (D) 368 (Feb)). The word ‘clear’ is important in this context given that conduct must be ‘unequivocal’ if it is to amount to an acceptance (Aroca Seiquer & Asociados v Adams [2018] EWCA Civ 1589; [2018] PNLR 32, [33]). What the courts are looking for is ‘final and unqualified’ assent to the terms of the offer. This is most straightforwardly evidenced by use of the word ‘accept’ or ‘acceptance’. However, there is no formal need for the use of such words provided that the court can discern from the evidence a final and unqualified expression of assent to the terms of the offer. Nor does the law require that expression of assent to refer to each and every term of the offer. Once the court is satisfied on the evidence that there has been acceptance by conduct that acceptance will extend to all of the terms of the offer (Arcadis Consulting (UK) Ltd v AMEC (BCS) Ltd [2018] EWCA Civ 2222; [2019] BLR 27, [91]–[93]). This being the case, a party who does not wish to accept a particular term of the offer should say so in express terms because otherwise there is a risk that the court will infer that it has accepted all of the terms of the offer. A purported acceptance which does not accept all the terms and conditions proposed by the offeror but which in fact introduces new terms is not an acceptance but a counter-offer, which is then treated as a new offer which is capable of acceptance or rejection. The effect of a counter-offer is to ‘kill off’ the original offer so that it cannot subsequently be accepted by the offeree. This rule can be seen in operation in the case of Hyde v Wrench (1840) 3 Beav 334. The defendant offered to sell some land to the claimant for £1,000 and the claimant replied by offering to purchase the land for £950. The defendant refused to sell for £950. So the claimant then wrote to the defendant agreeing to pay the £1,000 but the defendant still refused to sell. It was held that there was no contract between the parties. The claimant’s offer of £950 was a counter-offer which killed off the defendant’s original offer so as to render it incapable of subsequent acceptance. It is this rule that acceptance must be unqualified which has given rise to difficulties in the battle of the forms cases, such as Butler v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 (see Section 2.4). McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Offer and acceptance 3.8 39 Communication of the acceptance The general rule is that an acceptance must be communicated to the offeror. The acceptance is generally only validly communicated when it is actually brought to the attention of the offeror. The operation of this rule was illustrated by Denning LJ in Entores v Miles Far East Corp [1955] 2 QB 327. He said that if an oral acceptance is drowned out by an overflying aircraft, such that the offeror cannot hear the acceptance, then there is no contract unless the acceptor repeats his acceptance once the aircraft has passed over. Similarly, where two people make a contract by telephone, and the line goes ‘dead’ so that the acceptance is incomplete, then the acceptor must telephone the offeror to make sure that he has heard the acceptance. Where, however, the acceptance is made clearly and audibly, but the offeror does not hear what is said, a contract is nevertheless concluded unless the offeror makes clear to the acceptor that he has not heard what was said. In the case of instantaneous communication, such as telephone and telex, the acceptance takes place at the moment the acceptance is received by the offeror and at the place at which the offeror happens to be (see Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34). The rule, as it applies to instantaneous communications, is easy to state but it can give rise to difficulties in practice when seeking to decide when or where a contract was concluded. As Lord Sumption observed in Brownlie v Four Seasons Holdings Inc [2017] UKSC 80; [2018] 1 WLR 192, [16] ‘serious practical difficulties’ can arise because the ‘analysis of an informal conversation in terms of invitation to treat, offer and acceptance will often be impossible without a recording or a total recall of the sequence of exchanges and the exact words used at each stage, in order to establish points which are unlikely to have been of any importance to either party at the time.’ Notwithstanding such occasional practical difficulties, English law continues to adhere to the rules as set out by Denning LJ in Entores. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.9 Acceptance in ignorance of the offer An offer is effective when it is communicated to the offeree. This requirement generally does not give rise to problems, but difficulty does arise in the following type of case. X offers £100 for the safe return of his missing dog. Y returns the dog but is unaware of X’s offer. Is Y entitled to the money? A good argument can be made out to the effect that Y should be entitled to the money. X has got what he wanted, and there seems no reason in justice why he should not be required to pay what he has publicly promised to pay. At the same time Y has performed a socially useful act in returning the dog, and he should be rewarded for so doing. On the other hand, in the case of a bilateral contract which imposes mutual obligations upon the parties, the effect of such a rule would be to subject the ‘accepting’ party to obligations of which he was unaware. For example, if X offered to sell the dog for £50 to the first person who returned it to him, Y, who returns the dog, unaware of the offer, should not thereby be held to have accepted an offer to purchase the dog for £50. In the light of these considerations it has been argued that the best approach to adopt is to hold that knowledge of the offer is not necessary in the reward type of case but that knowledge should be required in the case of bilateral contracts (Hudson, 1968). McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. 40 Contract Law However, the rule which has been adopted in England is that a person who, in ignorance of the offer, performs the act or acts requested by the offeror is not entitled to sue as on a contract. The case of Gibbons v Proctor (1891) 64 LT 594, which was thought to stand for the contrary proposition, appears on closer examination of the facts to be a case where the person claiming the reward knew of the offer at the time when the information was given to the police (Treitel, 2020, para 2-049). It is here that we see the importance of the schematic approach to agreement. It is not sufficient to show that the parties were, at some moment in time, in agreement. There must be a definite offer which is mirrored by a definite acceptance. For the same reason, cross-offers which are identical do not create a contract unless or until they are accepted (Tinn v Hoffman & Co (1873) 29 LT 271). These cases reinforce the point made in Chapter 2 that contract law adopts an objective rather than a subjective approach to agreement and therefore the fact that the parties are subjectively agreed is not conclusive evidence that the parties have entered into a contract (contrast the view of Spencer discussed at Section 2.2). Once it is shown that the offer has been communicated to the other party, a person who knows of the offer may do the act required for acceptance with some motive other than that of accepting the offer (Williams v Carwardine (1833) 4 B & Ad 621, on which see Mitchell and Phillips, 2002). But the offer must have been present to his mind when he did the act which is said to constitute the acceptance. Thus, in R v Clarke (1927) 40 CLR 227, where the party claiming the reward had forgotten about the offer of a reward at the time he gave the information, it was held that he was not entitled to the reward. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.10 Prescribed method of acceptance Where the offeror prescribes a specific method of acceptance, the general rule is that the offeror is not bound unless the terms of his offer are complied with. However, the offeror who wishes to state that he will be bound only if the offer is accepted in a particular way must use clear words to achieve this purpose. Where the offeror has not used sufficiently clear words, a court will hold the offeror bound by an acceptance which is made in a form which is no less advantageous to him than the form which he prescribed. This can be seen in the case of Manchester Diocesan Council for Education v Commercial and General Investments Ltd [1969] 3 All ER 1593. The claimant decided to sell some property by tender and inserted a clause in the form of tender stating that the person whose bid was accepted would be informed by means of a letter sent to the address given in the tender. The defendant completed the form of tender and sent it to the claimant. The claimant decided to accept the defendant’s tender and sent a letter of acceptance to the defendant’s surveyor but not to the address on the tender. It was held that communication to the address in the tender was not the sole permitted means of communication of acceptance and that therefore a valid contract had been concluded. The defendant was not disadvantaged in any way by notification being given to its surveyor and, in any case, the stipulation had been inserted by the claimant, not the defendant, and so it was open to the claimant to waive strict compliance with the term, provided that the defendant was not adversely affected thereby. McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Offer and acceptance 3.11 41 Acceptance by silence Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. The general rule is that acceptance of an offer will not be implied from mere silence on the part of the offeree and that an offeror cannot impose a contractual obligation upon the offeree by stating that, unless the latter expressly rejects the offer, he will be held to have accepted it. The rationale behind this rule is that it is thought to be unfair to put an offeree to time and expense to avoid the imposition of unwanted contractual arrangements. The principal English authority on this point is Felthouse v Bindley (1862) 11 CB (NS) 869. The claimant and his nephew entered into negotiations for the sale of the nephew’s horse. The claimant stated that if he heard nothing further from his nephew then he considered that the horse was his at a price of £30 15s. The nephew did not respond to this offer but he decided to accept it and told the defendant auctioneer not to sell the horse because it had already been sold. Nevertheless, the auctioneer mistakenly sold the horse, and so the claimant sued the auctioneer in conversion (a tort claim in which it is alleged that the defendant has dealt with goods in a manner inconsistent with the rights of the true owner). The auctioneer argued that the claimant had no title to sue because he was not the owner of the horse as his offer to buy the horse had not been accepted by his nephew. This argument was upheld by the court on the ground that the nephew’s silence did not amount to an acceptance of the offer. The application of the general rule to the facts of Felthouse v Bindley has been the subject of criticism on the ground that the uncle had waived the need for communication of the acceptance, and the nephew had manifested his acceptance by informing the auctioneer that the horse had been sold (see Miller, 1972). But the rule that acceptance of an offer will not be implied from mere silence has not emerged unscathed from a line of cases represented by The Hannah Blumenthal (see Section 2.1), where the House of Lords held that a contract to abandon a reference to arbitration could be concluded by the silence of both parties. As Bingham J noted in Cie Française d’Importation et de Distribution SA v Deutsche Continental Handelsgesellschaft [1985] 2 Lloyd’s Rep 592, 599, this line of authority does: some violence … to familiar rules of contract such as the requirement that acceptance of an offer should be communicated to the offeror unless the requirement of communication is expressly or impliedly waived. But no case actually sought to overrule or to question explicitly the correctness of Felthouse v Bindley, and the reasoning in the arbitration cases was distorted by the fact that neither arbitrators nor courts had, at common law, the power to dismiss an arbitration for want of prosecution and so the courts were asked to employ any common law doctrine which appeared even remotely suitable to enable them to reach a commercially just solution, namely that the agreement to arbitrate had been abandoned. Now that Parliament has intervened in the form of section 41(3) of the Arbitration Act 1996 and given to arbitrators the power to dismiss a claim for want of prosecution, the courts no longer need to engage in such subterfuge, nor to distort the rules relating to offer and acceptance (see The Amazonia [1990] 1 Lloyd’s Rep 236, 243). McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. 42 Contract Law Instead, it is submitted that these arbitration cases remind us that the rule that silence does not amount to an acceptance is not an absolute one: ‘our law does in exceptional cases recognise acceptance of an offer by silence’ (Vitol SA v Norelf Ltd [1996] AC 800, 810, per Lord Steyn citing the case of Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334). For example, a course of dealing between the parties may give rise to the inference that silence amounts to acceptance. It is also unclear whether the general rule will apply where the offeree assumes that his silence has been effective to conclude a contract and then acts in reliance upon that belief. It is suggested that, in such a case, the general rule should give way and a court should hold that a contract has been concluded between the parties (see Miller, 1972, although it is very difficult to reconcile this proposition with Felthouse v Bindley). As we have noted, the purpose behind the general rule is to protect the offeree and therefore it should not apply where its application would cause hardship to the offeree. However, where the offeree only mentally assents to the offer but does not act in reliance upon it, it is suggested that the general rule should apply, because otherwise the offeree would be able to speculate against the offeror, by stating that he had accepted the offer when the contract was a good one for him and by stating that he had not accepted it when the contract turned out to be a bad one. Therefore it is submitted that some positive action is required on the part of the offeree to provide evidence that he has in fact accepted the offer. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.12 Exceptions to the rule requiring communication of acceptance The rule that acceptance must be communicated to the offeror is not absolute. For example, the terms of the offer may demonstrate that the offeror does not insist that the acceptance be communicated to him (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, see Section 3.3). The offeror may be prevented by his conduct from arguing that the acceptance was communicated to him (Entores v Miles Far East Corp [1955] 2 QB 327, see Section 3.8). But the major and most controversial exception relates to acceptances sent through the post. As a matter of theory, any of a number of possible solutions could be used to ascertain when an acceptance sent by post takes effect. It could be when the letter is posted, when it reaches the address of the offeror, when it is read by the offeror or when, in the ordinary course of the post, it would reach the offeror. The general rule which English law has adopted can be traced back to Adams v Lindsell (1818) 1 B & Ald 681, which is now understood to stand for the proposition that acceptance takes place when the letter of acceptance is posted by the offeree. 3.12.1 What are the justifications cited in support of the postal rule? However, the justifications put forward in support of this rule are, to say the least, rather tenuous (see Gardner, 1992). The first justification is that the Post Office is the agent of the offeror, and so receipt of the letter by the agent is equivalent to receipt by the offeror. This justification is open to the criticism that it cannot be said in any meaningful sense that the Post Office is the agent of the offeror because the Post Office McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. Offer and acceptance 43 has no power to contract on behalf of the offeror. The second justification is that the offeror has chosen to start negotiations through the post, and so the risk of delay or loss in the post should be imposed upon him. However, it is not necessarily the case that the offeror must have started the negotiations through the post. It could be the case that the offeree initiated negotiations through the post by asking the offeror for the terms on which he was prepared to do business. Nevertheless, it must be conceded that this justification has some element of validity because, in Henthorn v Fraser [1892] 2 Ch 27, it was held that the postal rule only applies where it is reasonable to use the post. However, it is reasonable to use the post where the parties live at a distance from each other; it is not necessary for the offeror to have commenced the negotiations by post. So it is not entirely true to say that the offeror has accepted the risk of delay in the post. A more promising justification is that the offeree should not be prejudiced once he has dispatched his acceptance and he should be able to rely on the efficacy of his acceptance. This argument is a strong one, but it could be met by providing that, once the acceptance has been posted, the offeror can no longer revoke his offer; it does not demand that the acceptance be treated as taking effect when it is dispatched. In fact, the explanation for the initial adoption of the rule may lie in the public perception of the postal service in the middle of the nineteenth century (Gardner, 1992). The uniform penny post was introduced in 1837. At around the same time postage began to be prepaid rather than paid for on receipt, and the cutting of letter boxes in doors meant that a letter need no longer be handed to the addressee individually. These factors, Gardner argues, meant that the public perception of the time was that a letter, once posted, would reach its destination ‘without further subvention from outside the system’ and that this led to the ‘notional equation of the posting of a letter with its delivery’. In the modern world, this perception seems ridiculous: with the advent of truly instantaneous means of communication, the idea that posting is equivalent to delivery is not credible. This may help explain why it was that the judiciary in the late nineteenth century (in cases such as Byrne v Van Tienhoven (1880) 5 CPD 344, see Section 3.14) began to confine the postal rule within narrow limits. As quicker methods of communication, such as the telephone, were developed, so the equation of posting with delivery began to look increasingly anomalous. Indeed, on this basis it can be said that the postal rule is now ‘something of a museum piece’, continuing to exist in a world which bears no relationship to the world in which the rule was introduced and therefore serving a purpose which is entirely different from the one intended by those who initially adopted and developed the rule. Not only are the justifications for the general rule weak, but the operation of the rule can give rise to manifest injustice. Take the following example. X makes an offer to Y and states that it will be open for acceptance until 5 pm on Friday. Applying the general rule, Y may validly ‘accept’ that offer by posting his acceptance at 4.45 pm on Friday afternoon, even though it will not reach X until Monday or Tuesday of the following week. It is true that X could avoid such hardship by stating in his offer that the acceptance must reach him by 5 pm on Friday (see below) but the fact that the parties can contract out of the general rule is no justification for the general rule itself. McKendrick, Ewan. Contract Law, Bloomsbury Publishing Plc, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/londonww/detail.action?docID=7217736. Created from londonww on 2023-12-07 18:24:46. 44 Contract Law Copyright © 2023. Bloomsbury Publishing Plc. All rights reserved. 3.12.2 Practical difficulties created by the current rule In addition to creating injustice, the general rule gives rise to practical difficulties. Two such difficulties will be dealt with here. The first arises where the letter of acceptance is lost in the post. A logical application of the general rule leads to the result that a contract has been concluded because the acceptance takes effect when it is posted and not when it reaches the offeror. This was held to be the case in England in Household Fire Insurance v Grant (1879) 4 Ex D 217. But in Scotland, this view was rejected by Lord Shand in Mason v Benhar Coal Co (1882) 9 R 883. He stated that, in his opinion, no contract came into existence when the acceptance was posted but never reached the offeror. It is suggested that the latter rule is the preferable one because it is the offeree who has sent the acceptance, and so he is in the best position to know when his acceptance is likely to reach the offeror and to take steps to check that it does so reach the offeror. Nevertheless, English law is presently committed to the view that a contract is concluded on the posting of the letter of acceptance even where it gets lost in the post. However, where the reason for the loss of the letter is that it has been incorrectly addressed by the offeree, acceptance will not take place on posting because, while the offeror may take the risk of delay or loss in the post, he does not take the further risk of carelessness by the offeree (Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB) at [15]). The second practical difficulty arises where the offeree posts his acceptance and then sends a rejection by a quicker method so that the rejection reaches the offeror before the acceptance. Once again, a logical application of the general rule leads to the result that the contract was concluded when the letter of acceptance was posted, and so the subsequent communication is not a revocation of the offer but a breach of contract, which may be accepted or rejected by the offeror. But it can be argued that it would be absurd to hold that a contract has been concluded when both parties have relied on the fact that there was no contract (although in such a case it coul