Lecture 3 Offer and Acceptance.

Taylor's University Undergraduate Business
Programs
Business Law (LAW60104)
Lecture 3
Formation of Contract – Offer &
Acceptance
24/8/2020 Jenita Kanapathy 1

Contracts

CONTRACTS
A legally binding/enforceable agreement

between two or more competent parties or
entities in which there is a promise to
perform or refrain from performing some
specified act(s) in return for a valuable
benefit known as consideration.

Offer
• S 2(a) Contracts Act 1950 (CA) when one
person indicates to another his
willingness to do or refrain from doing
anything, with a view to obtaining the
consent of that other to the act or
restrain, he is said to make a
proposal/offer
• S.2 (c) CA - the person making the
proposal/offer is called the
“promisor”/offeror and the person
accepting the proposal/offer is called
the “promisee”/offeree.
Requirements of Offer
1. can be made to a specific person/persons - only that
person/persons can accept the offer. Offer made to world at
large – can be accepted by any one who complies with
terms of offer. (See Carlill v Carbolic Smokeball)
2. must be communicated - 4.(1) CA the communication of
a proposal is complete when it comes to the knowledge of
the person to whom it is made. It is essential for ‘meeting
of the minds’ (consensus ad idem). Acceptor must be
aware of offer and its terms or else there cannot be an
acceptance.
Ayer Hitam Tin Dredging Malaysia Bhd v Y.C. Chin
Enterprises Sdn Bhd [1994] 2 MLJ 754
SC: Existence of an agreement depends upon intention of
parties, and for there to be agreement, parties must be ad
idem, i.e. there must be a consensus between them.
Requirements of Offer
3. May be expressed or implied. If it is made in
words, it is expressed and if not made in words, its
implied - s 9 - so far as the proposal or acceptance
of any promise is made in words, the promise is said
to be express. So far as the proposal or
acceptance is made otherwise than in words, the
promise is said to be implied.
4. Must be certain/clear. An agreement by a father
to build and give ‘a house which must be a suitable
building’ to the groom for agreeing to marry his
daughter was too vague to be enforced.
Ahmed Meah v Nacodah Merican (1890) 4 Ky 583
5. Must be legal
What is not an Offer –supply of information
Harvey v Facey [1893] AC 552

One party was anxious to purchase product known as
‘Bumper Hall Pen’. Purchasers sent telegram to
owners asking: ‘Will you sell us Bumper Hall Pen?
Telegraph lowest price.’ Owner replied ‘Lowest price
for Bumper Hall Pen ₤900.’ Purchasers did not
respond. Owners refused to complete the sale.
PC: no agreement to sell. Owners only supplying
information to them.

What is not an Offer – Invitation to Treat (ITT)
• ITT is not an offer. It is a statement inducing

another person to come and negotiate or to make
an offer.
• ITT cannot be accepted to form a contract.

Fisher v Bell [1961] 1 QB 394; [1960] 3 WLR919;
[1960] 3 All ER 482
Shopkeeper displayed in his shop flick-knife. He
was charged for offer to sell dangerous weapon
contrary to Restriction on Offensive Weapons Act
1959.
Court: Display of goods in shop was ITT, not an
offer for sale.
What is not an Offer –Invitation to Treat (ITT)
a) Display of goods for sale
Display of goods in a store at shop window or on the
shelf is not an offer. Customer who picks item and takes
it to payment counter is making an offer which is
accepted when payment is made and received.
Pharmaceutical Society of Great Britain v Boots Cash

Chemists [1953] 1 QB 401; [1953] 1 All ER 482; [1953]
2 WLR 427 (CB 28)
Boots Chemist charged for offer for selling dangerous
drugs without prescription of registered pharmacist.
Held: When drugs were displayed on shelf, company
made an ITT to customer. When customer took drugs to
check-out point, he made offer to buy. There was
registered pharmacist at the cash counter. Company did
not contravene the law.
What is not an Offer – Invitation to Treat
(ITT)
b) Advertisements in newspapers, catalogues,
circulars, list etc. are usually an ITT.
Partridge v Crittenden(1968)
Plaintiff advertised live birds for sale in the papers.

The plaintiff charged with unlawfully offering for
sale wild live bird contrary to s. 6(1) and sch. 4
of Protection of Birds Act 1954.
Court: plaintiff not guilty because advertisement was

ITT not offer for sale.

What is not an Offer – Invitation to Treat (ITT)
Exception - there are advertisements that are offers –
Carlill v Carbolic Smoke Ball [1893] 1 QB 256
The defendant was manufacturer of Carbolic Smokeball designed

to prevent user from contracting flu. To promote the
smokeball, defendant advertised in a newspaper to pay ₤100
to anyone who contracted flu after using the smokeball in the
specified manner for a specified period. Plaintiff read the
advertisement, purchased the smokeball and used it in the
manner and the period prescribed. Advertisement by Carbolic
also mentioned sum of £1000 was deposited with bank as sign
of sincerity.

Carlill v Carbolic Smoke Ball [1893] 1 QB 256
Plaintiff contracted flu and demanded from payment of ₤100
from defendant who refused to pay arguing no contract
because:
- advertisement too vague to be a contract
- offer cannot be made whole world
- plaintiff had not communicated to defendant her
acceptance of offer
- advert was just a mere puff, i.e. a marketing
gimmick.
Court: plaintiff could recover ₤100 from def. Advertisement

is offer to anyone who will perform conditions and
performance of that condition is acceptance.
Advertisement amounts to offer and not ITT.
There is contract between Mrs. Carlill & Smokeball.

Advertisement for jobs/vacancies -
Coelho v The Public Service Commission [1964], MLJ
12, HC – There were advertisements in The Malay Mail
by applicant inviting qualified people to apply for
positions at Immigration office is an invitation to those
who qualified to apply for the position. The application
of qualified people is a bid. Offer may be accepted or
not by employers.
Prospectus for shares – It is an ITT
Tenders -
Person who submits tender is making the offer. The
person inviting or advertising the tender is free to
accept or reject the tender.

Auctions – are an invitation to treat.
Payne v Cave (1789) 3 TR 148

Defendant bid £40 for goods at auction but before
fall of hammer he withdrew his bid.
Auctioneer's request for bids is not an offer (its an
ITT) which can be accepted by highest bidder. Each
bid constituted an offer which could be withdrawn
at any time until it's accepted. The fall of the
auctioneer's hammer constituted acceptance of the
highest bid.
• Where there is reserve price – auctioneer cannot

accept bids below the reserve price.
• Where there is no reserve price – auctioneer has to
accept highest bid.

Termination of Offer
s. 6. A proposal is revoked—
(a) by the communication of notice of revocation by the
proposer to the other party;
Byrne v Van Tienhoven (1880) 5 CPD 344

On 1/10 defendant offered by letter goods for sale to B.
On 11th B received and accepted by telegraph
immediately. On 8th, defendant wrote to B revoking
the offer. On 20th, B received letter of revocation.
Revocation of offer was not communicated by mere
posting of letter. It was effective on 20th. By then (on
the 11th) B had accepted the offer.
5. (1) A proposal may be revoked at any time before the

communication of its acceptance is complete as against the
proposer, but not afterwards.

ILLUSTRATION
A proposes, by a letter sent by post, to sell his
house to B. B accepts proposal by letter sent by
post. A may revoke his proposal at any time before
or at the moment when B posts his letter of
acceptance, but not afterwards. B may revoke his
acceptance at any time before or at the moment
when the letter communicating it reaches A, but not
afterwards.

(a) by the communication of notice of revocation by the
proposer to the other party;
Dickinson v. Dodds, 2 Ch. D. 463 (1876).

Def. offered to sell his house to claimant and promised to keep the
offer open until Friday. On Thursday, def. accepted a 3rd party’s
offer to purchase the house. Def. asked a friend to tell claimant
that offer was withdrawn. On hearing the news, claimant went
round to defendant’s house to accept the offer.
Court:
1) offer had been revoked. Notice of revocation given by 3rd party
(reliable source).
2) No contract – no meeting of minds.
3) no obligation to keep offer open until Friday since claimant did
not give any consideration in exchange for the promise.

(b) by the lapse of the time prescribed in the proposal
for its acceptance, or, if no time is so prescribed, by
the lapse of a reasonable time, without communication
of the acceptance;
(c) by the failure of the acceptor to fulfil a condition

precedent
to acceptance; or
(d) by the death or mental disorder of the proposer, if

the fact of his death or mental disorder comes to the
knowledge of the acceptor before acceptance.
1. Rejection – An offer can be rejected by saying ‘NO’. i.e.
explicit rejection - no contract. Cannot be revived i.e.
accepted later or offeror falling back on it. If so
offeror will be making a fresh offer.
2. Counter-offer – made by offeree to offeror. Roles

reversed. Original offer destroyed – cannot be revived.
Hyde v Wrench (1840) 49 ER 132
W offered to sell farm to H for £1,000. H said he would
give £950. W refused. H then said he would give £1,000.
When W refused to adhere to his original offer, H tried to
obtain specific performance of the alleged contract.
Held: No contract. Offer to buy at £950 in response to

offer to sell at £1,000 was counter-offer which destroyed
W’s offer. Offer once rejected cannot be revived.

Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of

the estate of Saw Cheng Chor, deceased) & Anor [1997] 1
MLJ 763
Defendants owned 4 pieces of land. They made offer to
sell 1 of it for RM350,000 to plaintiff who was to confirm
offer by 15.1.1979. On 15.1.1979, plaintiff & defendant
discussed sale of all 4 pieces of land for RM470,000.
Defendant decided not to proceed with sale. Plaintiff
accepted original offer by enclosing cheque for RM47,000
being 10% deposit. Defendants argued they had already
withdrawn offer when they proceeded with negotiations
for sale of 4 lots.
Court: By proposing to purchase all 4 lots, plaintiff made

counter-offer. The defendant did not have to keep offer
open, the effect of which was as if he had withdrawn that
offer.
Communication of Acceptance
▪ Acceptance by performance of conditions of offer
(Carlill –v- Carbolic Smokeball) – s 8
▪ Acceptance can be made by post – s 4
Illustration (b) B accepts A’s proposal by a letter sent by
post.
The communication of the acceptance is complete—
as against A, when the letter is posted;
as against B, when the letter is received by A.
Ignatius v Bell [1913] 2 FMSLR 115
Defendant gave plaintiff option to buy land on or before
20.8.1912 by notice in writing. Plaintiff exercised option by
posting a letter on 16th. Defendant received letter on 25th.
Defendant did not want to sell.
Court: parties contemplated use of post as means of
communication. S 4 of the Contracts Enactment (Malaysia)
applies. The acceptance was complete and a binding contract
emerged when it was put into the post office on 16th.
Instantaneous Communication
Communication of an acceptance can be via phone or
telex.
General rule - communication takes place when
offeree receives letter of acceptance. If parties from
different countries, law of country where acceptance
is received by offeror will be applied.
Entores v Miles Far East Corporation [1955] 2 QB 327
CA
P in London made offer by telex to D in Amsterdam. D

sent letter of acceptance from Amsterdam received
by P’s machine in London. Issue : where was contract
concluded?
Held : contract made in London where the letter of

acceptance was received.

Revocation of Acceptance
S 5(2) Contracts Act 1950 Acceptance may be
revoked any time before communication of
acceptance is complete as against acceptor, but not
afterwards.
ILLUSTRATION
A proposes, by letter sent by post, to sell his house
to B. B accepts proposal by letter sent by post.
A may revoke proposal any time before or when B

posts letter of acceptance, but not afterwards.
B may revoke acceptance any time before or when

letter communicating it reaches A, but not
afterwards.

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Taylor's University Undergraduate Business

24/8/2020 Jenita Kanapathy 1

24/8/2020 Jenita Kanapathy 3

A legally binding/enforceable agreement

24/8/2020 Jenita Kanapathy 4

Harvey v Facey [1893] AC 552

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• ITT is not an offer. It is a statement inducing

• ITT cannot be accepted to form a contract.

Pharmaceutical Society of Great Britain v Boots Cash

Plaintiff advertised live birds for sale in the papers.

Court: plaintiff not guilty because advertisement was

24/8/2020 Jenita Kanapathy 11

Carlill v Carbolic Smoke Ball [1893] 1 QB 256

The defendant was manufacturer of Carbolic Smokeball designed

24/8/2020 Jenita Kanapathy 12

Court: plaintiff could recover ₤100 from def. Advertisement

24/8/2020 Jenita Kanapathy 14

24/8/2020 Jenita Kanapathy 15

Payne v Cave (1789) 3 TR 148

• Where there is reserve price – auctioneer cannot

24/8/2020 Jenita Kanapathy 16

Byrne v Van Tienhoven (1880) 5 CPD 344

5. (1) A proposal may be revoked at any time before the

24/8/2020 Jenita Kanapathy 17

24/8/2020 Jenita Kanapathy 18

Dickinson v. Dodds, 2 Ch. D. 463 (1876).

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(c) by the failure of the acceptor to fulfil a condition

(d) by the death or mental disorder of the proposer, if

2. Counter-offer – made by offeree to offeror. Roles

Held: No contract. Offer to buy at £950 in response to

24/8/2020 Jenita Kanapathy 21

Malayan Flour Mills Bhd v Saw Eng Chee (Administrator of

Court: By proposing to purchase all 4 lots, plaintiff made

P in London made offer by telex to D in Amsterdam. D

Held : contract made in London where the letter of

24/8/2020 Jenita Kanapathy 24

A may revoke proposal any time before or when B

B may revoke acceptance any time before or when

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