Workshop 1 - Offer and Acceptance

What is contract law?

-the mechanism which allows parties to interact with each other on the basis of voluntarily assumed obligations - obligations which they have chosen for themselves and agreed to, rather than obligations imposed upon them

-provides a great range of transactions which individuals and commercial entities engage in

-these transactions may be routine and commonplace - e.g. agreement to the T&Cs of a website or on making an everyday purchase

-they can be of significant value such as the agreement for the sale and purchase of a company by private investors

-contract law is fundamental to any complex society and is relevant to a range of legal practice areas including commercial law, litigation, employment law, property law and corporate transactions

What are the requirements of a contract?

-in order for there to be a binding contract, the following must be present:

1. offer and acceptance

2. intention to create legal relations

3. consideration

What does ‘offer and acceptance’ mean?

For an agreement to take place, one party (the offeror) needs to make an offer and the person to whom the offer is made (the offeree) needs to communicate an unequivocal acceptance.

When determining whether an agreement exists between the offeror and the offeree, what is the court concerned with?

-oourt not concerned with the inward mental intent of the parties but with what a reasonable person would say was the intention of the parties, having regard to all the circumstances

-this is what Lord Denning also expressed in Storer v Manchester City Council [1974] - "In contracts you do not look into the actual intent in a man’s mind. You look at what he said and did”

-the idea of offer and acceptance is that it shows a ‘meeting of minds’, but the law applies an objective test when it comes to identifying agreement

What is the concept of a ‘clear and certain offer displaying an intention to be bound’?

-an offer must be clear and certain

-in Gibson v Manchester City Council, the city treasurer wrote to a tenant saying the council ‘may be prepared to sell the house to you at XXX’

-tenant signed and returned form but the council changed its policy and it was unable to proceed with his application

-tenant brought action cliaming the council’s letter was an offer which he’d accepted by returining the application form

-court held there was no binding contract as there was never an offer made by the council. The council’s letter stating that it ‘may be prepared to sell’ was not sufficiently clear and certain to be an offer - merely 1st step in negotiations o lacking requisite to be legally bound

What must an offeror show?

-an intention to be legally bound

-wording ‘may be prepared to sell’ lacked this

-contrasts with similar case of Storer v Manch City Council where the words ‘if u will sign the agreement and return it to me i WILL send u the agreement signed on behalf of the corporation in exchange’ - demonstrates intention to be bound

-remember court takes objective approach to ascertain whether there was an intention to be bound. What matters is what a reasonable man would say the parties in Gibson and Storer intended, on the basis of their letters. What was actually in the minds of the people who wrote the letters is not relevant.

What are the two kinds of contract?

Bilateral and unilateral contract.

What is a bilateral contract?

A bilateral contract is the most common type of contract, and it is characterised by both parties assuming an obligation to each other, usually by making a promise to do something. So for example in a contract for the sale of a car, the seller makes a promise to sell his car to the buyer for a specific sum of money. The buyer in turn promises to buy the car and pay the specific sum of money. Both parties to the contract have assumed obligations towards each other.

What is an unilateral contract?

In contrast, in a unilateral contract, one party makes an offer or proposal in terms which call for an act to be performed by one or more parties. A unilateral contract does not involve mutual promises – only the person making an offer assumes an obligation. The other party accepts the offer by performing the required act in accordance with the requirements of the offer hence creating a unilateral contract. A common example of a unilateral contract is when a person puts a notice offering a reward for the safe return of their lost pet. The person putting up the notice has assumed an obligation to pay a reward to the person who returns his pet. Anyone can accept the offer by performing the required act of returning the pet to the person who put up the notice.

What are the key steps in analysing offer and acceptance in contract formation?

A structured analysis of offer and acceptance involves seven steps:

1. Identify the nature of the communication – Is it an offer or an invitation to treat?

2. Assess further communications – Is the reply a counter‑offer or a request for further information, and what effect does it have on the original offer?

3. Check the acceptance – Is the acceptance actually in response to the offer?

4. Determine whether acceptance is unqualified – Does it mirror the offer, or does it amount to a counter‑offer/request for information?

5. Consider the mode of acceptance – Was the acceptance made using a valid method?

6. Check communication of acceptance – Has acceptance been communicated? Apply the postal rule or instantaneous communication rules (e.g., Entores v Miles Far East).

7. Confirm the offer was still open – Had the offer been terminated by rejection, lapse, or revocation before acceptance?

What must an offer be distinguished from?

An offer must be distinguished from a mere invitation to treat.

What is an ‘invitation to treat’?

An invitation to treat is a first step in negotiations which may or may not lead to a firm offer by one of the parties. It usually takes the form of an invitation to make an offer.

What is the difference between an offer and an invitation to treat?

An offer is an undertaking to be contractually bound by the terms of that offer in the event of an unconditional acceptance being made by the offeree.

In contrast, an invitation to treat cannot be accepted to form a binding contract.

What are examples of ‘invitations to treat’?

· Advertisements

· Displays goods

· Invitations to tender

· Auctions

What is the general rule regarding advertisements?

The general rule regarding advertisements is that they are regarded as statements inviting further negotiations or invitations to treat (Partridge v Crittenden [1968] 1 WLR 1204).

This has been held the case in relation to adverts in periodicals, advertisements by an auctioneer that certain goods would be sold at a specified location on a specific date, and adverts listing specific goods at a specific price.

There are good reasons for this, including that the advertiser may have limited supplies of the goods in question. If the advert was an offer (rather than invitation to treat) it could be accepted by a larger number of people than the advertiser was able to supply, which would result in the advertiser breaching one or more contracts.

What should be noted about advertisements though?

Advertisements – exception to the general rule

It should be noted that the general rule concerning advertisements does not apply where the advertisement amounts to a unilateral offer.

What principle was established in Carlill v Carbolic Smoke Ball Co (1893), and why was the advertisement held to be a binding unilateral offer?

Carlill v Carbolic Smoke Ball Co confirmed that an advertisement can amount to a unilateral offer where:

• A prescribed act is required (using the smoke ball as directed and still catching influenza).

• A clear intention to be bound is shown (evidenced by the company depositing £1,000 and using definite language).

Because Mrs Carlill performed the prescribed act, a binding contract arose and she was entitled to the £100 reward. The case illustrates that unilateral offers become binding upon performance, similar to reward cases for lost property.

Note the twin requirements of a unilateral offer in the Carlill case of both a prescribed act and a clear intention to be bound

Why are goods displayed in shops (in windows or on shelves) treated as an invitation to treat rather than an offer, and which cases establish this principle?

Key cases:

• Fisher v Bell [1961] – Displaying a price‑marked item in a shop window is an invitation to treat.

• Pharmaceutical Society v Boots [1953] – Goods on self‑service shelves are also an invitation to treat.

Reasoning:

• If displays were offers, the trader would be obliged to sell to anyone who “accepted” (e.g., by taking the item to the till), even where judgment about the customer is required.

• This avoids problems with restricted goods (e.g., age‑limited items).

• The offer occurs at the checkout when the customer presents the goods; the acceptance occurs when the shop chooses to sell.

What is the general rule on invitations to tender, and what are the key exceptions established by case law?

A request for tenders is used where a party (usually a company or public body) wishes to purchase a major item or service. The requestor invites tenders (i.e. offers) from those interested in supplying the goods or the services required. This action of inviting parties to tender is, as a general rule, deemed an invitation to treat (Spencer v Harding (1870) LR 5 CP 561) ie an invitation to interested parties to make offers to be considered. The requestor can accept or reject any tender, even if it is the most competitive.

General rule:
A request for tenders is normally an invitation to treat, not an offer.

• Spencer v Harding (1870) – The party inviting tenders is free to accept or reject any tender, even the most competitive.

Exception to the rule 1 – Highest/lowest bid undertakings:

• Harvela Investments v Royal Trust Co (1985) – If the invitation expressly promises to accept the highest or lowest bid, it becomes a unilateral offer.

• The required act is submitting the highest/lowest bid; performance binds the inviter.

Exception 2 – Duty to consider compliant tenders:

• Blackpool & Fylde Aero Club v Blackpool BC (1990) – An invitation to tender creates a binding obligation to consider all tenders where:

1. Tenders were solicited from known, specified parties.

2. There was an absolute deadline.

3. Submission conditions were strict and non‑negotiable.
   → A contractual duty arises to consider all tenders properly submitted.

What is the legal position on auction sales, and how do Payne v Cave and s 57 Sale of Goods Act 1979 define offer and acceptance in this context?

General rule:
An auctioneer’s request for bids is an invitation to treat, not an offer.

• Payne v Cave (1789) – Each bid is an offer that the auctioneer may accept or reject.

• Acceptance occurs only when the hammer falls.

Revocation:
A bidder may withdraw their bid at any time before the hammer falls, consistent with general offer‑revocation principles.

Statutory confirmation – s 57 Sale of Goods Act 1979:
A sale is complete only when the auctioneer announces completion (e.g., by the fall of the hammer).
Until that moment, any bidder may retract their bid.

Note:
Auctions without reserve operate differently and form an exception (covered separately).

If you want, I can also create a separate flashcard for auctions without reserve.

What is the legal effect of an auction being held “without reserve”, and how do Warlow v Harrison and Barry v Davies explain the contractual structure?

In an auction without reserve, the seller promises to sell to the highest bona fide bidder, whatever the final bid is.

Key principles:

• Warlow v Harrison (1859) (obiter) – An auction “without reserve” creates two contracts:

  1. Bilateral contract: The usual auction structure—each bid is an offer, accepted when the hammer falls. This determines who gets the goods.

  2. Unilateral contract: A promise that the auction will be without reserve. The required act is making the highest bona fide bid.

• If the auctioneer refuses to sell to the highest bidder, they breach the unilateral contract, and the bidder is entitled to damages, not the goods.

• Barry v Davies (2000) – The Court of Appeal confirmed this analysis and awarded damages to the highest bidder when goods were wrongly withdrawn.

Core idea:
A “without reserve” auction binds the auctioneer to consider and accept the highest genuine bid, creating liability if they withdraw the goods.

Can an invitation to treat be accepted to form a binding contract?

NO

What is a termination of an offer?

· Rejection

· Lapse

· Revocation

An offer can come to an end in these three ways. In each case, the offer loses its legal effect and becomes incapable of acceptance.

How does rejection terminate an offer in contract law, and when does the rejection take effect?

-Rejection terminates an offer — once an offeree rejects an offer, it cannot later be accepted, unless the offeror chooses to make the offer again.

• A rejection is only effective when it is actually communicated to the offeror, because only then does the offeror know they are no longer bound by the offer.

What is the effect of counter‑offers on an existing offer, and how does the “last shot” rule operate?

• An attempt to accept an offer on new terms is treated as a counter‑offer, which rejects and terminates the original offer.

  • Hyde v Wrench (1840) – A counter‑offer destroys the original offer, which cannot then be accepted.

• If the counter‑offer is accepted, its terms become the terms of the contract.

• When parties exchange standard terms that differ, the offeree’s “acceptance” is actually a counter‑offer.

• This leads to the “last shot” rule:
  The party who last puts forward their terms before performance usually prevails, because their counter‑offer is taken as the operative one.

• If both parties keep insisting on their own terms and never reach agreement, no contract is formed.

How do you distinguish a counter‑offer from a request for further information, and what does Stevenson, Jacques & Co v McLean illustrate?

• A counter‑offer introduces new terms and therefore rejects and terminates the original offer.

• A request for further information merely seeks clarification or asks about possible variations; it does not reject the original offer, which remains open.

Key case:

• Stevenson, Jacques & Co v McLean (1880) – Asking whether the seller would accept delivery over two months was held to be an enquiry, not a counter‑offer.

• Because the original offer was not rejected, the claimant could validly accept it later, creating a binding contract.

When does an offer lapse, making it incapable of acceptance/what is termination by lapse?

An offer may lapse (terminate) in two main situations:

1. Passage of time

• If the offeror sets a specific time limit, the offer lapses when that period expires.

• If no time limit is stated, the offer lapses after a reasonable time, judged according to the circumstances (e.g., nature of goods, market conditions).

2. Death of a party

• Death of the offeror:

  • If the offeree knows the offeror has died → the offer lapses.

  • If the offeree is unaware → the offer probably remains open.

• Death of the offeree:

• The offer always lapses, as it cannot be accepted by the offeree’s representatives.

What is termination by revocation?

• An offeror may revoke (withdraw) an offer any time before acceptance.

  • Payne v Cave (1789) – Revocation is valid up to the moment acceptance occurs.

• Once a valid acceptance is made, the offer cannot be revoked.

Communication requirement

• Revocation is only effective when it is actually communicated to the offeree.

• If sent by post, revocation takes effect when received, not when posted.

• Byrne v Van Tienhoven (1880) – A posted revocation is ineffective until it reaches the offeree.

When is indirect revocation of an offer effective, and what principle is illustrated by Dickinson v Dodds?

• Revocation is effective once the offeree receives notice—even if the information comes from a third party.

• The offeror must have shown a clear intention to revoke through words or conduct.

• Dickinson v Dodds (1876) – A third party can validly communicate revocation, and this will terminate the offer.

Key concern:

• The offeree risks relying on potentially unreliable third‑party information, since the law does not require the revocation to come directly from the offeror.

When can a unilateral offer be revoked, and what limits apply once performance has begun?

• In unilateral contracts, acceptance = complete performance of the required act.

• Therefore, the offeror may revoke the offer any time before full performance.

• Great Northern Railway Co v Witham (1873) – Revocation is possible until the act is completed.

Exception: commencement of performance

• If the offeree has begun performance and is willing and able to complete, the offeror may be under an implied obligation not to revoke.

• The offeree’s consideration for this implied promise is the act of starting performance.

Key case: Errington v Errington & Woods (1952)

• A father promised to transfer a house if the couple paid off the mortgage.

• Once they started paying instalments, the offer could not be revoked as long as they continued performance.

How is revocation communicated when a unilateral offer is made to the whole world, as in Carlill v Carbolic Smoke Ball Co?

• A unilateral offer can be made to the whole world, and offerees do not need to communicate acceptance before performing (per Carlill).

• Because the offeror cannot know who is performing, direct communication of revocation is often impossible.

• Revocation will be effective if the offeror takes reasonable steps to bring the withdrawal to the attention of everyone who might have seen the offer (e.g., publishing a notice in the same medium).

What are the four aspects to identifying whether there has been the communication of an unequivocal acceptance needed to form a contract

a) Acceptance must be in response to the offer

b) Acceptance must be unqualified

c) It may be necessary to follow a prescribed mode of acceptance

d) Acceptance must be communicated

What does ‘Acceptance must be in response to the offer’ mean?

Only the person / people to whom an offer is made (the offerees) can accept the offer. For example, it would not be possible to accept an offer you overheard that was not addressed to you.

Where an offer is made generally to the world at large then everyone with notice of the offer is an 'offeree', and a valid acceptance may be made by any person with notice of the offer: Carlill v Carbolic Smoke Ball Co. (1893).

What does ‘Acceptance must be unqualified’ mean?

Acceptance must be unqualified and must correspond exactly with the terms of the offer: Hyde v Wrench (1840) 3 Beav 334. This is sometimes called ‘the mirror image rule’. Not all transactions lend themselves to an easy analysis in terms of ‘offer’ and ‘acceptance’. Yet the court will always examine the communication between the parties to discover whether, at any one time, one party may be deemed to have assented to all the terms, express and implied, of a firm offer by the other party. An assent which is qualified in any way does not take effect as an acceptance.

If the offeree’s response to the offer is qualified, it will be necessary to decide whether it constitutes a counter-offer or a request for information. Remind yourself of the importance of this distinction by revisiting the relevant elements.

What does ‘It may be necessary to follow a prescribed mode of acceptance’ mean?

Acceptance can usually be communicated in any manner the offeree chooses. However, sometimes the offeror specifies a particular method of acceptance. The key question is whether that method is mandatory or merely a suggested method.

🔍 Key principles

• General rule:
  Acceptance may be communicated in any reasonable manner unless the offeror clearly states otherwise.

• Prescribed mode of acceptance:
  If the offeror specifies a method, the law asks whether the offeror has insisted that only that method will bind them.

🧑‍⚖ Manchester Diocesan Council v Commercial and General Investments (1970)

Buckley J explained that an offeror can require acceptance in a particular way, but they must use very clear words to make that method mandatory:

“If an offeror intends that he shall be bound only if his offer is accepted in some particular manner, it must be for him to make this clear.”

So, unless the offeror explicitly states that no other method will do, the offeree may accept using a different method—provided it is no less advantageous to the offeror.

🧑‍⚖ Tinn v Hoffman (1873)

If the offeror does not make the prescribed mode mandatory, then any equally effective method of acceptance will bind them.

💡 In short:

A prescribed mode of acceptance only becomes compulsory if the offeror clearly insists that acceptance must be communicated in that exact way and no other. Otherwise, a different but equally effective method will still create a binding contract.

What does ‘Acceptance must be communicated’ mean?

• Acceptance is only effective when it is communicated to the offeror.

• Mere intention or mental assent is not enough—there must be an outward communication.

• The offeror cannot impose a term stating that silence will count as acceptance.

• Silence is not acceptance because:

• The offeror needs to know clearly when they are bound.

• It would unfairly burden the offeree if failing to respond could create a contract.

Can acceptance be communicated by a third party, and when will such communication create a binding contract?

• Acceptance can be communicated by a third party, and a contract may still arise, provided the third party is acting with the offeree’s authority.

• If the third party communicates acceptance without the offeree’s authority, and the offeree had not yet treated their decision to accept as final or irrevocable, no contract is formed.

Core idea:
A third party can validly communicate acceptance only when they are authorised and the offeree has genuinely decided to accept.

What is the postal rule, when does it apply, and what are its key limitations?

Basic rule – Adams v Lindsell (1818)

Where post is a reasonable and contemplated method of communication, acceptance becomes effective the moment the letter is properly posted, not when it is received.

• Proper posting = placed in an official letter box or handed to an authorised Post Office employee.

• Handing it to a postman who only delivers letters is not proper posting.

Rationale

The rule aims to balance fairness where letters may be delayed or lost.

• It places the risk on the offeror, partly because posting is easier to prove than receipt.

• It is an exception to the general rule that acceptance must be communicated.

📌 When the postal rule does apply

• Even if the acceptance is delayed or lost

• Household Fire Insurance v Grant (1879)

📌 When the postal rule does not apply

• Where it was not reasonable or contemplated that post would be used

  • Henthorn v Fraser (1892)

• To revocations of offers

  • Revocation must be received to be effective

  • Byrne v Van Tienhoven (1880)

• Where the letter is incorrectly addressed

• Where the offeror disapplies the rule by specifying another method of acceptance

Why does the postal rule mean a contract is formed even when a revocation is received before the acceptance arrives?

Timeline:

• Day 1: A makes an offer to B.

• Day 2 (morning): A posts a revocation.

• Day 2 (afternoon): B posts a letter of acceptance.

• Day 3: B receives the revocation.

• Day 4: A receives the acceptance.

Legal effect:

A contract is formed on Day 2 (afternoon) when B posts the acceptance.

Why?

• The postal rule applies only to acceptances → acceptance is effective on posting, not on receipt.

• Revocation must be received to be effective → posting a revocation is not enough.

So even though B receives the revocation before A receives the acceptance, the acceptance was already legally effective when posted.
→ Contract formed.

When does the postal rule not apply, particularly regarding incorrectly addressed acceptances and offerors disapplying the rule?

1. Incorrectly addressed acceptance

• The postal rule will not apply if the offeree incorrectly addresses the acceptance.

• Reason: the offeree, through their own carelessness, loses the benefit of the rule.

2. Offeror disapplies (“ousts”) the postal rule

• The offeror can require actual communication of acceptance (e.g., “acceptance must be received”).

• If the offeror clearly insists on receipt, the postal rule is displaced.

• In such cases, acceptance is only effective when received, not when posted.

• Authority: Holwell Securities v Hughes [1974] – the offer required “notice in writing,” which ousted the postal rule.

How does acceptance work when communicated by instantaneous means, and what rules apply to emails and messages sent outside office hours?

General rule – instantaneous communication

• Acceptance is effective when received by the offeror, not when sent.

• Entores v Miles Far East Corporation (1955) – If the message does not reach the offeror without their fault, no contract is formed.

• If the failure is due to the offeror’s fault (e.g., poor reception, not asking for repetition), they cannot deny receipt.

📧 Emails – postal rule does NOT apply

• For a time, it was unclear whether email was “instantaneous” or “postal.”

• Thomas v BPE Solicitors [2010] – The postal rule does not apply to emails.

• Acceptance by email is effective when received, meaning when it arrives on the offeror’s email server, not when sent.

🕒 Messages sent during office hours – The Brimnes (1975)

• A message sent during ordinary office hours is effective when it arrives, even if not read until later.

• Office staff’s failure to check messages may amount to negligence, so the offeror is treated as having received it.

🌙 Messages sent outside office hours – Mondial Shipping (1995)

• A message sent outside office hours is treated as received at the start of the next business day.

• Example: A telex sent at 23:41 on Friday was deemed received at start of business Monday.

When is communication of acceptance waived in unilateral contracts, and what does Carlill v Carbolic Smoke Ball Co establish?

General principle

• In unilateral contracts, acceptance does not need to be communicated to the offeror.

• Acceptance occurs through performance of the act required by the offer.

Key case: Carlill v Carbolic Smoke Ball Co (1893)

• The advert was a unilateral offer to the world.

• Mrs Carlill accepted by performing the required act (using the smoke ball as directed).

• No separate notification of acceptance was needed.

Reward situations

• The same rule applies to rewards (e.g., for lost property).

• People searching for the item do not need to inform the offeror beforehand.

• Acceptance is complete when the finder returns the item to the offeror.

If you want, I can also create a flashcard comparing communication rules in bilateral vs unilateral contracts.

When will a contract be too uncertain or incomplete to be enforceable, and how do courts decide whether the parties reached agreement on all material terms?

General principle

A binding contract requires all material terms to be certain and complete.
If the agreement is too vague, ambiguous, or incomplete, a court may not be able to enforce it.

Objective test – RTS Flexible Systems v Müller (2010)

Courts ask whether, objectively, the parties agreed all terms they regarded as preconditions to creating legal relations, considering all the circumstances.

📌 Examples

Too uncertain → not enforceable

• Scammell v Ouston (1941)

• Agreement on “hire‑purchase terms” was too vague because hire‑purchase arrangements vary widely.

• The court could not identify the essential terms → no enforceable contract.

Sufficiently certain → enforceable

• Hillas v Arcos (1932)

• Agreement to buy “timber of fair specification” was upheld.

• The phrase could be given a reasonable meaning, especially considering the parties’ previous dealings.

🧠 Summary

• Courts will not enforce an agreement that is too vague or incomplete, but this is a last resort.

• Courts try to uphold agreements where possible, interpreting terms in a way that reflects the parties’ intentions.

• The key question is whether the parties objectively agreed all terms they considered essential to forming legal relations.