Offer and acceptance

Definition of a contract

A contract is a legally binding agreement between two or more parties. Two types of contract: bilateral (both parties have an obligation) and unilateral (only one person has an obligation).

Four elements to a contract

A contract has four essential elements which must be proved; an offer, which must be accepted; both parties must provide consideration, and there must be an intention to create legal relations.

ELEMENT 1: offer

An offer is the starting point for a contract. It is a statement of the terms by which the offeror is prepared to be bound. The offer comes into existence as soon as it is communicated. It must be certain and communicated- Gibson v Manchester City Council. 

The 5 ways an offer can come to an end

Revocation, rejection, counter-offer, lapse of time, death.

Revocation

The offer can be withdrawn at any time before it has been accepted, but this must be communicated to the offeree- Dickinson v Dodds. It can be communicated by a third party, but the third party must be reliable.

Rejection

Once an offer is rejected, it is extinguished and cannot be accepted. The rejection must be clear and communicated to the offeror, not simply a request for more information- Stevenson v McClean. If the offeree attempts to accept the offer after rejection, they are in fact making a new offer.

Counter offer

This ends the original offer and creates a new one. Any counter offer to be effective must be communicated- Hyde v Wrench. 

Lapse of time

If the offer has a time limit and this runs out. Otherwise, the offer will end after a reasonable time- Ramsgate Victoria Hotel.

Death

If the offeror dies, it can still be accepted as long as the offeree doesn’t know about the death. If the offeree dies, the offer closes immediately as there is no-one to accept. 

Invitation to treat (ITT)

This is not an offer. It is simply an indication of a willingness to start negotiations. It invites the other person to make an offer which can be accepted or rejected.

3 types of ITT

1) Items on display- Fisher v Bell.

2) Auctions- the auctioneer is inviting you to make them an offer.

3) Adverts- Partidge v Crittenden.

Advertisements WILL be an offer if:

The advert is made to a specific group of people. The advert is a unilateral contract- Carlill v Carbolic smoke ball.

SR: request for information & reply

Request for information and reply to this request isn’t an offer. Harvey v Facey- all you are doing is asking for more information, before you decide whether or not to make the actual offer.

ELEMENT 2: acceptance

This is an agreement to all the terms of the offer. Acceptance is valid as soon as it is communicated- this creates the agreement between the offeror and the offeree.

Acceptance continued

Acceptance can be in any form- verbal, written, email, text.

SR: silence is not acceptable- Felthouse v Bindley.

SR: acceptance needs positive conduct. Exam tip- this is an act e.g. going to find a lost cat after seeing the poster. (Note unilateral contracts which are accepted by conduct- Carlill v Carbolic smoke ball).

Acceptance continued

SR: postal rule: a letter of acceptance takes effect at the moment of posting- Adams v Lindsell.

The letter of acceptance must:

Be the usual method of communication between the parties.

Be correctly stamped and addressed and the claimant must be able to prove the letter was posted.

SR: electronic communication. If acceptance is given over the phone, this is instant communication. If acceptance by fax, email or text takes place when received rather than when it was sent. If the communication arrives outside of office hours, it will be communicated at the start of the next working day.