contract law - agreement: offer, acceptance, termination

define offer

an intimation, by words or conduct, of a willingness to enter into a legally binding contract

which in its terms expressly or impliedly indicates that is it to become binding on the offeror as soon as it has been accepted by an act, forbearance or return promise on the part of the person to whom it is addressed

define invitation to treat

statement or act which welcomes offers but is not intended to be binding

just invites others to make offers or start negotiations

distinguishing between offer and invitation to treat

depends on intention and situation

no fixed legal rule

what do courts look to when it is unclear whether it is an offer or an invitation to treat

context

consequences is treated as a binding offer

case which shows that a statement of fact merely to supply info cannot be treated as an offer and accepted to create a valid contract

harvey v facey

a valid offer must show clear intention to be bound once accepted

issues if adverts were treated as offers

seller would be obliged to sell to every person who accepts regardless of supply

seller would be forced into contract with worst enemy

why are transactions by machine display likely to be an offer

purchased product cannot easily be retrieved from the buyer’s property.

case surrounding whether auctioneer and highest bona fide bidder have a contract in a “without reserve“ auction

warlow v harrison 1859

a bid at an auction is only an offer which can be withdrawn at any time before the hammer falls

at an auction “without reserve“ there may exist a collateral contract if the auctioneer promises to sell to the highest bona fide bidder - consideration is the act of making a genuine bid

which case confirmed warlow v harrison

barry v davies 2000

when is an announcement inviting tenders seen as an offer

when it is accompanied by words indicating that the highest or lowest tender will be accepted

is a tender seen as an offer

not usually - just an attempt to ascertain whether an acceptable offer can be obtained

what happens in a case where there is no offer to contract with the highest or lowest bidder in a tender

if the invitation to tender prescribes a clear, orderly and familiar procedure, it may be an offer to consider all conforming tenders

what is an auction ‘without reserve’

auctioneer indicates to prospective buyers that

• the bid of the highest bona fide bidder will be accepted

• the goods will not be withdrawn for example on the ground that the reserve price has not yet been reached

case for auctions

warlow v harrison

what is a general offer

an offer that is not made to an ascertained person

no contract can arise until it has been accepted by an ascertained person

may be susceptible to acceptance with by one person or multiple

case that shows for general offers, no acceptance of the offer other than performance of the condition needed

carlill v carbolic smoke ball co

does an offer have to be communicated to the offeree

yes - there can be no acceptance in ignorance of an offer

what is a cross-offer

two manifestations of a willingness to make the same bargain

does not constitute a contract unless one is made with reference to the other

why must an offer by rendering services be communicated

although conduct can constitute an offer, where than offer is not communicated to the offeree, there is no opportunity of rejection and no presumption of acceptance.

define the ‘mirror-image’ rule

the intention of the offeree to accept must be expressed without any room for doubt as to the fact of acceptance or as to the coincidence of the terms of the acceptance with those of the offer

acceptance must be absolute and must correspond with the terms of the offer

what is a counter-offer

amounts to rejection of the offer and so operates to terminate

what may not necessarily amount to a counter offer

making express what would otherwise be implied

inquiring whether the offeror will modify his terms does not necessarily amount to a counter offer

define ‘battle of the forms’

occurs when both parties attempt to contract on their own standard terms, leading to uncertainty over whose terms prevail and therefore what the contract actually contains.

what are the two solutions to the battle of the forms

first shot approach

last shot approach

what is the first shot approach

the seller-offeree, by purporting to accept the buyer-offeror’s offer, is said to have waived its own conditions of trade, so that the contract is concluded subject to the buyer’s conditions

what is the last shot approach

under this, the seller’s purporting to accept the buyer’s offer is seen as justa counteroffer

the buyer is said to have accepted through the acceptance of the goods so the seller had the last shot so it is subject to their conditions.

what must acceptance do

assent unequivocally and without qualification to the terms of the offer

when is acceptance seen as incomplete

when it is qualified by reference to the preparation of a more formal contract or by reference to terms which have still to be negotiated

what is insufficient to amount to communication of acceptance

communicated acceptance must be more than a mere mental assent

a tacit formation of intention is insufficient

must acceptance be communicated by the offeree

no - must be communicated either by the offeree or by his duly authorised agent

why does the general rule of communication of acceptance to the offeror benefit the offeror

they may expressly or impliedly waive the requirement of notification and agree that an uncommunicated acceptance will suffice

what two things are necessary if the offeror indicates that uncommunicated acceptance will suffice

there must be an express or implied intimation from the offeror that a particular mode of acceptance will suffice

there must be some overt or conduct on the part of the offeree which is evidence of an intention to accept, and which conforms to the mode of acceptance indicated by the offeror

when is performance, not notice of acceptance that is contemplated

general offer

other offers which indicate performance as a mode of acceptance so as to create a unilateral contract

carlill v carbolic smoke ball co

what is the confliction in terms of promise for an act

does starting the task count as acceptance or is finishing the task what makes it binding?

examples of instantaneous methods of acceptance

telephone, email

when is acceptance completed if the offeree notifies acceptance by post

when the letter is posted

the offeror is bound from that point even though letter may never be delivered

what happens in the case of a delay or loss of acceptance by post being at the fault of the offeree

it only takes effect if and when it is received by the offeror provided that this occurs within the time in which a regular acceptance would have been received

what is the rationale of the postal rule

eliminate difficulties as to consensus by treating the post office as the agent of the offeror not only for delivering the offer but for receiving the notification of its acceptance

acceptance pus it irretrievably out of the offeree’s control

if hardship is caused by the delay or loss of a letter of acceptance, some rule is necessary - commercial convenience

reason for the postal rule

offeror can protect themselves - they can stipulate that they must receive acceptance before it counts in the offer

prevents unfair revocation - stops offeror from withdrawing after offeree has posted

prevents games or speculation - offeree cannot send letter then change mind before it arrives

fairness - if there is delay or loss, more likely the offeror will notice first as they will be waiting for reply

criticism of postal rule

outdated - telephone, emails, SMS

unfairly favours offeree - they know of acceptance before offeror

creates inconsistency since it is not applied to faster forms of inconsistency

risk of delay or loss

can an offeror set rules for how and when the offeree accepts

yes but cannot set rules for how and when the offeree refuses

cannot force contract on someone just because they did not say no in a certain way in a certain time

case showing that the acceptor must have knowledge of the offer

fitch v snedaker - a reward cannot be claimed by one who did not know it had been offered

what happens when the acceptor knows of the offer but is inspired to performance by a motive other than that of claiming the reward

such a motive is immaterial

is the offeree bound to a mode of acceptance

not if the terms of the offer do no more than suggest a mode as long as the mode used is one which did not cause delay and which brought the acceptance to the knowledge of the offeror

if the offeror insists upon a mode of acceptance in the offer, he is entitled to say that he is not bound unless the acceptance is effected or communicated in that way

rule for revocation of acceptance

general rule is acceptance is not complete until communicated to the offeror so acceptance can be revoked at any time before this occurs provided that the revocation is communicated before the acceptance arrives

exception: postal rule

how is the postal rule an exception to the general rule of revocation of acceptance

acceptance is complete as soon as the letter of acceptance is posted so telephone call would be inoperative even though it reached offeror before letter

why is the postal rule an exception to the general rule of revocation of acceptance

would allow the offeror to pull out of offer suddenly if the offer become disadvantageous whilst still having the certainty of the offer if it remained advantageous.

general rule of termination of an offer

once the acceptance has been communicated to the offeror, it cannot be recalled or undone

can be terminated at any time before an offer is accepted

ways in which termination of an offer can come about

revoked before acceptance

offeree may reject offer

offer may lapse by the passage of time

offer may be determined by the death of either party

case for an offer being revocable before acceptance

offord v davies

key cases for an offer being irrevocable after acceptance

great northern railway co v witham

errington v errington

what is the traditional answer to the issue of unilateral contracts

the acceptance is complete only when the act has been completely performed

up until this time, the offeror is at liberty to revoke the offer

law tries to protect the offeree - if the offeror revokes offer during performance, offeree will usually be entitled to a remedy

what is meant by a “subsidiary contract”

a smaller contract created which means that the offeror promises not to revoke the main offer while the offeree is performing in a unilateral contract

how does communication of acceptance and revocation differ

acceptance in certain circumstances does not necessarily come to the notice of the offeror - posting a letter, performance of an act may constitute acceptance

revocation cannot be communicated in the same way - must be brought to the notice of the offeree

define promise

not necessarily an agreement

moral obligation rather than a legal obligation so not legally enforceable

no need for anything in return

define agreement

requires the assent of at least two parties

need to least two promises or two undertakings

in which cases is the offer and acceptance analysis not readily applicable

signing a written document by both parties

concluding a multi-party agreement

key case showing the inapplicability of offer and acceptance analysis

clarke v earl of dunraven

factors of an enforceable contract

offer, acceptance, consideration, certainty, ICLR

what is the objective approach

refers to how a reasonable person would interpret a party’s intention from its conduct in all circumstances

key case for the objective approach

storer v manchester city council

what is a bilateral contract

both parties make a promise/undertaking to each other

what is a unilateral contract

only one party makes a promise

one party makes an offer which the other party accepts by performance and not by promising to perform

what is the general rule surrounding advertisements and displays

advertisements to treat

not offers even if the word offer is used

exception to the general rule surrounding advertisements and displays

for bilateral contracts, advertisements can amount to offers on the basis of certainty of terms

for unilateral contracts, advertisements are regarded as offers (carbolic smoke ball)

what is an auction ‘without reserve’

not stipulated that there is any specific price that is aspirational