Professional Documents
Culture Documents
Offer
Offer
A. Overview
‘agreement’ almost always requires ‘offer and acceptance’
a clear statement that one party (the “offeror”) wishes to deal on certain terms, and
an unqualified acceptance of those terms by the other party (the “offeree”).
Offer and acceptance are required for a contract in almost every situation.
Exceptions:
Gibson v Manchester City Council (1978)
both parties have carried out the terms of an agreement by conduct over time as if a
contract had been concluded, the Court may find a contract even though there has
not
Brogden v Metropolitan Railway Co (1877)
G Percy Trentham Ltd v Archital Luxfer (1993)
Not really have acceptance but they perform as if there’s a binding contract
B. Offer
“An indication of a willingness to be bound on certain terms made with the intention
to be bound as soon as the offer is accepted” (Treitel, quoted in F/G).
An “offer” must be certain and intended to be binding on the offeror.
X thinking
Invitation to treat
The law distinguishes binding “offers” from non-binding “invitations to treat”. The
latter are merely preparatory steps in negotiation “inviting” the other party to make
a binding offer.
B1. Advertisements
Advertisements are usually only invitations to treat. Readers of the advertisement
may be tempted to make an offer, but the advertiser is free to accept or reject this
Partridge v Crittenden (1968)
A criminal prosecution for “offering for sale” birds contrary to the Protection of Birds
Act, 1954. D had advertised, in a trade magazine, bramblefinches “25 shillings each”.
Prosecution failed as the advertisement was NOT an “offer”; merely an “invitation to
treat”; inviting readers to offer to buy.
Carlill v Carbolic Smoke Ball Co (1893) Exception
Where the advertiser makes clear that s/he intends to be bound in respect of anyone
who complies, the advertisement may be treated as an “offer”
D’s advertised their product which they confidently stated would prevent a person
catching influenza if used properly. They offered to pay £100 to anyone who used the
product as directed but still caught ‘flu. They said they had deposited £1,000 in the
bank to meet any claims. P bought the product, used it as directed but caught ‘flu.
1. They said “no contract” because you cannot make a contract with the whole
world. BUT Bowen LJ said:
“It is not a contract made with all the world….it is an offer made to all the world; &
why should not an offer be made to all the world which is to ripen into a contract
with anybody who comes forward & performs the condition?”
2. They said their promise was “too vague” to be an offer since it had no time limit.
The Court held that it was “implied” that it would last only for a “reasonable”
period”.
3. They said even IF offer, P had not “communicated” acceptance thereof.
The Court held that an offeror can, exceptionally, “waive” the need for formal
acceptance so that the “act” of acceptance is enough (the company would not want
100’s of letters of acceptance).
4. They said that they had never intended their promise to be taken seriously….it was
a mere “advertising puff” to advertise their product.
Of course this defence failed because they had deposited money to meet claims so
MUST have intended it to be serious.
5. They said P had provided no “consideration”.
This is our next topic. When we come to Consideration, decide for yourself what Mrs
C’s consideration was.
Unilateral contract
Carlill involves a unilateral (one-sided) contract. Only ONE side has any obligations.
No one is obliged to use the product etc but if anyone does & fulfils requirements,
D’s must pay.
Some wrongly state that a “unilateral” offer is one “made to the whole world”. It is
true that unilateral offers are OFTEN made to the whole world (like Carlill) but this is
not always the case. Unilateral just means “one-sided” because only 1 party has
obligations. Errington for example was unilateral but made to only 1 party.
Most contracts are bi-lateral because BOTH sides have obligations (eg sale &
purchase).
Two questions to consider:
1. Would it have been different if, when she took the medicine & caught ‘flu Mrs
C had never seen the advert?
Different. If she had never seen the advert, she was unaware of the reward,
she would not be able to accept the offer. Acceptance in ignorance is not
permitted.
2. Would it have made a difference if someone else had bought the ball & given
it to Mrs C to use?
No difference. There is a binding contract between the company and the one
who performed the act as required. The ways of getting the smokeball is
irrelevant.
Fisher v Bell
A shop displayed an “offensive weapon” (a flick-knife) in window with price tag and
prosecuted for “offering for sale” contrary to Restriction of Offensive Weapons Act,
1959.
Held: not guilty (criminal case) because under established rules of contract it was
NOT an offer to sell but an “invitation to treat”.*
B2. Auctions
it is the bidder who makes the offer which the auctioneer (acting on behalf of the
owner) may accept or reject (usually by the fall of the hammer)
lots advertised at auction are only an “invitation to treat”.
The rule in England was established in the old case of Payne v Cave (1789) and given
statutory force by section 57(2)of the Sale of Goods Act, 1979.* The statutory rule is
adopted in Hong Kong by section 60(2) of the Sale of Goods Ordinance (Cap 26).
This means that before the hammer falls the auctioneer may withdraw lots (eg if
“reserve”* not reached or bids too low) AND the bidder may withdraw his bid
BEFORE the hammer falls.
There are 2 “special situations” with auctions:
1. The auctioneer wrongly “selling” below reserve;
* What is a “reserve price”; why would the auctioneer start bidding under this price?
If the owner of goods puts on a “reserve” price, the auctioneer (his agent) has
no authority to sell below. If he (negligently/deliberately) “accepts” a lower
bid, the sale is VOID since he has no authority to sell. BUT he will then have to
compensate the unfortunate bidder…..
Hong Sook Fong v Ismail Halima (2009) Sakhrani J stated:
“…an auctioneer who sells property without …authority will be liable to the
purchaser in damages for breach of the implied warranty of
authority….where a reserve price has been fixed by the vendor and the sale
is…subject to a reserve, the auctioneer has no authority to sell below it”.
2. The auctioneer refusing to accept a bid where auction “without reserve”.
Where an auction is stated to be “without reserve”, this is a promise to sell to
highest bidder, however low the bid. If the auctioneer refuses to accept the
bid there is no sale (because the offer has not been accepted) BUT the
auctioneer will be liable to pay damages to the bidder:
Barry v Heathcote Ball & Co (2001).*
B4. Tenders
An invitation for the submission of tenders is not an offer, merely an invitation to
treat unless the party seeking tenders expressly promises to accept the highest (or
lowest)* tender
* If the Government for example asks for tenders for a project they will probably
want the lowest BUT if they are asking for tenders to buy land plots they will
probably want the highest one.
Harvela Investments Ltd v Royal Trust Co of Canada Ltd(1985)
D1 advertised shares for sale to highest bidder. Bids (tenders) were to be secret. P’s
bid (Can) $2,175,000. D2 bid $2,100,000 OR $100,000 more than any other bid (a
“referential” bid). D1 accepted D2 bid. P’s successfully sued for breach and HL said
the non-referential bid should have been accepted……Why?
TWO main reasons:
1. Referential bids cause uncertainty (what if more than one referential bid?);
2. They destroy the purpose of secret tenders (to get the best price) by allowing
a low fixed price followed by a referential one.
Again the invitation for tenders, because there is a promise to accept the highest, is a
“unilateral” offer. No one has to bid BUT if they do bid and are the highest, their bid
must be accepted.
If there is no promise to sell to the highest bidder, the invitation for tenders is just an
“invitation to treat” and there is no obligation to accept the highest (or any)
tender….ALL of them can be rejected.
C. Acceptance
“final & unqualified assent to the terms of the offer”.
So no acceptance if there are any qualifications attached.
C3. Counter-offer
A “counter-offer” (which is not an “unequivocal” acceptance) is not a valid
acceptance because it produces a variation of terms from that originally offered. The
counter-offer brings the original offer to an end.
Hyde v Wrench (1840)
D offered to sell land to P for £1,000. P replied offering £950 which D refused. P then
agreed to pay £1,000 but D no longer interested. P sued for breach.
Held: no contract as P’s “counter-offer” had brought D’s offer to an end.
Capacious Investments Ltd v Secretary for Justice (2001)
Butler Machine Tool Ltd v Ex-Cell-O Corp (England) Ltd (1979). P’s offered to sell
machinery to D’s for £75, 535 on P’s standard terms which allowed for “price
variation”. D’s accepted on “their” terms (No price variation!) with a tear-off
“acceptance” strip. P’s returned the strip but added that the contract was on their
original terms. They later claimed the additional (varied) price….
The action failed as it was held the sellers had accepted the buyer’s terms by
returning the tear-off “acceptance” strip (their reference to their own terms was
irrelevant). Lord Denning said that in these cases whoever “fired the last (accepted)
shot” dictated terms and if neither did there would be no contract. He suggested
Court should be able to impose “reasonable” terms but this view not followed.
Suppose the offeror makes TWO slightly different offers (on 2nd & 3rd) and offeree
then “accepts your offer of 2nd”:
1. Has offeree accepted 1st offer?
2. Has offeror withdrawn 1st offer by 2nd offer?
3. If so, is offeree now making a “counter-offer”?
It’s an unusual scenario, not likely to happen often but (if you are keen!) read:
Pickfords Ltd v Celestica Ltd [2003] EWCA Civ 1741
C6b. Exceptions
Exception 1
There is no need for communication if the offeror “waives” (does away with) it for his
convenience. E.g in Carlill all the “sniffers” did not have to communicate; fulfilling the
requirements was enough (they wouldn’t want 100’s of letters). Same if I offer
$1,000 to anyone who swims Harbour in January. You don’t have to notify me…just
do the act.
The “silence not acceptance” rule is to prevent a “forced” contract.* BUT….
Given that the nephew wanted to sell to his uncle, shouldn’t Felthouse have been
treated as a case of “waiver”?
Exception 2
Remember that communication of acceptance will not be needed in those very rare
cases where it has been held that acceptance has taken place by conduct: (eg
Brogden case).
C7.Postal rule
A previously important (but now practically insignificant) exception to the rule that
acceptance takes effect when/where notice received is the “Postal Rule”.
1. If post a proper means of acceptance &
2. The letter of acceptance is properly posted &
3. The offeror does not state otherwise…
A LETTER* of acceptance takes effect as soon as it is validly posted even if it does not
arrive!
Adams v Lindsell (1818)
D made a (wrongly addressed) offer by post to P who posted a letter of acceptance
on September 5 which arrived on September 9. D had already sold on 8 th. P sued.
P’s action for breach succeeded. P had completed contract on 5th when letter posted
so D’s sale on 7th was a breach.
Why? Court said D had indicated a letter of acceptance was a proper method so ran
the risk of delays in the post. AND (practically)…
“…if D’s were not bound by their offer…till the answer was received, then P’s ought
not to be bound till after they had received the notification that D’s had received their
answer & assented to it. And so it might go ad infinitum.”
BUT key factor probably…
(the real reason)
“ (the delay arose) entirely from the mistake of (D’s)”.
However, the “rule” has since been applied irrespective of offeror’s fault:
Dunlop v Higgins (1848 HL but Scots);
Henthorn v Fraser (1892 CA)
Postal rule exceptions
1.The post must be a proper method of acceptance. So, if the offeror says “I need
your reply urgently” or “email or telephone your reply; post too slow”…a letter would
not be a proper method and the rule would not apply. The rules on “method” are
most clearly laid down in
Yates v Pulleyn (1975)
1. If offeror insists on one method of acceptance only, offeree must comply;
2. If offeror recommends the method of acceptance, offeree must use this OR
one “no less favourable” to offeror;
(Court “presumes” 2 not 1 unless insistence very clear).
3. If neither 1 or 2 applies offeree must use “reasonable” method.
What is “reasonable” (lawyers love this word!) depends on the circumstances
of each case but for example “I need your answer quickly”… a posted letter
would not be reasonable.
2. The letter of acceptance must be validly posted. So, if offeree puts the wrong
address or insufficient postage rule does not apply.
What if misdirected acceptance finally arrives? When does it take effect? Treitel
suggests “at the least favourable time for the careless offeree”
[adopted in Korbetis v Transgrain Shipping (2005)].
3. The offeror may exclude the rule by saying “your acceptance will only take effect
on receipt”:
Holwell Securities v Hughes (1974)
Involved an offer (an “option”) to purchase land. The Court held that the words:
“The said option shall be exercisable by notice in writing…”…were sufficient to
exclude the postal rule (so acceptance only on receipt).
4.The rule only applies to acceptances. So, curiously, a letter withdrawing or
“revoking” an offer only takes effect on receipt. Consider the following scenario:
A makes an offer by post to B on 2nd;
On 3rd A changes his mind and posts a revocation letter;
On 4th receives the offer and immediately posts acceptance;
On 5th B receives the revocation;
On 6th A receives the acceptance.
Any contract? Yes, a contract on 4th; even though at that time A no longer wanted to
deal! This is basically the scenario of:
Byrne v Van Tienhoven (1880)
5. Remember that the rule only applies to letters and telegrams (have any of you
seen a telegram?).
The “general rule” (Entores/Susanto- Wing etc): other forms of acceptance take
effect when “Notice” received by offeror.
D. Termination of offer
Offers do not last indefinitely. So how do they come to an end? There are 4
situations:
1. Rejection;
An offer comes to an end if it is rejected by the offeree.
Remember that a “counter-offer” has the same effect as a clear rejection and
brings the offer to an end (Hyde v Wrench/ Capacious Investments Ltd v
Secretary for Justice ).
2. Revocation;
a “withdrawal” of the offer by the offeror.
The general rule is that the offeror may withdraw (revoke) his offer at any
time until acceptance is complete.
However, revocation only takes effect when communication of withdrawal is
received by the offeree
Byrne v Van Tienhoven.
What if offeror promises to keep his offer open for a certain period…can he
withdraw earlier?
Eg “I offer to sell my Porsche car to you for $300,000. I will give you until
Friday to decide”. Can he withdraw on Thursday?
Yes, UNLESS offeree has given some “consideration” to keep offer open:
Dickinson v Dodds (1876)
The Court said that unless some consideration given for promise, it was only a
“naked bargain” (“nudum pactum”).
So, a promise to keep an offer open only binding if offeree gives something in
return for promise (eg paying money) in which case he has purchased an
“option”. He is not bound to buy BUT offeror is bound to keep offer open for
the fixed period.
B. How can the offeror revoke an offer “made to the whole world”?
Where an offer is made to the whole world (like Carlill) how can it be
withdrawn? Obviously the offeror cannot contact everyone individually. There
is not much common law authority BUT it is generally believed that the view
of the US Supreme Court in Shuey v US (1875) would be followed… The
revocation must have the “same notoriety” as the offer.
3. Lapse of time
Where an offer is expressed to be open only for a fixed time it will end when
the time expires.
If there is NO fixed period the offer will end “after a reasonable time” (that
word again!):
Ramsgate Victoria Hotel v Montefiore (1866)
What is reasonable depends on the facts of each case.*
*The offer of a volatile commodity like shares would last less time than one
for a more stable one.
4. Death
If the offeror dies and the offeree KNOWS this, s/he cannot accept. If offeree
unaware it seems s/he can still accept:
Bradbury v Morgan (1862)
Offeree can accept & enforce contract against offeror’s “estate” unless
contract “personal”.
Little case authority but it seems that if offeree dies, the offer to him ends &
estate cannot accept on his behalf.
Reynolds v Atherton (1921)
Re Irvine (1928, Canadian).