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Multiple Offers and an Examination of Their Effects on the Acceptance of Offers

Example Contract Law Problem Question

Scenario
Hugo, a recently retired lawyer, joined the ‘NO TECH movement in July 2013. The members of the movement are strongly opposed to
the use of digital technology. The majority of members live in the village of Utopia.

Hugo will be moving to Utopia at the end of 2014. Therefore, he will no longer need his car, a five year old Volkswagen Polo. He places
an advertisement on the notice board of his local newsagent.

‘FOR SALE’- Volkswagen Polo in excellent condition. Will be sold to the first person who sends notice in writing that they wish to buy it
for £3,000 to the following address: 53 Bridge Street, UT1 FG3′

On Sunday evening, Letty, a newly qualified driver, posts a letter stating that she wants to buy Hugo’s house on Wednesday morning.

On Monday morning, Jackie, Hugo’s acquaintance, passes the news agent’s on her way to work. She sees the advertisement and
recognises the address. On her arrival at work, she sends Hugo an email to the email address that he provided her with when they first
met, two years ago, stating that she is willing to pay £3,000 for the car. Hugo never receives the email, since as a member of the ‘NO
TECH’ movement he no longer uses computers or mobile phones.

On Tuesday evening Hugo meets his friend Mike for dinner and over the course of the meal, Hugo promises to sell the car to Mike for
£2,500.

Advise Hugo as to whether he is contractually bound to Letty, Jackie and Mike.

Answer
In order for any contract to be valid, three elements must be present. Firstly, there must be an agreement by the parties. Secondly, this
agreement must be such as to demonstrate an intention to create legal intentions and finally, the agreement must be supported by
consideration.1 Clearly, the final two elements will only become relevant once an agreement is found and, on the facts here, will only
require discussion in respect of Mike and then only in relation to legal intention.

The starting point is the agreement therefore and in order to consider this point, it is prudent to briefly set out the general approach
taken by the courts when determining the existence of a potential agreement, then work through each of the parties’ claims to a binding
contract with Hugo and finally conclude whether Hugo is bound to sell his car to any one of them.

The Courts’ General Approach

In contractual terms an agreement is split into two parts, an offer and acceptance.2 An offer is seen as a statement that has the effect of
demonstrating that a party is willing to contract on the terms set out on the basis that they will be bound to do so if the offer is
accepted by the party to whom it is addressed.3 Acceptance, rather unsurprisingly, is the response given by the party to whom the offer
has been made, which demonstrates that they agree unconditionally to the terms set out.4 In respect of both elements,5 the court takes
an objective view as to the existence of an agreement.6 In this respect an individual will be bound by their conduct if the conduct is such
that a reasonable person would believe that they intended to contract, even if they actually held no such intention.7 The starting point in
this scenario therefore is to consider whether Hugo’s advertisement could be seen to constitute an offer.

Is there an Offer?
In ordinary circumstances an advertisement is not considered an offer.8 It appears that this is the case because of the binding nature of
an offer. In other words, if Hugo’s advertisement was considered an offer, he would be bound to sell the car to all who accepted it,
something which is clearly impossible.9 Here however, the nature of Hugo’s advertisement is slightly different to ordinary
advertisements. In ordinary circumstances, an advertisement is often open to some degree of negotiation. Here, for example, a potential
purchaser of Hugo’s car may attempt to negotiate a lower price than that advertised. This does not appear to be possible in respectHelp of
Hugo’s advertisement. Hugo’s advertisement makes it clear that the car will only be sold to a person who sends written confirmation of
their desire to buy. In this respect, there is little doubt that Hugo intends to be bound once this written confirmation has occurred. At
this point he cannot renege on the offer. This kind of contract is known as a unilateral contract10 and has the effect of making an
advertisement into an offer.11 The point being in this respect, that it is only when an advertiser makes it clear that they intend to be
bound immediately by anybody accepting the offer, that it will constitute an offer. The distinction is a fine one and it seems that the crux
of the matter in this context is Hugo’s use of the word ‘first’ in his advertisement. In using this specific wording he is demonstrating his
intention to be bound by one offeree only, thus avoiding the impossibility issues discussed above, but also demonstrating that the
acceptance will be binding on him.

It seems reasonable to suggest that in the absence of the word ‘first’ the advertisement would have been considered an invitation to
treat rather than an offer and Hugo would not therefore have been bound by any of the parties. Given that the advertisement is likely to
be considered an offer however, it becomes necessary to consider each of the remaining character’s actions in turn.

Letty
There are two issues in respect of Letty’s comments. The first of these is whether her letter constitutes acceptance of Hugo’s offer at all
and, if it does, whether it will be binding on Hugo because it seems clear from the facts that when he agreed to sell the car to Mike,
Hugo had not yet received the letter from Letty.

In terms of the first matter, the issue in this context is whether Letty’s letter is accepting the terms of the offer as set out by Hugo or is
attempting to impose a new term. If it can be found that it is the latter circumstance, Letty’s letter will not be considered an acceptance
of the offer at all, but rather a counter offer to Hugo’s offer or an invitation to treat. The point in this context is that Letty stipulates that
she will buy Hugo’s car on Wednesday morning. If this means that she will only buy the car on Wednesday morning and, if it is not
available at that time, will have no interest in buying it, the letter may not be considered as acceptance of Hugo’s offer. It is at this point
that the court’s objective approach becomes important and rather difficult where the provided facts are limited. The question in this
context is whether a reasonable person would believe that Letty’s letter constituted acceptance of Hugo’s offer as it stood. In this
respect, it seems reasonable to suggest that facts outside of those specifically contained within the letter would be taken into
consideration.12 If, for example, Letty was going to be away from the area where the car was located until Wednesday, but wanted to
ensure that Hugo would not sell it before then, it could be suggested, because Hugo had not stipulated within the offer the date upon
which the car must be purchased, that the specific comments within Letty’s letter were simply clarifying points rather than an attempt to
impose additional terms into the contract. If however, Letty will only be in the area where the car is located on Wednesday and will not
be willing to buy it on any other day, it seems that this will be an additional term and cannot be considered acceptance to Hugo’s offer.

The fact that the status of Letty’s letter is unclear means that it is necessary to consider the second element in this context, whether it
will be binding on Hugo. The general position in respect of all offers is that acceptance must be communicated to the offeror.13 For
these purposes, communication ordinarily occurs once the offeror is made aware of the acceptance.14 There are certain circumstances
whereby the need for communication is waived however. The most common of these being where the contract is a unilateral one.15
Although it appears that Hugo’s advertisement could be considered an offer for the reasons set out above on the basis that it creates a
unilateral contract, the very nature of the offer is that it requires express acceptance in the form set out. In other words, where conduct
is sufficient for a unilateral contract offer to be accepted in ordinary circumstances thus avoiding the need for communication to the
offeror, here Hugo has set out the conduct required within the offer; that conduct being communication.

On the face of it at this stage in the consideration, it appears that Letty will not have communicated her acceptance of the offer to Hugo
by the time he promised to sell the car to Mike because he was unaware that Letty’s letter had been sent. This is not the end of the
matter however because there is one significant exception to the notion that communication of acceptance occurs only when the offeror
is aware of it.

Under, what is known as the postal or posting rule, acceptance is considered to have been communicated to the offeror as soon as the
offeree posts a letter containing it.16 This is because the post office is considered to be the agent of both parties to the agreement and
thus, it is considered that the offeror is aware of the acceptance as soon as it is posted.17 There is one further complication in this
respect. This is that it is possible for an offer to be made in such a way that it is expressly apparent that the postal rule should not apply.
In other words, the offeror is able to assert that the acceptance must be communicated to them. One method of doing this is by holding
that the offer can only be accepted once the offeror has notice of the acceptance.18 This approach clearly fits with the facts here, in that
Hugo expressly states that he will require written notice of acceptance and therefore it seems that, in doing so, he will have avoided the
postal rule.

The result of this is that even if Letty’s letter is considered to constitute acceptance, it will not have been communicated to Hugo and will
not therefore be binding on him, at least until it arrives at his address. In order to avoid being bound at this point, something that may
be important given the discussions below, Hugo must place another advertisement stating that the offer of sale on the terms set out has
been revoked.19

Jackie
Jackie presents an interesting problem here, in that whilst Hugo’s offer stipulates that written confirmation must be sent to his address,
it does not stipulate that this must take the form of a letter. The effect of this, it could be suggested, is that, because emails are
practically instantaneous, it would be deemed to have been received by Hugo almost as soon as Jackie sent it.20
Help
There are two issues in this respect however. The first, in the same manner as described above, relates to the use of the word notice
within Hugo’s offer. This, as mentioned, connotes the notion that in order to be bound Hugo would need to be aware of the contents of
Jackie’s email, which of course, he was not. The alternative issue is that email communications are only considered to have been received
at the point when it would be reasonable to expect the recipient to have read them.21 In this context, it seems that even if Jackie was
unaware that Hugo belongs to the ‘NO TECH’ movement, it would be reasonable for Hugo to argue that she could not reasonably have
been certain that he would have read an email that was sent to an address that was two years old.

It seems clear in this context, if either of the approaches mentioned above are taken, that whilst Jackie’s email could, on the facts,
constitute acceptance of Hugo’s offer, the acceptance will not be binding on him because it will not have been effectively
communicated to him.

Mike
The position in respect of Mike is not in any way linked to the offer that Hugo made in the advertisement. The offer to sell Mike the car
for £2,500 is clearly separate from that earlier offer. In this respect, it seems clear that offer and acceptance would be satisfied, although
the facts are silent as to the details of this. The only issue in this respect therefore would lie in whether, if he wished to avoid the
contract, Hugo would be able to demonstrate that there was no intention to create legal relations between the parties.

The general position in this respect is that in social agreements, and agreements between friends clearly fall within this category,22 are
not intended to be legally binding.23 This does not mean that such an agreement cannot be binding however, because here, as in
assessing offer and acceptance, the courts will look objectively at the facts.24

No facts are set in the scenario as to the nature of how Hugo’s promise was made, but if it was in passing in a general chat at the meal,
Hugo may be able to assert that he did not intend it to be legally binding. If the discussion was more considered however, it seems far
more likely that Hugo would have difficulty in demonstrating this point.

Conclusion
Hugo will not be bound by Letty’s letter until it arrives, will not be bound by Jackie’s email and may be able demonstrate on the facts
that he ought not to be bound by his promise to Mike.

Footnotes
1 Chitty on Contracts (31st edn Westlaw) at 2-001

2
Ibid at 2-002

3 Air Transworld Ltd v Bombardier Inc 2012 EWHC 243

4 Op cit at n 1 at 2-027

5
Inland Revenue Commissioners v Fry 2001 STC 1715

6 Ignazio Messina & Co v Polskie Linie Oceaniczne 1995 2 Lloyd’s Rep 566

7
See OT Africa Line Ltd v Vickers plc 1996 1 Lloyd’s Rep 700

8
Partridge v Crittenden 1968 1 WLR 1204

9 Grainger & Son v Gough 1896 AC 325

10
See Rogers v Snow (1573) Dalison 94, for example

11 Carlill v Carbolic Smoke Ball Co Ltd 1893 1 QB 256

12 See Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd 1979 1 All ER 965

13
McIver v Richardson (1813) 1 M & S 557

14 See Entores Ltd v Miles Far East Corp 1955 2 QB 327

15 Op cit at n 11

16
Adams v Lindsell (1818) 1 B & A 681

17 Household Fire Insurance Co v Grant (1879) 4 Ex D 216

18
Holwell Securities Ltd v Hughes 1974 1 WLR 155

19
Shuey v United States (1875) 92 US 73

20 See Entores Ltd v Miles Far East Corporation 1955 2 QB 327

21 Help
Brinkibon Ltd v Stahag Stahl 1983 2 AC 34

22 Coward v Motor Insurers’ Bureau 1963 1 QB 259

23 Balfour v Balfour 1919 2 KB 571

24
Op cit at n 11

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