Introduction: Elements of Contract
• Offer
+ Acceptance = Agreement
• Consideration
• Intention
to Create Legal Relations
Contract types:
• Bilateral: 2 parties 2 promises
• Unilaterial:
1 promise – act rather than promise
Offer
• Definition: proposal or promise to be bound on specific
terms
• Determine
whether there’s an offer:
– Certainty
– Gunthing
v Lynn (1831)
Offer or Invitation
to Treat?
• An
offer once accepted creates an agreement
• An
offer can be contrasted with an invitation to treat
• An
invitation to treat is an invitation to enter negotiations
• The
“acceptance” of an invitation to treat does NOT create an agreement
• It
is not always easy to distinguish between an offer and an invitation to treat
In certain types of standard transactions (e.g. display of
goods, advertisements)
there
are some general rules that apply as to whether or not an offer has been made
Display of goods in shop
• Display of goods in self service
shop not an offer: the customer makes the offer (Boots)
• A shop is a place for bargaining,
not compulsory sales?
• Shopkeeper exposed to an action for
damages if stock exhausted?
• Customer bound on picking up the
goods?
Auctions
• Notice of auction unlikely to
constitute an offer
• When the auction is held, the bid is
the offer, accepted on the fall of the hammer: (SGA 1979, s 57(2))
Advertisements
• Generally
these are Invitations to Treat NOT offers
• If
an advert in the paper was an offer the person who placed the advertisement
would be required to contract with anyone/everyone who wanted to purchase the
goods at the price stated
• Advertisement
– generally an invitation to treat
• Partridge
v Crittenden [1968]
• Harris
v Nickerson (1873)
Treat each case on its merits
But sometimes a seller may indicate that he or she is making
an offer (Lefkowitz).
Unilateral contracts
•
Carlill v Carbolic Smokeball Company [1892]
–
Offer made to the world at large
–
Advertisement - £100 offered “reward”
–
Offer capable of acceptance
Parties:
•
Offeror – the person making an offer
•
Offeree – the person receiving the offer
Communication of
offer
• Must
be communicated to be binding
– Taylor
v Laird (1856)
• Reward? Only if aware of its existence
Termination of offer
• Death
of offeror or offereee before acceptance
• Revocation
(withdrawn)
• Revocation
effective? Must be communicated
– Bryne
v Van Tienhoven (1880)
Exceptions:
– Revocation
would have been recv’d – negligence
– Offer
made to general public
• Difficulty
with unilateral contracts (Carlill)
• Refusal
or rejection
• Lapse
of offer
– Ramsgate
Victoria Hotel Company v Montefiore (1866)
Counter-offer
• Principle: counter-offer terminates original offer
– Hyde
v Wrench (1840)
• Counter-offer
or request for further information?
Stevenson v McLean (1880)
Acceptance
Acceptance
is (a) an absolute and unconditional acceptance of the offeror’s offer or
proposal, signifying formal agreement, or (b) the act or promise requested by
the offeror in his or her offer.
• Acceptance
must equal offer
– Acceptance
must be unequivocal & unconditional
• Acknowledgement
is insufficient
Mode of Acceptance
• Acceptance
can be communicated :
– Orally
– In
writing or
– Implied
from conduct
Implied Acceptance
• Implied
by conduct:
– Carlill
v Carbolic Smokeball Company [1893]
Brogden v Metropolitan Railway Company (1877
Acceptance requirements
- Must
be made while the offer is still in force
- Must
accept the entire offer
- Must
be absolute and unqualified
- Communicated
to the offeror
- Acceptance
while the offer is in force: lapses after a ‘reasonable time’
– What
is reasonable?
– Victoria
Hotel Company v Montefiore (1866)
- Must
accept the entire offer
- Acceptance
must be absolute & unqualified
– Counter-offer
– Hyde
v Wrench (1840)
- Communication
to the offeror
– Rule: acceptance must be communicated
– Exemptions
1.
Silence
2.
Postal Rules
3.
Instant Communication
Exemptions to the
general rule
• Effect
of silence
– Felthouse
v Bindley (1862)
• Acceptance
by post: the postal rule
– Adams
v Lindsell (1818)
– Brinkibon
Ltd v Stahag Stahl Gmbh [1983]
The postal rule
• General rule that acceptance is
complete on posting
• Offeror may require actual
communication if he/she wishes
• There is no postal rule for the
withdrawal or the rejection of offers
• The rule will not apply where it
will lead to “manifest inconvenience or absurdity” (Holwell) or where
the letter is misaddressed (Korbetis)
• The ordinary rule does not apply
where the letter is wrongly addressed
Postal rule
or communication of acceptance?
• Fax?
• Web-based transactions?
• E-mail?
• Texting?
Qualified acceptance
Counter-offer?
Or
- Conditional
Acceptance
- Clarifying
the terms of the ofer
- Battle
of the forms
• Conditional
Acceptance
– Neither
full acceptance nor counter-offer
– ‘Subject
to Contract’
• Clarifying
the terms of the offer:
– Complex
business contracts – clarifying terms & extent of offer?
– Stevenson,
Jacques & Co v McLean (1880)
•
Held: request
for information not counter-offer
• Battle
of the forms
– Butler
Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979]
‘Last shot’ principle
The battle of the forms
Butler
Machine Tool Co v Ex-Cell-O-Corporation (1979)
1 On May 23
S offered to sell a machine to B, subject to terms and conditions “which shall
prevail over any terms and conditions” in B’s order. One condition included a
price variation clause.
2 On May 27
B ordered the machine, subject to B’s terms and conditions. These did not
include a pvc. Order had a tear-off acknowledgment of receipt, stating “We
accept your order on the terms and conditions stated thereon”.
3 On June 5
S completed and signed the receipt and returned it together with a letter
stating that the machine would be delivered in accordance with the quote of May
23.
Whose terms
should prevail?
Withdrawal of offer
• An offer can be withdrawn at any
time before acceptance unless there is a contract to keep it open
• Withdrawal of the offer must be
communicated
• In the case of a unilateral contract
the offeror must take reasonable steps to communicate the withdrawal of the
offer
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