Offer Acceptance Notes

Contract Law: Offer & Acceptance

Agreement in contract law

Criteria of a valid contract

• Agreement = Offer + Acceptance. A contract needs a clear and certain offer; and a clear and unequivocal acceptance.

• Intentional to create legal relations

• Consideration

Bilateral and unilateral contracts

• Bilateral contract: most common. Both parties assume an obligation to each other, by making each other a promise to do something (eg sell the other party an item in exchange for a payment).

• Unilateral contracts: one party makes an offer or proposal in terms which call for an act to be performed by one or more other parties (eg offer calls for specific lost property to be returned in exchange for a reward). Does not involve mutual promises – only one party, the offeror, assumes an obligation. Only actual performance of the required act will constitute acceptance. A unilateral contract is then made when the other party ‘accepts’ the offer by performing the act in accordance with the requirements of the offer.

  • Carlill v Carbolic Smoke Ball Co; Errington v Errington and Woods.

  • Carlill v Carbolic: unilateral offer since it prescribed acts which, when performed, would constitute acceptance. The prescribed acts were sufficiently ‘clear and certain’; clear ‘communication’; and intention to be contractually bound. Carlill is a unilateral offer made to all the world, but such offers can also be one-to-one.

OFFER

Define offer

• An ‘expression of willingness to contract on specified terms made with intention that it shall become legally binding as soon as it is accepted by the person to whom it is addressed’ (Treitel, The Law of Contract; confirmed in Leonidas).

• Offer must have intention to be bound (ICLR), assessed objectively (Smith v Hughes): whether ‘reasonable man’ would believe.

• Hartog v Colin & Shields: an offeree cannot ‘snap up’ an offer which he knows, or ought to have known, is made in error.

• Valid offer = (1) clear and certain; (2) communicated; (3) ICLR (objectively ascertained).

Criteria for a valid offer

• Must be:

• (1) Clear and certain

• (2) Communicated

• AND

• (3) show intention to enter into a legal relationship (objectively ascertained—Smith v Hughes).

• Businesses are deemed to be legally bound.

• Family and friends cannot make contracts with each other.

Intention to be legally bound

• Assessed objectively—Smith v Hughes.

Clear & certain

• Storer v Manchester CC: was clear and certain.

• CF Gibson v Manchester CC not clear & certain, letter had said we ‘may’ be willing to sell the property, Gibson sent application form back with a blank price (not valid acceptance) uncertain, tentative wording.

Offer CF Invitation To Treat

• Invitation to Treat (ITT): a first step in negotiations, not an offer capable of leading to a contract.

• Goods in shops (generally ITT)

  • Display of goods for sale, Fisher v Bell: price-marked goods displayed in shop window (flick-knife here) = ITT. Seller can still refuse to sell.

  • Goods on shelves of self-service store: Pharmaceutical Society of GB v Boots Cash Chemists: = ITT. Offer made by customer when presents goods at the cash desk; can be accepted or rejected at cash desk. Customer can take goods from shelves, then change minds. Policy reason: shopkeeper can refuse to sell.

• Advertising

  • Generally, ITT (Partridge v Crittendon—only advertised selling wild birds, was an ITT).

  • Advert by an auctioneer/a request for bids at auction = ITT (Harris v Nickerson).

  • Price lists advertising specific goods at specific price = ITT (Grainger & Son v Gough). Wine merchant list stocks were limited, not limitless supplies.

  • 2 exceptions, where advert = offer

  • (1) clear & certain adverts by manufacturers with limitless supplies (Grainger v Gough; Partridge v Crittenden obiter Lord Parker CJ)

  • (2) unilateral offers, Carlill v Carbolic Smoke Ball Co: an offer because: (2) prescribed specific act as acceptance—was (2) clear & certain wording (Storer v MCC, showing intention to be bound); communication; showed (3) intention because they deposited money (1000) to pay out on performance.

  • So for advert + offer, must be : (1) unilateral (prescribing an act to constitute acceptance); (2) clear & certain; (3) show intention to be bound.

  • Lefkowitz v Great Minneapolis Surplus Store (clear prescribed act = being first customer to arrive at store at 9am)

  • Leonard v Pepsico.

• Invitations to Tender

  • A negotiating device, where a party (usually a company) wishes to purchase a major item/service. Requestor invites tenders from those interested in supplying the goods/services.

  • Generally = ITT, an invitation to interested parties to make offers to be considered.

  • Generally = ITT (Spencer v Harding). The tender (circular sent out, stock offered for sale by tender) C submitted highest bid, D wouldn’t accept it. Held: tender = ITT, the tenders were offers the D’s could accept/reject.

  • EXCEPTION—if the invitation to tender expressly undertakes to accept the highest or lowest bed, then = a unilateral offer : said in Spencer, if circular said ‘we undertake to sell to the highest bidder’. Confirmed in Harvela Investments v Royal Trust Co of Canada). Is a unilateral offer, satisfied by performance of a prescribed act (making the highest bid); actually creates 2 unilateral contracts (Lord Diplock).

  • Tenders/requests for tenders can give rise to a contractual obligation to consider tenders properly submitted (Blackpool v Blackpool) this obligation arose on the facts because (i) the invitation was made by the Council to a specified number of parties; (ii) there were specific and absolute conditions for the submissions and timing of tenders showed intention to consider all tenders properly submitted.

• Auctions

  • Auction with reserve: Generally, auctioneer’s request for bids = ITT (Payne v Cave).

    • Bidder makes offer, which auctioneer then free to accept/reject.

    • Acceptance indicated by fall of hammer.

    • Cave could withdraw offer any time before fall of hammer.

  • Without reserve auction (...

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