Offer Duration
An offer can only be accepted while it remains open
How is an offer terminated?
Revocation of offer by offeror
Lapse of time: if no time prescribed after a reasonable time
Death of offeror/ offeree
Failure of a condition
Rejection by offeree: rejection must be communicated
Termination of offer - revocation
Withdrawal or revocation
Can occur at any time before acceptance, (even if the offeror promised to keep it open) – Dickinson v Dodds
An offer might have been made but it can always be revoked and that is at any time up until it's been accepted.
By words or action inconsistent with continuance of offer - Dodds.
Effective when it reaches (i.e. communicated to) the offeree (by offeror or some other reasonably reliable source) - Dodds
Offers to the public at large can be revoked in the same way (or other way with same coverage) that the offer was made (eg. in newspaper- if you had an advertisement in a newspaper that amounted to an offer like the Carbolic one, that could be revoked through a similar advertisement in the same type of newspaper.)- in relation to unilateral offers
Exceptions:
If consideration has been paid to keep the offer open - options - the right to revoke is not the same- Goldsborough Mort
If a unilateral contract, performance has commenced, it may be that there is no right to revoke, and there is an implied contract not to revoke or an estoppel – Mobil Oil
If there is a promise to hold an offer open that is subject to the CISG, not revokabale (Article 16)
Revocation of offer: Dickinson v Dodds (1876 UKCA)
Background
Authority for the principle that an offer can generally be revoked anytime up until acceptance.
Facts
10 June: Dodds made an offer to sell land to Dickinson (to be left open until 9am on 12 June).
11 June: Dodds sold the land to Allan.
Evening of 11 June: Dickinson’s agent, Berry, told Dickinson about Dodd’s sale to Allan.
Before 9am on 12 June: Dickinson accepted Dodd’s offer.
Issue:
Was there a binding contract?
Was the offer still open for Dickinson to accept given that Dodds had already sold the land and information of this sale had been communicated to Dickinson.
Held:
Dodds revoked the offer by selling the land to someone else. This revocation had been communicated to Dickinson before acceptance (Berry was a reasonably reliable source). There was no contract.
In depth summary
Involves negotiations in relation to the sale of land. Dodds was the owner of the land and was interested in selling it and he made an offer to Dickinson who wanted to buy it to sell at a particular price.
And he said that the offer would remain open for two days until 9AM on the June 12. This was said by Dodds on the June 10.
However, Dodds got a good offer from somebody else and went ahead and sold the land, entered into a contract to sell the land to somebody else, a third party on the June 11.
Information about that sale to the third party filtered through to Dickinson indirectly through his agent, so he knew that the land had been sold.
Nevertheless Dickinson really wanted the land and so he attempted to accept the original offer made by Dodds that was said to have been open until 9AM on the June 12. So Dickinson tried to accept that offer before that stipulated deadline.
And so the key issue was, was the offer still open for Dickinson to accept given that Dodds had already sold the land and information of this sale had been communicated to Dickinson.
The Court of Appeal held that there was no binding contract because Dodds had effectively revoked the offer and he'd done this by selling the land to someone else. That was an action inconsistent with the continuation of the offer. Although he didn't explicitly say I'm revoking the offer, the fact that he sold it to someone else was conduct inconsistent with the continuation of the offer and amounted to a revocation. And that revocation was communicated to Dickinson, albeit indirectly through Dickinson's agent, and as a result there was no contract.
Revocation: options/ option contracts
A promise to hold an offer open is binding at common law if consideration has been given in return for that promise.
In essence what this means that if somebody has paid an amount, (it needn't actually be money it can be in kind payment of some other nature for the right to enter into a contract on certain terms in the future) well that in itself is binding and that offer must remain open.
Goldsbrough Mort v Quinn (1910 HCA)
(This is an exception to the general rule that an offer can be revoked any time prior to acceptance.)
This concept is widespread in the commercial world, particularly in stock market trading. Options contracts, known as calls and puts, are a type of futures contract. They give the holder the right to buy or sell shares at a set price on a specific future date. A similar principle applies in lease agreements, where tenants often have the option to renew their lease at a predetermined price. Fundamentally, an option operates as a right—secured by payment—to keep an offer open, allowing the offeree to decide whether to accept or reject it in the future. But they're not at risk of that offer being revoked.
Goldsbrough Mort v Quinn (1910 HCA)
Facts
Goldsbrough paid 5 shillings for the right to purchase land at Bena Billa for 30s per acre “calculated on a freehold basis” within a week.
Quinn purported to revoke the offer. Goldsbrough accepted within the week and sought specific performance (ie the land).
Held:
Here, the offeree paid for the option to have one week to consider the offer. It was held that the offeror could not withdraw before the expiration of the promised period.
The Judges analysed the arrangement in different ways:
Griffith CJ/ O’Connor J - conditional contract
There was a contract to sell the land subject to a condition (ie exercise of the option).
Isaacs J – 2 separate contracts
There were two separate contracts:
option was a preliminary contract to hold the offer open (ie an offer with a promise not to withdraw); and
the exercise of the option created a second contract to sell the land.
On either analysis: An option contract (a promise to keep an offer open, for value) is binding, and specific performance can be given.
In depth summary
A 1910 case of the High Court of Australia.
Relates to the sale of land and a revocation of an offer. There was an option in existence because Goldsbrough, the purchaser of the land, had paid money 5 shillings for the right to purchase particular land within a week. So the right to purchase the land and to have that offer kept open for the week.
The vendor tried to revoke the offer because Quinn the vendor had made an error in relation to the calculation of the value. The offer was expressed to be calculated on a freehold basis Quinn thought that he was going to receive 30 shillings per acre on a clear basis but because it was calculated on a freehold basis there were substantial costs involved that Quinn would have to incur in order to convert the land to freehold. And so for that reason Quinn wasn't happy to go ahead with the sale.
Goldsbrough nevertheless purported to accept the offer even though Quinn had tried to revoke it and had to go to court to seek specific performance.
And the court held that here as Goldsbrough had paid for the option to have the offer kept open for one week, the offerer Quinn was not at liberty to revoke the offer before the end of that period.
Judges reasonings
The judges gave different reasons as to why the offer could not be revoked on a legal basis. The conventional view, what's been considered the conventional view, was that put forward by Chief Justice Griffith and Justice O'Connor. And that was that what was created by paying the money to keep the offer open was a conditional contract. And this is an immediate contract was created to sell the land, but it was subject to the offeree exercising, subject to the condition being Goldsbrough Mort, the offeree exercising the option. So rather than it merely being viewed as an offer that has been promised to be kept open. What we actually have is a contract. So through the payment of money to keep the offer open, actually end up with a binding contract. That is the conventional view in relation to why options are effective.
An alternate view was put forward by Justice Isaacs which also makes logical sense and he said that what occurs are two separate contracts. So again the essential thing being that we have an enforceable contract created once we've got the payment of money to keep the offer open. But he said there were two contracts. Firstly, a preliminary contract, so not a contract to sell the land, but a separate contract simply to hold the offer open. And then once the option is exercised, that creates the second main contract to sell the land.
On either analysis you get the same result and that is whenever you have a promise to keep an offer open, which is supported by the payment of some sort of consideration, usually money, then that is binding and that offer cannot be revoked.
Revocation of offer: unilateral contracts
There is no universal rule that a unilateral offer cannot be revoked before acceptance (even where offeree has begun performance). Generally, a unilateral offer can be revoked before acceptance, however a remedy may be available under:
In implied contract not to revoke
Estoppel (week 7)
There is no problem if the offer is withdrawn before the offeree begins to perform and accept, but difficulties arise where the offeree has commenced performance but has not quite completed the acts required to constitute full acceptance. e.g the unilateral offer is an offer to pay $100,000 to the first person to swim backstroke across the Bass Strait, it would seem quite unfair if the offer could be revoked when a swimmer had commenced swimming and was halfway across.
There's no universal rule that a unilateral offer cannot be revoked before acceptance, even where the offeree has begun performance. Generally a unilateral offer can be revoked before acceptance however there may be a remedy available on one of two different grounds.
Firstly, it could be possible to argue that there's an implied contract not to revoke the offer. And another alternative would be to rely on the principle of estoppel
Mobil Oil v Wellcome
Mobil Oil v Wellcome Intl Pty Ltd (FFC 1998)
Announcement by Mobil to franchisees that if scored >90% in Circle of Excellence program for 6 years - entitled to 9 free extra years on franchise
Plaintiff proceeded to get such scores but offer revoked after 4 years and program cancelled
5 franchisees commenced action against Mobil Oil as test case (over 150 affected)
Trial J (Wilcox):
Unilateral contract offer cannot be revoked once performance has commenced.
Held FFC:
No offer - statement too vague and uncertain to be a contractual obligation
Even if it were an offer, Mobil entitled to revoke unilateral offer although performance had commenced.
There is no general proposition that an offeror can’t revoke the offer once the offeree commences performance.
But there may be times where there is an implied ancillary contract not to revoke the offer once the offeree commences performance (an implied promise not to revoke given in return for consideration of commencing performance) - in which case revocation is still effective and offeror is liable to pay damages for breach of ancillary contract.
The essence of it is really a matter of interpretation, whether or not the parties would have considered it fair or reasonable that the offer could be revoked in these circumstances
No such implied ancillary contract here because:
“commencing” performance is too vague – vague in this particular scenario where you have a six year requirement to accept the alleged unilateral contract. There wasn't a clear, answer to the question, what does commencing mean? Clearly, one day wouldn't be enough out of six years.
the franchisees did not suffer any substantial detriment- in proceeding with the excellence program, they were doing things that were good for their business
the franchisees were already bound to adhere to Mobil franchisee standards
In-depth summary
It relates to a dispute between Mobile Oil and a number of franchisees who operated petrol service stations under the Mobile brand.
The nature of these franchise agreements was that the franchisees would pay quite a substantial sum of money to be given the right to use and operate their petrol stations under the mobile brand. And they would also be required to adopt certain business practices.
Mobile is, as most franchisors are, keen to protect its brand and ensure that the levels of service, cleanliness, all that sort of thing are maintained to a high degree. And as a result, Mobile announced to its franchisees that if they scored higher than 90% in Mobile's Circle of Excellence program for six years, that the franchisees would be entitled to nine free extra years on their franchise. So that's a saving of these franchise fees they would otherwise have to pay.
The plaintiff in these particular proceedings was one of these franchisees who had managed to achieve the required scores for a number of years and was aggrieved when Mobile revoked the offer after four years and cancelled the program. There were five such franchisees who commenced litigation against Mobile Oil and this was really a test case. There were over 150 affected franchisees. This slide sets out the findings at the different levels of the court.
The trial stage Justice Wilcox held in favour of the franchisees and said, a unilateral contract offer cannot be revoked once performance has commenced, because it's not fair. But this was overturned by the full federal court. The ratio for the decision was that the statements themselves in relation to the nine year extension did not actually amount to an offer because the statements were too vague and uncertain to be contractual offers. What it says strictly as Obita in relation to when a unilateral offer can be revoked, and the court said that even if this was an offer, mobile would have been entitled to revoke it, even though performance had commenced. Because there is no general proposition that an offeror cannot revoke an offer once the offeree commences performance.
But importantly, the full court did say that there will be times where a unilateral offer cannot be revoked, and the basis upon which such a result may occur is if there is an implied ancillary contract not to revoke the offer once performance has been commenced.
Revocation of offer: CISG
FILL IN FROM SLIDES
The Vienna Convention on the International Sale of Goods
This is part of our Victorian law in relation to international sale of non consumer sale of goods
The rules in relation to revocation are different under the CISG
In relation to (2)(a) this means that you don't necessarily need an option contract for an offer to be irrevocable. It just simply needs to be stated to be irrevocable or open for a fixed time. So that is a significant difference to our common law.
Termination of offer: lapse of time
The second way in which an offer may come to an end is through a lapse of time.
Offer may be open for specified period – will lapse at end of specified time
If no period specified – will lapse after a “reasonable time”
What is “reasonable” will depend on the context – apply objective test- What would a reasonable person think was a reasonable period of time for the offer to remain open?
Termination of offer: death of offeror
The third way in which an offer may come to an end is if either the offerer or the offeree dies.
Offer will lapse on death of offeror (where offeree knows of the death)
Fong v Cilli (1968) 11 FLR 495 (NT SC)
Vendor died before one of the purchasers signed. The remaining purchaser had notice of the death. Offer lapsed.
Implication that an offer may still be accepted before noticeof death of the offerer unless personal services required.
No clear authority as to whether an offer will lapse on death of offeror when offeree doesn’t know about the death, however it seems that an offer would generally lapse on death of offeree (depends on the parties’ intentions and the circumstances).
Option contracts remain enforceable against deceased estate unless:
Personal services of deceased required; or- e.g it was the offerer was, you know, a builder and they were offering to build a house. Well clearly that would terminate.
Intent of option was that it not be exercisable after death
Laybutt v Amoco Australia Pty Ltd (1974 HCA)
Ask the question was that a can basically ask the question was it a condition of the offer that it would only be open for acceptance while the offeror was alive?
In relation to death of the offeree, we don't have any clear authority as to whether an offer will lapse. However, it seems that an offer would generally lapse on the death of an offeree but it depends on the party's intentions and the circumstances.
Termination of offer: failure of condition and changed circumstances
The fourth way in which an offer may fail or come to an end is through the failure of a condition.
Offers may be conditional offers. Those conditions may be expressly stipulated or implied.
Express condition: The offeror may stipulate circumstances in which an offer will stay open or lapse, or which must be satisfied before an offer can be accepted (eg offer subject to board approval). If that condition is not satisfied, any attempt by the offeree to accept the offer will be futile.
Implied condition: If the offeror does not do so expressly, it may still be obvious to an objective observer that the offer was made on the basis of certain circumstances. It may be that if these circumstances change, that the offer lapses.
Eg Financings Ltd v Stimson (1962 UKCA)
In that case the purchaser made an offer to purchase the car which was held to be subject to an implied condition that the car would remain in the same condition as when the purchaser inspected the car. The car was stolen and damaged and the vendor, the seller, was unable to accept the offer once that damage had occurred and there had been that change of circumstances.
Termination of offer: rejection & counter offer
The final way in which an offer might come to an end that we look at is through rejection or counter offer.
Once an offer has been rejected it is no longer available for acceptance. It generally terminates the offer. And a counter offer is treated as a rejection.
A counter offer (eg “I’ll give you $X instead”) is treated as a rejection.
A “mere inquiry” is distinguished from a counter offer and not a rejection (eg – “is there room for movement on the price?”, “would you accept $X?”)
Stevenson, Jaques & Co v McLean
But - A rejected offer may in all the circumstances be treated as remaining open and available for acceptance on the basis of mutual assent manifested by conduct (per Heydon J, Brambles)
Stevenson, Jaques & Co v McLean (1880 UK)
Facts:
McLean offered to sell iron to Stevenson, Jaques & Co for 40s per ton, offer open till Monday.
9.42am Monday Stevenson Jaques & Co telegraphed: “please wire whether you would accept forty for delivery over two months, or if not, longest limit you could give”. Issue: Was this a rejection of the offer?
McLean didn’t answer and sold the iron to someone else.
Stevenson, Jaques & Co sent a telegram accepting the offer.
Issue:
Was there a binding contract to sell iron?
Held:
Not a rejection of the offer; not a counter-offer but a mere inquiry. The offer could have been revoked (but wasn’t) so it was still open and was accepted. There was a binding contract.
In depth summary
There was an offer made by McLean to sell iron to Stephenson Jaques at a particular price of 40 shillings per tonne. Stephenson Jaques weren't a % sure that they were happy with that. And they they wanted to find out if they could get a better deal.
So they sent a response through Telex at 09:42 on Monday with these particular words. Please wire whether you would accept 40 for delivery over two months or if not the longest limit you could give. So what they're suggesting there is that they wanted to take the delivery over a longer time frame. Maybe they had cash flow issues or who knows. The critical issue became the interpretation of this communication and in particular whether it was a mere inquiry or a rejection.
McLean didn't answer and sold the iron to someone else, but that didn't revoke the original offer because that was not communicated in time to Stephens, Jaques.
Stephens, Jaques then decided to accept the original offer and telegrammed with the acceptance. And so the issue was whether there was a binding contract to sell the iron which hinged upon whether or not this communication here was a rejection of the original offer which would have killed the offer. The court held no this was not a rejection of the offer. It was not a counter offer but a mere inquiry.
The offer could have been revoked but it wasn't because the sale of the iron to somebody else was never communicated and so the offer remained open and was effectively accepted by Stephens Jaques and there was a binding contract.
The key thing to take away from this case is to understand the distinction between a counter offer which is treated as a rejection and terminates an offer and a mere inquiry and looking at the particular facts and the language used in that communication which was considered to be a mere inquiry.