Saad Andalib

Barrister-at-Law

OFFER AND ACCEPTANCE

BILATERAL AGREEMENTS
A bilateral agreement comes into existence where one party - the offeror - makes an offer to a second
party - the offeree - and that second party indicates consent. Under Bilateral Contracts each party
undertakes to the other party to do or to refrain from doing something, and in the event of his/her failure
to preform his/her undertaking, the law provides the other party with a remedy. United Dominions Trust
Ltd v Eagle Aircraft Services Ltd

WHAT AMOUNTS TO AN OFFER?

An offer requires an unequivocal statement of willingness to contract on certain specified terms. Those
terms will become binding upon their acceptance by the offeree; the offeree is the person to whom the
offer was made (Storer v MCC).

Thus, to amount to an offer, the words or conduct of the offeror must be:
1. Communicated to a potential offeree; and
2. Clear and complete enough to be capable of giving rise to a legally enforceable agreement if
consented to by the offeree; and
3. Intended by the offeror to give rise a legally enforceable agreement if consented to by the offeree.

A request for information does not constitute an offer (Harvey v Facey).

INVITATION TO TREAT

During negotiations leading up to the making of a bilateral agreement, many communications may flow
between the parties that do not contain one or more of these three essential ingredients. Examples of
such communications include: general indications of a willingness to 'do business’. These types of
communication are often referred to as invitations to treat. Gibson v Manchester City Council

WHAT IS THE KEY DIFFERENCE BETWEEN AN INVITATION TO TREAT AND AN OFFER?

An invitation to treat will never give rise to a binding agreement merely as a result of an expression of
consent - i.e. acceptance - by the other party. An offer, by contrast, will always give rise to a binding
agreement, if accepted.
A positive response to an offer is an acceptance. A positive response to an invitation to treat or a tender
usually amounts to an initial offer.

(a) ADVERTISEMENTS

(i) Bi-lateral advertisement:

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Such advertisements are usually held not to amount to offers. Three reasons are given:
Firstly- such advertisements may lead to further bargaining
Secondly- the vendor may wish to assure himself that the prospective purchaser will be able to pay for
the goods before entering into a binding agreement.
Thirdly- availability of the goods may be an issue. Partridge v Crittenden

Exception- There is a strong presumption that advertisement in trade journals and other like situations
are offers (Partridge). Another view is that if the advertisements come from manufacturer, it will be
treated as an offer.

(ii) Unilateral advertisement: This kind of advertisement is commonly construed as an offer. Carlill v
Carbolic Smoke Ball

(b) DISPLAYS:

The general rule is that display of goods is an ITT rather than offer. Pharmaceutical Society of GB v Boots.
EXCEPTION: Display of hire is an offer rather than ITT (Chapleton Barry v UDC). Here display of deck chairs
under ‘for hire’ sign was held to be an offer. If there is any clear indication which means ‘first come first
serve’, then it may amount to an offer (Lefkowitz v Great Minneapolis Surplus Store).

(c) VENDING MACHINES:

An automatic machine ready to take coins constitutes an offer, the customer accepts that offer by paying.
Thornton v Shoe Lane Parking

TERMINATION OF OFFER

If an offer is made and then terminated before acceptance, there is nothing left to accept. It is as though
no offer had been made in the first place. By contrast, though, purported termination of an offer after
acceptance is too late. There are five ways how an offer can be terminated prior to acceptance:
1. REVOCATION BY THE OFFEROR: An offeror is free to revoke an offer at any stage prior to
acceptance by the offeree - Offord v Davies. This is so even where the offeror has stated that the offer
will be open e.g. for a fixed period of time - sometimes referred to as a firm offer. The will not hold the
offeror to be bound by a bare 'one-way' promise. So, in Routledge v Grant, Grant offered to lease
Routledge's house. The offer was expressed to be open for six weeks. Grant then withdrew his offer
before the six weeks was up. The court held that he was entitled to do so. As an obvious exception to the
general position, an offeror will be obliged to leave an offer open for the stated time where he is bound
by another binding agreement to leave it open for that period (Mountford v Scott). Such a contract
requiring an offer to stay open and unchanged for a time is called an option.

COMMUNICATION OF REVOCATION
Firstly, to be effective, the offeror must actually communicate revocation to the offeree. This is so,
regardless of whether the communication is instantaneous or non-instantaneous. In essence, there is no
postal rule in respect of revocation of offers. This creates an interesting situation where communication
of acceptance and of revocation cross in the post. Byrne v Van Tienhoven

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Secondly, reliable evidence of revocation is sufficient- Dickinson v Dodds. A revocation heard via a third
party was sufficient. However, the third party must be a reliable source and the offeree ought reasonably
to believe the grapevine in question.
2. REJECTION-ACTION OR INACTION BY THE OFFEREE: A rejection may be a simple statement by the
offeree that he has no interest in the offer made to him. Or it may be implied from a counter offer made
by the offeree. A communication which is at variance with an offer, cannot amount to an acceptance and
will constitute a counter offer. A counter-offer by an offeree in response to an offer kills that offer (Hyde
v Wrench).
A counter offer has 2 distinct effects:
a) it acts as a rejection of the original offer
b) and it stands as a new offer capable of acceptance by the offeror.

An intermediate category of communication exists which is not sufficiently inconsistent with the offer to
constitute a counter-offer but which also does not amount to a sufficiently unequivocal assent so as to
constitute an acceptance. Such an intermediate response is termed as a mere inquiry (Stevenson v
McLean).

3. LAPSE OF TIME: In addition, an offer may lapse as a result of inaction by the offeree. But where
an offer did not express a time limit, it had to be accepted within a reasonable time (Ramsgate Victoria
Hotel v Montefiore).

4. THE OCCURANCE OF A STIPULATED EVENT: An offer may be made subject to condition. If the
condition is not satisfied, the offer is not capable of acceptance. Financings Ltd v Stimson - An offer to
buy a car could not be accepted once it had been stolen and damaged.

5. DEATH OF EITHER THE OFFEROR OR THE OFFEREE: Death of the offeree before acceptance
probably causes the offer to lapse. Death of the offeror is rather more complicated. It seems that the
effect of death varies according to the nature of the particular contract. An offer to perform a personal
service probably dies with the offeror (Bradbury v Morgan). Any other type of offer may survive the death
of the offeror, at least until the offeree becomes aware of the death.

ACCEPTANCE
An acceptance is an unequivocal and final assent to the terms of an offer. There needs to be a mirror
image of the offer. A valid acceptance actually comprises two elements:

(i) The Fact of Acceptance; and

(ii) Communication of Acceptance.

(i) FACT OF ACCEPTANCE: The so-called 'mirror image' rule dictates that, to be effective, an
acceptance must exactly match all the terms offered. (Jones v Daniel).
CAN SILENCE AMOUNT TO ACCEPTANCE: Silence will not constitute an acceptance. Felthouse v Bindley
There is an exception to the silence rule where someone solicit the offer and fail to act inconsistently

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 Bowerman V ABTA The offeree can rely on the silence acceptance rule
Saad Andalib prescribed by the offeror. Here the justification for the rule is that, as the offeror has
Barrister-at-Law prescribed the silence acceptance, he will be bound by his own word if the offeree
remain silent and later come to compel the offeror to comply with his own word.
with it. Rust v Abbey Life

(ii) COMMUNICATION OF ACCEPTANCE: Where difficulties arise in the area of acceptance, they are,
in fact, less likely to be connected with the fact of acceptance and more likely to concern whether that
acceptance has been successfully communicated. To understand the issues that arise in relation to
communication of acceptance, it is helpful to subdivide the topic into two categories:
a. Instantaneous Communication; and
b. Non-instantaneous Communication.

a. INSTANTANEOUS COMMUNICATION: It may occur either where the parties are face-to-face
or where they are at a distance and e.g. speaking to each other 'live' via the telephone or a
video conferencing link. Here the communication of acceptance and its receipt occur at the same
time. Therefore, in the case of instantaneous communication, the position is straight-forward. The
acceptance must be both communicated and received to make a contract. The general rule is
applicable in all form of instantaneous communication including telephone conversations and the
use of telexes.
If the communication failed on an instantaneous method of acceptance, then who should take
responsibility?
Generally, the person in fault should take responsibility. So, if the offeror claimed that he did not
understand offeree’s words on a telephone conversation. He need to make it clear to the offeree
otherwise it should be considered as the fault of the offeror. Because he had the chance to ask
the offeree to repeat his words.
Rationale behind this rule- Lord Denning in Entores v Miles Far East Corporation, the oferee either is or
should be aware that the communication of the acceptance has failed and so he is required to repeat it.

EXCEPTION: Lord Denning also said the offeror is ‘clearly bound’:

a. where the communication failed but the offeree thinks it was successful and
b. the failure to receive it was the fault of the offeror.

If the offeree had done all that can reasonably be expected of him but the offeror has not, then the
acceptance will be communicated.
b. Remember, this exception will not apply when the offeror is not at fault. There will be no contract if the
communication fails through no fault of either party, e.g. the email fails but the offeree’s computer records
that the message was sent successfully and the offeror’s computer does not record that there has been any
new message.

FAX/TELEX/EMAIL
What amounts to communication to the offeror when the message is received by an un-staffed receptor?
It may be difficult to lay down a universal rule here.
Lord Wilberforce in Brinkibon v Stahag Stahl.—these issues must be resolved by reference to the
intentions of the parties, by sound business practice and in some cases by a judgment where the risks
should lie.
An acceptance sent by fax or email should be regarded as communicated when it is received by the
offeror’s machine only where it is reasonable to expect the offeror to immediately become aware of the
receipt.
Communication to an office outside normal trading hours, the message should be regarded as
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Barrister-at-Law
communicated when a reasonable person in the position of the offeror would have become aware of it.

Please add the email communication part from the other notes. Specifically Superdrug case.
Email is an instantaneous method of communication (Superdrug)
. NON-INSTANTANEOUS COMMUNICATION: Add from the basic illustration note.

POSTAL RULE
This is an exception to the general rule that acceptance must be communicated to the offeror. When it
Is reasonable to use the post as a means of communication, the acceptance is complete when a properly
addressed letter of acceptance is deposited in the post box. Adams v Lindsell

THE CONSEQUENCE OF THE POSTAL RULE

The postal rule produces the possibility that a contract will come into existence when the letter of
acceptance is lost in the post. Henthorn v Fraser
WHEN DOES POSTAL RULE APPLY?
a) Where an offer was made by post it will usually be possible to accept it by post.
b) The postal rule may apply even where the offer was not made by post.
Therefore, the guiding principle seems to be that it will apply whenever it is reasonable to use the post
as a method of acceptance.
c) Acceptance by post will not be reasonable where as in Holwell Securities v Hughes –the offeror
has made it clear that acceptance must be notified to him.
d) Acceptance by post will not be reasonable where the offeror expressly or by implication requests
a speedy response. Offer made by telegram could not be accepted by post. Quenerduaine v Cole.
e) Even where a particular means of communication is prescribed by the offeror, the oferee will
generally be able to use a different means if it is ‘just as good’ from the offeror’s point of view. Tinn v
Hoffmans.
f) Postal rule of acceptance is not applicable to the revocation of offers or to acceptances
communicated by instantaneous means.
g) Postal rule is only applicable when the letter of acceptance is received by the Post office. Placing
the letter in an official post box will be sufficient, but giving it to an EE of the Post Office who is authorised
to distribute but not to collect letters will not be. Re London & Nothern Bank.
h) Last of all, postal rule will not apply where it would produce ‘manifest inconvenience or
uncertainty’.
WHERE THE OFFEREE SEEKS TO REVOKE HIS POSTED ACCEPTANCE?

The Scottish case of Dunmore v Alexander is sometimes cited for the proposition that recall of a posted
acceptance is possible, but it is not a clear decision. There are cases in other jurisdictions, Wenkheim v
Arndt and A to Z Bazaars v Minister of Agriculture, which suggest that no recall is possible. This, indeed,
would be the result of applying the normal rule about acceptances, which is that once they are made
they can not be recalled. On the other hand, there does not seem to be any particular harm in allowing
recall by a speedier means. By definition, the offeror does not know about the acceptance and so can
not have acted on it and it might seem a little odd to apply a rule which was devised for the benefit of

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Barrister-at-Law
acceptors in a way which acts to their disadvantages.

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